Leading Projects In

Organizations
SCS 1952

Session 3
Organizational Structure, Project
Management Maturity and the
Project Management Office
Session Outline
1. Strategy follows Structure; Structure supports Strategy
2. Organizational Structure Helps or Hurts Project Success
3. Project Management Maturity
4. Project Management Office

Learning Objectives
Explain the link between Strategy and Structure
Understand McKinseys 7S Framework
Describe the advantages and disadvantages of each type of organizational
structure
Define Project Management Maturity (PMM)
Describe the importance of the Project Management Office (PMO) in strategic
planning

*Please refer to the textbook for details on references 2

and sources of all information and exhibits
Readings

Organizational Structure
Arora and Baronikian,
Leadership in Project Management, Second Edition
Chapter 3: Organizational Structure
PMM and PMO
Arora and Baronikian,
Leadership in Project Management, Second Edition
Chapter 2: Project Management Maturity and the
Project Management Office

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1. Strategy follows Structure;
Structure supports Strategy

4
Strategy follows Structure
Organizational structure is nothing but formal
reporting relationships, procedures, controls,
authority, decision-making and key processes
Strategy is the foundation for organizational culture
and operations
Strategy defines how various organizational
components relate to one another and work
together
The right structure is required for a strategy to be
implemented and to succeed
5
Organizational Restructuring and
Strategy Modification
An organization must consider and map out all major aspects
of structural change required to support the implementation
of a new strategy
Implementing a strategic shift may well require an array of
significant changes, even major redesigns, to the
organizational structure itself
When an organization changes its structure but not its
strategy, the strategy will likely mutate to fit the new
structure

6
McKinseys 7S Framework
According to McKinseys 7S
Framework, strategy and
structure are two of seven key
pillars or elements
The 7S Framework is a powerful
tool to help ensure alignment or
realignment of these pillars to
support a proposed new strategy
Linking and integrating strategy
with structure, and vice versa, is
imperative to accomplishing
organizational goals

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7S Framework Characterization of Pillars
Hard elements are easier to define or identify and
management can directly influence them
Soft elements on the other hand, can be more
difficult to describe, are less tangible and more
influenced by culture

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2. Organizational Structure Helps or Hurts
Project Success

9
Organization Breakdown Structure (OBS)
The OBS provides a hierarchical representation of the organizational
structure surrounding a project or program
A useful tool for understanding, communicating and generally
working with a given organizational structure in a project setting
As with WBS and RBS, it relies on
decomposition of larger units into
smaller ones
The structure can include all key
participating departments,
business units, other relevant
projects, Steering Committee

10
Types of Organizational Structures
Three primary organizational structures relevant
to projects and project management:
Functional structure
Projectized structure
Matrix structure
These are found in a wide range of organizations
and sectors
The given structure heavily influences the
operation of that organization
Each kind of structure has its own advantages
and disadvantages
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Functional Structure
Functional organization structure is also known as a traditional,
hierarchical or classical structure
The organization is divided by function, department or area of
specialization
The functional structure is appropriate for organizations that
produce standardized goods or services in large volume
Within functional organizations, a
projects scope is usually limited
by the boundaries of the
function or department

12
Influence on Project Management
The functional structure is required to improve systems, procedures,
or processes
Tends to be internal rather than external in focus
Authority (including authority for projects) remains in the hands of a
functional manager or department head
Ongoing and efficient output is the organizations primary objective
Projects generally occur within a department and it is difficult to
cross functional lines
Cross-functional projects are typically coordinated in an ad hoc
manner by functional managers,
as there is often
no designated PM

13
Functional Structures
Advantages and Disadvantages
Advantages
Clear reporting authority with
only one supervisor or boss
Facilitates functional
specialization, with knowledge
and practices shared between
individuals in the functional unit
Supports repetitive processes,
knowledge transfer and
continuous improvement
Disadvantages
Functional managers tend to stick
to functional specialization,
avoiding involvement in cross-
functional activities
Organizational strategy can suffer
from a lack of big picture thinking
Functional segregation can lead
both to more communication
barriers and more conflict
The functional structure tends to be
more fixed and can become quite
resistant to change
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Projectized Structure
Primarily concerned with
planning, organizing and
executing projects
A completely projectized
organization structure is
a rare entity Projects
under the
oversight
of a PMO
Found in consulting, and led
by the PM

construction, advertising
and other sectors

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Influence on Project Management
The structure provides authority and independence to the PM for
strong control of the project and oversight of the project team
The structure is effective for projects that are difficult to plan
accurately and where resource requirements and allocation
levels cannot be accurately established before-hand
PMs are generally drawn from a resource pool or one of several
specialized pools
Also well-suited to larger, more
complex and longer-duration
projects

