CHAPTER 3 - ORGANIZATION: STRUCTURE AND CULTURE
Project Management Structure
Once management approves a project, these structures show how the project will be implemented.
Although not exhaustive, these structures and their variant forms represent the major approaches for organizing
projects
Three structures used by firms:
1. Functional Organization
2. Dedicated Project Teams
3. Matrix Structure
Organizational Culture
Organizational culture reflects the “personality” of the organization. There are often considerable
differences in how projects are managed within certain firms even with similar structure. This is attributable to
the organizational culture of the firm.
3.1 PROJECT MANAGEMENT STRUCTURES
Project Management System
Project management system provides a framework for launching and implementing project activities
within a parent organization. A good system appropriately balances the needs of both the parent organization
and the project by defining the interface between the project and parent organization in terms of authority.
Organizing Projects within the Functional Organization
One approach to organizing projects is to simply manage them within the existing functional hierarchy
of the organization.
Once management decides to implement a project, the different segments of the project are delegated to
the respective functional units with each unit responsible for completing its segment of the project
Figure 3.1 Functional Organization
Example:
A tool manufacturing firm decides to differentiate its product line by offering a series of tools specially
designed for left-handed individuals.
Top management decides to implement the project, and different segments of the project are distributed to
appropriate areas.
The Industrial Design Department is responsible for modifying specifications to conform to the needs of left-
handed users.
The Production Department is responsible for devising the means for producing new tools according to these
new design specifications.
The Marketing Department is responsible for gauging demand and price as well as identifying distribution
outlets.
The overall project will be managed within the normal hierarchy, with the project being part of the working
agenda of top management.
The functional organization is also commonly used when, given the nature of the project,
one functional area plays a dominant role in completing the project or has a dominant interest
in the success of the project.
● A high ranking manager in that area is given the responsibility of coordinating the project.
Examples:
➢ The transfer of equipment and personnel to a new office would be managed by a top-ranking manager in
the firm’s Facilities Department.
➢ A project involving the upgrading of the management information system would be managed by the
Information Systems Department.
In both cases, most of the project work would be done within the specified department, and coordination with
other departments would occur through normal channels.
Advantages for Using the Existing Functional Organization:
1. No change. Projects are completed within the basic functional structure of the parent organization.
There is no radical alteration in the design and operation of the parent organization.
2. Flexibility. There is maximum flexibility in the use of staff. Appropriate specialists in different
functional units can temporarily be assigned to work on the project and then return to their normal work.
With a broad base of technical personnel available within each functional department, people can be
switched among different projects with relative ease.
3. In-depth expertise. If the scope of the project is narrow and the proper functional unit is assigned
primary responsibility, then in-depth expertise can be brought to bear on the most crucial aspects of the
project.
4. Easy post-project transition. Normal career paths within a functional division are maintained. While
specialists can make significant contributions to projects, their functional field is their professional home
and the focus of their professional growth and advancement.
Disadvantages for Using the Existing Functional Organization:
(These are particularly pronounced when the scope of the project is broad and one functional department does
not take the dominant technological and managerial lead on the project)
1. Lack of focus. Each functional unit has its own core routine work to do; sometimes project
responsibilities get pushed aside to meet primary obligations. This difficulty is compounded when the
project has different priorities for different units.
a. For example, the Marketing Department may consider the project urgent but the operations
people consider it only of secondary importance. Imagine the tension if the marketing people
have to wait for the operations people to complete their segment of the project before they
proceed.
2. Poor integration. There may be poor integration across functional units. Functional specialists tend to
be concerned only with their segment of the project and not with what is best for the total project.
3. Slow. It generally takes longer to complete projects through this functional arrangement. This is in part
attributable to slow response time—project information and decisions have to be circulated through
normal management channels. Furthermore, the lack of horizontal, direct communication among
functional groups contributes to rework as specialists realize the implications of others’ actions after the
fact.
4. Lack of ownership. The motivation of people assigned to the project can be weak. The project may be
seen as an additional burden that is not directly linked to their professional development or
advancement. Furthermore, because they are working on only a segment of the project, professionals do
not identify with the project.