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Projectized Structure
Advantages vs. Disadvantages
Advantages
Lines of communication are
straightforward, without
interference from functional
managers
There is ultimate clarity in
accountability
In a projectized structure, fast
reaction times help to keep
activities on schedule and on
budget
The structure is flexible and can be
extremely responsive to change
Easier to incorporate external
consultants and other temporary
staff to augment resources
Disadvantages
Tendency to retain personnel on a
project long after they are truly needed
(hoarding of resources)
Knowledge exchange between projects
and project teams can be limited
Running several projects concurrently
can result in duplication of effort
Prolonged absence from specialization
pool or functional area can lead to that
individuals specialization becoming
diluted over time
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Matrix Structure
A matrix organizational structure is a blend of
functional and projectized characteristics
It is structured with two or more channels of
reporting and two or more lines of budget authority
There are 3 types of matrix structure:
Weak Matrix
Strong Matrix Project led by PM; project
team members also report to
their Functional Managers

Balanced Matrix

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Weak Matrix
The term weak comes from the weak power of the PM
relative to the functional manager
Functional managers maintain control over their
resources and project areas
Functional managers are the ones to determine career
progression, rewards, recognition and incentives for
project team members
Projects are often ignored because functional priorities
are favoured, leading to disputes between the PM,
functional managers and project team members

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Strong Matrix
The term strong comes from the strong power of the PM relative to the
functional manager
PMs may have dedicated cross-functional teams with almost total
responsibility and accountability for project success
PMs may have HR responsibilities for the team members allocated to them,
including performance evaluation, training, and career progression
PMs and functional managers work closely, but project accountability rests
fully with PM

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Balanced Matrix
The term balanced indicates that power is shared
between functional managers and the PM relatively equally
To effectively balance power, appropriate organizational
policies and practices need to be in place for resource
allocation, authority and decision-making to work well

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Influence on Project Management
The matrix structure can offer the best of both the projectized
and functional structures
Multiple bosses, though, can lead to conflicting requirements,
loyalties and receiving contradictory direction for project team
members
Each project organization can operate independently
Team members will always have a home after project
completion
The PM and functional managers share responsibility for
assigning priorities and directing the work of individuals
The balance of power between the PM and functional managers
must be monitored

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Matrix Structure
Advantages vs. Disadvantages
Advantages
Matrix structure provides for a
relatively rapid response to
changes and other project needs
Due to balancing of functional and
project resources, resources can
be easily reassigned to absorb
changes in demand or supply
Projects tend to be closer to the
operational objectives of the
functional units
Matrix structure distributes risk
between projects and functional
units
Disadvantages
Communication issues, conflict and
ongoing negotiation can create
barriers to project progress
May be less cost-effective
May require more time and effort to
define policies and procedures
Project team members may feel
overloaded with work on multiple
projects (and functional
responsibilities)
There may be efficiency losses with
continual mental and/or physical
switching between projects
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Summary of Types of Organizational Structure
From left to
right, the
PMs power
increases
relative to the
functional
manager

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3. Project Management Maturity -
Bridging Organizational Strategy to
Successful Projects

25
Challenges Faced by Organizations
Typical challenges facing the practice of
project management in organizations:
PMs not being provided with templates,
resources, methodologies or adequate
coaching
PMs spending too much time on the creation
of reports
Executives spending insufficient time on
prioritization of projects
Project sponsors having no formal method of
tracking project benefits
Sponsors not getting accurate forecasts for
project completion

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Project Management Maturity (PMM)
PMM is defined as the progressive development of an
enterprise-wide project management approach,
methodology, strategy and decision-making process
Organizational PMM describes an organizations overall
ability to select and manage projects in a way that
supports its strategic goals
The level of current organizational maturity is reflected in
the extent of best practices achieved within the project,
program and portfolio domains

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Driving Forces for Maturity

Efficiency and Capital

Effectiveness Projects

New Product Customer

Development Expectations

Executive Competitiveness
Understanding

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PMM Is Linked To Project Success And
Organizational Strategy

PMM helps
organizations use project
management to
accomplish their goals
on time, within budget,
and most importantly to
improve their overall
effectiveness

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Benefits of using PMM models
Effective PMM models help:
Build a culture of project
management excellence
Make the delivery of projects
more predictable
Measure project performance
Help projects work together
instead of against each other
Determine the need for a Project
Management Office (PMO)
Generally, PMM models are
based on overarching principles
of consistent standards and
continuous improvement

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Structure of PMM Models
PMM models follow a structured approach, from assessing
maturity to implementing improvement
The process typically starts with an assessment tool used to
perform a gap analysis on the current state of
project/program management maturity in that organization
This analysis documents the current state, helps the
organization identify a path for improvement, and provides
guidance on project prioritization and strategic planning

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Organizational PMM Model (OPM3)
PMI released the Organizational Project Management
Maturity Model (OPM3) in December 2003
It addresses maturity in terms of the extent of best
practices used within the project, program as well as
portfolio domains
The OPM3 process consists of
5 steps, with increasing
organizational knowledge at
each step

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Kerzners Maturity Model
Kerzners maturity model defines five levels of maturity
and includes a process of feedback