3.2 ORGANIZING PROJECTS AS DEDICATED TEAMS
At the other end of the structural spectrum is the creation of a dedicated project team. These teams
operate as units separate from the rest of the parent organization.
Full-time project manager is designated to pull together a core group of specialists who work full time on the
project.
Project manager recruits necessary personnel from both within and outside the parent company. The
subsequent team is physically separated from the parent organization and given marching orders to complete the
project.
Figure 3.2 Dedicated Project Team
Example: Skunk Works at Lockhead Martin “Established culture over quantity of people”
In firms where projects dominate, such as construction and consulting firms, the organizational structure is
designed to support project teams effectively. These firms consist of multiple semi-independent teams dedicated
to specific projects, with traditional functional departments like Marketing and Human Resources serving to
assist these teams.
Example:
● The Marketing Department focuses on generating new business opportunities, while Human Resources
manages personnel matters and recruits new talent. This structure is commonly referred to as a
projectized organization. It is noteworthy that not all team members are exclusively assigned to one
project; individuals may contribute part-time to various [Link] organizations where projects
dominate, such as construction or consulting firms, the entire structure is designed to support project
teams. These firms typically consist of multiple quasi-independent teams focusing on specific projects,
with traditional functional departments primarily tasked with assisting these teams. For instance, the
Marketing Department aims to generate new business opportunities, while the Human Resource
Department manages personnel issues, recruitment, and training. This organizational framework is
known as a projectized organization, where it is noteworthy that staff may work part-time across several
projects rather than being dedicated solely to one team.
Figure 3.3 Projectized Organization Structure
Example: The Birth of the Mac "Facing uncertainties, handling vast perspectives"
As in the case of functional organization, the dedicated project team approach has strengths and weaknesses.
The following are recognized as strengths:
1. Simple. Other than taking away resources in the form of specialists assigned to the project, the
functional organization remains intact with the project team operating independently.
2. Fast. Projects tend to get done more quickly when participants devote their full attention to the project
and are not distracted by other obligations and duties. Furthermore, response time tends to be quicker
under this arrangement because most decisions are made within the team and are not deferred up the
hierarchy.
3. Cohesive. A high level of motivation and cohesiveness often emerges within the project team.
Participants share a common goal and personal responsibility toward the project and the team.
4. Cross-functional integration. Specialists from different areas work closely together and, with proper
guidance, become committed to optimizing the project, not their respective areas of expertise.
The following are recognized as weaknesses:
1. Expensive. Not only have you created a new management position (project manager), but resources are
also assigned on a full-time basis. This can result in duplication of efforts across projects and a loss of
economies of scale.
2. Internal strife. Sometimes dedicated project teams become an entity in their own right and conflict
emerges between the team and the remainder of the organization. This divisiveness can undermine not
only the integration of the eventual outcomes of the project into mainstream operations but also the
assimilation of project team members back into their functional units once the project is completed.
3. Limited technological expertise. Creating self-contained teams limits the technological expertise
available to address problems, as it relies on the skills and experience of the specialists assigned to
specific projects. Though specialists can seek consultation from others within their functional divisions,
organizational culture and informal barriers often discourage such collaboration.
4. Difficult post-project transition. Assigning full-time personnel to a project presents challenges
regarding their reassignment after project completion. In cases where subsequent project work is
unavailable, the transition back to their original departments may prove difficult due to their extended
absence and the necessity to update themselves on recent developments in their functional areas.
Organizing Projects within a Matrix Arrangement
One of the biggest management innovations to emerge in the past 40 years has been the matrix
organization. Matrix management is a hybrid organizational form in which a horizontal project management
structure is “overlaid” on the normal functional hierarchy. In a matrix system, there are usually two chains of
command, one along functional lines and the other along project lines. Instead of delegating segments of a
project to different units or creating an autonomous team, project participants report simultaneously to both
functional and project managers.
Companies apply this matrix arrangement in a variety of ways. Some organizations set up temporary
matrix systems to deal with specific projects, whereas “matrix” may be a permanent fixture in other
organizations. Let us first look at its general application and then proceed to a more detailed discussion of finer
points. There are three projects currently underway: A, B, and C. All three project managers (PM A–C) report
to a director of project management, who supervises all projects. Each project has an administrative assistant,
although the one for project C is only part time.
Figure 3.4 Matrix Organization Structure
Project A involves the design and expansion of an existing production line to accommodate new metal
alloys. To accomplish this objective, project A has assigned 3.5 people from Manufacturing and 6 people from
Engineering. These individuals are assigned to the project on a part-time or full-time basis, depending on the
project’s needs during various phases of the project. Project B involves the development of a new product that
requires the heavy representation of Engineering, Manufacturing, and Marketing. Project C involves forecasting
changing needs of an existing customer base. While these three projects, as well as others, are being completed,
the functional divisions continue performing their basic, core activities.
The matrix structure is designed to utilize resources optimally by having individuals work on multiple
projects as well as being capable of performing normal functional duties. At the same time, the matrix approach
attempts to achieve greater integration by creating and legitimizing the authority of a project manager. In
theory, the matrix approach provides a dual focus between functional/technical expertise and project
requirements that is missing in either the project team or functional approach to project management. This focus
can easily be seen in the relative input of functional managers and project managers over key project decision.
Division of Project Manager and Functional Manager Responsibilities in a Matrix Structure
Project Manager Negotiated Issues Functional Manager
What has to be done? Who will do the task? How will it be done?
When should the task be done? Where will the task be
done?
How much money is available to Why will the task be done? How will the project involvement
do the task? impact normal
functional activities?
How well has the total project Is the task satisfactorily How well has the functional input
been done? completed? been integrated?
Different Matrix Forms
In practice there are really different kinds of matrix systems, depending on the relative authority of the
project and functional managers (Bowen et al., 1994; Larson & Gobeli, 1987). Here is a thumbnail sketch of the
three kinds of matrices:
1. Weak Matrix
This form is very similar to a functional approach with the exception that there is a formally designated
project manager responsible for coordinating project activities. Functional managers are responsible for
managing their segment of the project. The project manager basically acts as a staff assistant who draws the
schedules and checklists, collects information on the status of work, and facilitates project completion. The
project manager has indirect authority to expedite and monitor the project. Functional managers call most of the
shots and decide who does what and when the work is completed.
2. Balanced Matrix
This is the classic matrix, in which the project manager is responsible for defining what needs to be
accomplished, while the functional managers are concerned with how it will be accomplished. More
specifically, the project manager establishes the overall plan for completing the project, integrates the
contribution of the different disciplines, sets schedules, and monitors progress. The functional managers are
responsible for assigning personnel and executing their segment of the project according to the standards and
schedules set by the project manager. The merger of “what and how” requires both parties to work closely
together and jointly approve technical and operational decisions.
3. Strong Matrix
This form attempts to create the “feel” of a project team within a matrix environment. The project
manager controls most aspects of the project, including scope trade-offs and assignment of functional personnel.
The project manager controls when and what specialists do and has final say on major projects. The functional
manager has title over her people and is consulted on a need basis. In some situations a functional manager’s
department may serve as a “subcontractor” for the project, in which case it has more control over specialized
work. For example, the development of a new series of laptop computers may require a team of experts from
different disciplines working on the basic design and performance requirements within a project matrix
arrangement.
Advantages of Matrix Organization
1. Efficient. Resources can be shared across multiple projects as well as within functional divisions.
Individuals can divide their energy among multiple projects on an as-needed basis. This reduces the
duplication required in a projectized structure.
2. Strong project focus. A stronger project focus is provided by having a formally designated project
manager who is responsible for coordinating and integrating contributions of different units. This helps
sustain a holistic approach to problem solving that is often missing in the functional organization.
3. Easier post-project transition. Because the project organization is overlaid on the functional divisions,
specialists maintain ties with their functional group, so they have a homeport to return to once the
project is completed.