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Kerzners Five Levels of Maturity
Level 1 Common Language
Organization recognizes the importance of project management
Level 1 can be fulfilled through a good understanding of PMBOK
Level 2 Common Processes
Organization recognizes that common processes need to be developed to repeat project success
This is the level where the organization realizes that methodologies and processes are needed to ensure
success on one project can be replicated to others
Level 3 Singular Methodology
Organization defines a single methodology for project management
Organizations that have reached this level are committed to project management
Level 4 Benchmarking
Organization recognizes that process improvement is necessary to maintain competitive advantage
For project management benchmarking, the critical success factors are usually the key business processes
and how they are integrated
Level 5 Continuous Improvement
Organization evaluates the information obtained through benchmarking and decides how to improve its
processes
This level will determine if the organization has embraced continuous improvement and has reached an
advanced stage of PMM

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4. Project Management Office

In todays business climate, companies are

expected to deliver results on a quarterly not
yearly cycle. As a result, senior management
is increasingly expecting the PMO to ensure
delivery of projects as committed because of
their significant impact on corporate financials.

Robert Chaves, PMO Director,

Fifth Third Bank (2007)

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What is a PMO?

A PMO is used to create an efficient and effective

organization, therefore being more efficient, with better
outcomes, and hopefully, more profitable.

The Project Management Institute(PMI) describes the PMO as follows:

A project management office (PMO) is an organizational body or entity

assigned various responsibilities related to the centralized and coordinated
management of those projects under its domain. The responsibilities of a
PMO can range from providing project management support functions to
actually being responsible for the direct management of a project.

36
PMO Background
PMOs first appeared in
aerospace, defense and heavy
construction
Was mainly used for large $
value and multi-year duration
projects
Now applicable in all industries
and organizations such as
governments, not-for-profit
firms and many others

As a focal point for all projects within an organization, the PMO contributes to overall governance,
while facilitating the alignment of projects with organization vision, mission and strategy

37
PMO Key Features
Identify and develop PM methodology, best practices and standards
Central monitoring of all PMO project timelines and budgets, usually at the
enterprise level
Management of project policies, procedures, templates and other shared
documentation
Central repository and management for both shared and unique risks for all
projects
Centralized configuration management
A mentoring platform for all project managers
Coordination of overall project quality standards

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PMO Classifications
PMOs can be divided by their relative focus:
Strategic Focus Generates value through strategic
activities: portfolio management, portfolio governance,
capacity management, change management, executive
reporting, and standard setting
Operational Focus Generates value through project
execution tasks, including managing Project Managers,
defining methodology, and allocating resources
Monitoring Focus Generates value through monitoring
portfolio status and health, recognizing emerging portfolio
risks, and possibly ensuring compliance with corporate
standards

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Shifting PMO Attention to Strategic Focus
The table shows some important differences between
an operational or monitoring focus and a strategic
focus
The shift simply represents a
greater weighting of PMO
attention towards strategic
considerations
High-performing project
organizations deploy 20% more
key PMO capabilities than
comparable low-performing
organizations

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PMO Strategic Tie-in
The PMO facilitates strategic tie-in for its portfolios,
programs and projects
PMOs accomplish this in
several ways:
Change enablement
Coaching Project Managers
Connecting organizational silos
Centralized, superior project
management assets
Selection of the right projects
Manulife Financial PMO
The Global Services Project
Management Office (PMO) provides
resourcing, project delivery oversight
and a project methodology framework
with processes, tools and templates to
support successful delivery of large
projects within Manulifes Corporate
Division. This includes delivering
projects and programs for the
Corporate Systems, Information Risk
Management, Strategic Initiatives and
Global Expense Management
departments, as well as for the Global
Chief Technology Officer.
The Global Services PMO also chairs
the Global Project Management (PM)
Council. The PM Council collaborates
across Manulife and John Hancock to
develop project standards, tools and
templates and to recommend best
practices and lessons learned,
facilitating the growth of the project
management profession at Manulife.
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Common PMO challenges:
Increased headcount NHS Scotland eHealth PMO
The key objective of the Scottish Governments

Excessive demand on National eHealth PMO is to co-ordinate the delivery

of all nationally funded projects, program and
systems. With bases in Glasgow and Edinburgh, the
PM resources PMO is well placed to provide advice, support and
guidance in a range of areas relating to project
management.
Increased bureaucracy The strategy of the PMO is to ensure that core
services are understood and adopted by all of key
Power struggles stakeholders and customers. These core services
include:

Streamlining existing project monitoring processes
to encourage information sharing and facilitate
more pro-active knowledge management;

Strengthening the governance of the eHealth
Program through the establishment of Portfolio
Management Groups;

Supporting NHS Boards in improving their project
management maturity through facilitated maturity
assessments and the provision of relevant
specialist project and management support and
advice; and,

Rationalizing project management processes
through the development of a PMO Handbook,
which documents operational procedures.
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Chapter Summary
The design of the organizational structure can either impede or
support the overall success of the organization and projects
McKinseys 7S Framework highlights the interdependencies of
strategy, structure and five other important organizational factors
OBS helps to decompose and document the structure surrounding a
given project
The main types of organizational structure are functional, matrix
and projectized
PMM Models provide a framework for understanding the requisite
elements for more sophisticated and effective project, program and
portfolio management
There are many kinds of PMOs,
delivering a range of services

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