4. Flexible. Matrix arrangements provide for flexible utilization of resources and expertise within the firm.
In some cases functional units provide individuals who are managed by the project manager.
Disadvantages of Matrix Organization
1. Dysfunctional conflict. The matrix approach is predicated on tension between functional managers and
project managers who bring critical expertise and perspectives to the project. Such tension is viewed as a
necessary mechanism for achieving an appropriate balance between complex technical issues and unique
project requirements. While the Intent is noble, the effect is sometimes analogous to opening Pandora’s
box.
2. Infighting. Any situation in which equipment, resources, and people are being shared across projects
and functional activities lends itself to conflict and competition for scarce resources. Infighting can
occur among project managers, who are primarily interested in what is best for their project.
3. Stressful. Matrix management violates the management principle of unity of command. Project
participants have at least two bosses—their functional head and one or more project managers. Working
in a matrix environment can be extremely stressful. Imagine working in an environment in which you
are being told to do three conflicting things by three different managers.
4. Slow. In theory, the presence of a project manager to coordinate the project should accelerate its
completion. In practice, however, decision making can get bogged down, as agreements have to be
forged across multiple functional groups. This is especially true for the balanced matrix.
When the three variant forms of the matrix approach are considered, we can see that advantages and
disadvantages are not necessarily true for all three forms of matrix. The strong matrix is likely to enhance
project integration, diminish internal power struggles, and ultimately improve control of project activities and
costs. On the downside, technical quality may suffer because functional areas have less control over their
contributions. Finally, projects may emerge as the members develop a strong team identity.
The weak matrix is likely to improve technical quality as well as provide a better system for managing
conflict across projects because the functional manager assigns personnel to different projects. The problem is
that functional control is often maintained at the expense of poor project integration. The balanced matrix can
achieve better balance between technical and project requirements, but it is a very delicate system to manage
and is more likely to succumb to many of the problems associated with the matrix approach.
3.2 PROJECT MANAGEMENT OFFICE (PMO)
Project Management Office (PMO)
● A centralised unit within an organization or a department that oversees and supports the execution of
projects.
● According to Mahendra Gupta (2024), the project management office (PMO) serves as a central hub for
project oversight, governance, and support, ensuring that projects are executed effectively and aligned
with business objectives.
KINDS OF PROJECT MANAGEMENT OFFICE according to Casey and Peck (2001)
1. Weather Station PMO
PRIMARY FUNCTION: To track and monitor project performance.
Just like how a weather station works, PMO provides forecasts and makes anticipations about the
whereabouts of the project/s being monitored. It is to ensure that all on-going projects are executed as planned.
QUESTIONS ANSWERED FOR SPECIFIC PROJECTS INCLUDES:
a. How are our projects progressing?
b. Which one is on track? Which one are not?
c. How are we doing in terms of cost?
d. Which projects are over or under budget?
e. What are the major problems confronting projects?
f. Are contingency plans in place?
g. What can the organization do to help the project?
SCENARIO
PROBLEM. Top management shows eager interest to know about all the money they’re
spending on projects. They get confused by different reporting formats from different managers
and the sheer number of activities going on at once.
SOLUTION. Weather Station PMO tracks and reports events without directly influencing them.
It serves as a middle man between anyone else having a need to know.
2. Control Tower PMO
PRIMARY FUNCTION: To improve project execution.
It considers project management as a profession to be protected and advanced. According to Project
Management Institute (PMI), it has four (4) general functions:
1. Establishes standards for managing projects
2. Consults on how to follow those standards
3. Enforces the standards
4. Improves the standards
SCENARIO
PROBLEM. There are various vital assets that the organization completely fails to manage.
For example, training – which may be copious – is neither applied or supported, executives
with little project management knowledge oversee project managers, or lessons learned in
one project are not applied to other projects.
SOLUTION. Control Tower PMO provides a more centralized organization to address these
issues and treat project management as a business process to be protected and nurtured.
3. Resource Pool
PRIMARY FUNCTION: To provide the organization with a cadre of trained project managers and
professionals.
It operates like an academy for continually upgrading the skills of a firm’s project professionals.
According to PMI, with a resource pool in place, executives may reasonably expect:
1. A pool of skilled project managers to which to draw
2. Project managers skilled at managing the type of projects to which they are assigned
3. Project managers supervised to ensure that they properly applied their skills.
SCENARIO
PROBLEM. Often, the person who hires and manages project managers knows less about
project management than they do, in exchange, there is a high tendency of job mismatches.
SOLUTION. Resource Pool PMO was set up for project managers. Managers and
executives needing projects then source a project manager from this repository of expertise.
4. Command and Control Center additional by McGraw
PRIMARY FUNCTION: Acts as a key decision maker on the project.
In comparison to the other three PMOs which are a support type, this leans more on active participation.
It ensures that the project is aligned with business objectives and conforms to accepted practices by making
recommendations, approving significant changes, and even terminating projects.
3. 4 ORGANIZATIONAL CULTURE
● Refers to a system of shared norms, beliefs, values, and assumptions that binds people together, thereby
creating shared meanings. (Deal & Kennedy, 1982)
● Reflects the “personality” of the organization.
EXAMPLE: DISNEY
The happiest place on earth. They also embody that belief not just to be imparted to their
customers but also to the entire organization as whole. The company focuses so much on
experiences and ensures that employees have great experiences. On their career page, they
invite those aspiring to be part of their team to have an exhilarating experience. Their
“Life at Disney” section shows diversity, kindness, and unity which is the kind of culture
they are promoting.
PRIMARY CHARACTERISTICS OF ORGANIZATION’S CULTURE
1. Member Identity – the degree to which employees identify with the organization as a whole rather than
with their type of job or field of professional expertise.
2. Team Emphasis – the degree to which work activities are organized around groups rather than
individuals.
3. Management Focus – the degree to which management decisions take into account the effect of
outcomes on people within the organization.
4. Unit Integration – the degree to which units within the organization are encouraged to operate in a
coordinated or interdependent manner.
5. Control – the degree to which rules, policies, and direct supervision are used to oversee and control the
employee behavior.
6. Risk Tolerance – the degree to which employees are encouraged to be aggressive, innovative, and risk
seeking.
7. Reward Criteria – the degree to which rewards such as promotion and salary increases are allocated
according to employee performance rather than seniority, favoritism, or other nonperformance factors.
8. Conflict Tolerance – the degree to which management focuses on outcomes rather than on techniques
and processes used to achieve those results.
9. Means versus Ends Orientation – the degree to which management focuses on outcomes rather than
on techniques and processes used to achieve those results.
10. Open-system Focus – the degree to which the organization monitors and responds to changes in the
external environment.
FUNCTIONS OF CULTURE IN ORGANIZATIONS
1. PROVIDE A SENSE OF IDENTITY FOR ITS MEMBERS
● It gives the organization unique character
● The more clearly an organization’s shared perceptions and values are stated, the more strongly
people can identify with their organization and feel a vital part of it.
● It encourages a holistic engagement.
2. HELPS LEGITIMIZE THE MANAGEMENT SYSTEM
● Helps clarify authority relationships.
● It provides reasons why people are in a position of authority and why their authority should be
respected.
3. CLARIFIES AND REINFORCES STANDARDS OF BEHAVIOR
● Helps define what is permissible and inappropriate behavior.
● It helps create social order.
● It also established a common belief accepted by the entire organization, and respects other
beliefs foreign to them.
Identifying Cultural Characteristics
Understanding an organization’s culture is an important process to analyze and assess its current and
past history. It involves looking at the different perspectives such as physical work environment, observing
employees' behaviors, and examining their responses to various events arising within the company.
A strong organizational culture promotes collaboration, innovation, and trust, enhancing employee
engagement and shaping customer perceptions. It also influences how stakeholders view the organization. A
healthy culture strengthens employee relationships, boosts retention, and lays the groundwork for long-term
success. Focusing on a positive culture creates a domino effect that benefits both employees and the business.
Example given: A certain company is famous for its offered products and services. Given that they have
high sales and huge advertisements everywhere, news boomed that they are mistreating their employees.
Making them work overtime but are paying them less. Although the business itself is successful, the news of the
toxic organization environment will have a huge impact on customers' perception of their services.
In identifying the cultural characteristics of an organization, there are some questions that you need to
take into consideration to see the differences and similarities with other organizations. Also to further
understand how the organization works as a team and a group.
Study the physical characteristics of an organization.
● What does the external architecture say about the organization?
● Does it convey uniqueness or a specific image?
● Are the buildings and offices equally well-designed for all employees, or are modern, luxurious spaces
reserved for senior executives or certain departments?
● What are the norms around dress code?
● What symbols are used to show authority and status within the organization?
The physical aspects of an organization, such as its architecture, office layouts, and design choices, can
reveal a lot about its internal dynamics. They can indicate who holds the real power, how authority is
distributed, and whether certain individuals or departments are given more prominence. These elements also
highlight the level of internal division or hierarchy within the organization. Additionally, the way the
organization presents itself through its physical environment often reflects how formal or professional it is in its
operations and business dealings. Observing these details provides valuable insight into the organization’s
culture and structure. The physical attributes of the organization leads us to know how the interaction of the
employers and employees within each department.
Read about the organization.
Examine posted materials and documents that entails information about the organization such as annual
reports, mission statements, press releases, and internal newsletters.
● What do these documents focus on?
● What values or principles do they highlight?
● Do they emphasize the people and their contributions, or do they focus more on the company’s financial
performance?
The way a company emphasizes different aspects reflects its culture. If the focus is on the people and
their roles, it shows a culture that values employees and their contributions. This type of emphasis suggests a
company cares about the well-being and development of its staff. On the other hand, if the focus is on financial
results and performance, it reflects a culture that prioritizes outcomes, efficiency, and the bottom line. Each
approach signals a different set of priorities and values within the organization, highlighting whether people or
profits are the main concern.
Observe how people interact within the organization.
● What is their pace—is it slow and methodical or urgent and spontaneous?
● What rituals exist within the organization? What values do they express?
● Who are the people at the meetings?
● Who does the talking? To whom do they talk?
● How candid is the conversation?
● Do people speak for the organization or for the individual department?
● What is the focus of the meetings?
● How much time is spent on various issues?
It provides insight into how employees interact, communicate, and respond to various situations. By
watching their behaviors, attitudes, and decision-making processes, you can identify key elements of the
organization's culture, such as its values, beliefs, and social norms. Issues that are discussed repeatedly and at
length are clues about the values of the organization’s culture. These observations reveal whether the
organization values collaboration, innovation, hierarchy, or independence, among other cultural traits.
Understanding these cultural characteristics helps leaders align strategies with organizational values, improve
workplace dynamics, and guide decision-making processes effectively. It also aids in ensuring that new
policies, practices, or changes resonate well with the existing culture.
Interpret stories and folklore surrounding the organization.
● What do people see as the keys to getting ahead within the organization?
● What contributes to downfalls?
Look for common themes in the stories shared by different people within the organization. The topics
that come up frequently in these stories often reveal what is truly valued in the organization's culture. These
recurring stories can highlight what employees see as important or what is celebrated within the company. It's
also crucial to pay attention to how promotions and rewards are given. This can provide valuable insight into
the qualities and behaviors the organization recognizes and rewards. At the same time, it can uncover the
cultural taboos or sensitive areas that, if not handled carefully, could hinder someone's career progression. By
understanding these patterns, you can gain a deeper understanding of what truly drives success in the
organization and what might hold people back.
With practice an observer can assess how strong the dominant culture of an organization is and the
significance of subcultures and countercultures. Furthermore, learners can discern and identify where the
culture of an organization stands on the 10 cultural dimensions presented earlier and, in essence, begin to build
a cultural profile for a firm. Based on this profile, conclusions can be drawn about specific customs and norms
that need to be adhered to, as well as those behaviors and actions that violate the norms of a firm.