Project based organisations

Introduction

In recent years more and more industries are moving towards project based approaches . The traditional way of organizing development is rigid in its structures leading to problems in execution of new and innovative initiatives. This is because the organizational structures inhibits the flexibility necessary to develop in a dynamic environment, and inhibits the flexible nature of projects . This has lead researchers and practitioners to looking at ways of organizing in a more flexible manner; projects. The film industry is a classic example of an industry that has historically been working more of less purely project based; a Project Based Organization . This way of working has reached increased attention in other industries in the last couple of decades, where Michael Hobday's work on Project based organisations has been a key source of inspiration for many researchers to build on . This article will focus the Project Based Organisation5 comparing it to the traditional functional organization.

This article will give an overview of Project Based Organizations (PBO's), mainly focusing on the engineering industry. The article will first present the big idea; the characteristics of PBO's and how they solve the problems that occur in the traditional organizational structures, including an overview of the PBO and traditional functional organization structures and perspectives on how Project, Program and Portfolio management relates to the PBO. It will present an application of the PBO; what strategies exist for transforming organizations and which steps to take to enhance the specific values that a PBO structure brings. lastly the article will present the limitations of PBO's, both giving an overview of the limitations inherent to the PBO, as well as limitations in application.

Big Idea

What are Project based organizations?

The Project Based Organization is an organizational form that attempts to create a structure that favors the dynamic and flexible environment of projects. To better be able to understand the project based organization an introduction of its opposite; the traditional functional organization, is necessary.

The functional organization

The traditional functional organization, is structured in departments or functional units each specialized within a certain domain. Classical examples of these functional units or departments are; R&D, Finance, Marketing etc.. The structure of the functional organization is illustrated in figure X, where it can be seen that the departments all run parallel to each other with no links in between. Each department refers to the Senior management, who are in charge of creating the objectives of the organizations vision and strategy. The functional managers thus have to make sure that initiatives within their department align with these to keep the support of Senior Management. This is done through structured documenting practices and well defined formal procedures, such as reporting.

The structure of parallel running departments in the traditional organizations creates silo systems, that makes this type of organization well suited for repetitive operations with small incremental changes. However the structure becomes problematic if the organization introduces a higher rate of projects. This is because there is little range for flexibility or cross domain collaboration in such silo structures. A project manager in such an organizational structure would in the hierarchy be under a head of department. If the project needs collaboration across departments, the manager would have to refer to, and ask permission from all department managers when making decisions. This creates high control for the head of departments yet low control for the project manager, leading to problems in project progress due to low flexibility and authority. It leads to poor communication for the project manager internally with their team and with external partners, because the PM can rarely answer questions without having the decision accepted by each department manager. For the above mentioned reasons it becomes difficult to execute innovative and experimenting initiatives or projects that need competences across specializations in a functional organization.

The Project based organization, attempts to solve these issues of cross collaboration and flexibility, which have arisen in the last decades with the higher project focus that has also entered industries that traditionally were in functional organizations.

The project based organization

The Project Based organization attempts to create a structure that favors the dynamic and flexible environment of projects. Project based organisation (PBO) is an organizational structure where projects are the main driver of business, and the project manager has high control over all functions of the project including resources, with only senior management to refer to. This means that the functional units, i.e. R&D, finance, marketing etc. are integrated in each project in the PBO instead of a project manager having to try to build collaboration across rigid departments as seen in the functional organization. Figure X, illustrates this structure where projects run parallel to each other and are the main driver of the business instead of the domain specializations being main drivers as seen in the functional organization. In the PBO the specialized domains are integrated into each project by gathering a team of employees with the different specializations. This means the team members of the project, can focus on that project only and do not have to prioritize between operational and project work. Furthermore, because the project manager (PM) only refers to senior management and not several other department leads first, the PM is given high authority over the project. This is the key to agility and flexibility that is inherent to PBO's.

Due to these structures and the authority that lies with the PM, the PBO has the ability to deal with fast change as well as being proactive to uncertainty and project risk. The project manager, has the power to make fast decisions that fits with the problem at hand. This characteristic of the PBO stands in contrast to the functional organization where the project manager would not have the authority over resource distribution to make proactive decisions. The PBO structure also leads to an organizational openness that makes it easier to work across organizations and include external stakeholders in the project process. The authority of the PM enhances communication with external partner which means Project manager can ensure that external partners are properly informed, and even part of the decisions made through the project process. Thus the PBO becomes an enabler for co-creation in projects. PBO's are therefore beneficial when dealing with complex products or systems where the clients' needs may change through the progression of the project as they gain more knowledge.

• The structure of PBOs and its advantages in project work
  • open structure leads to innovation - temporary collaboration forms
  • co-creation and inclusion of the client in the project progress
  • prime contractors can look very different - PBO structure helps adapt to the best possible way of operating with the specific client
  • only one main contact point - that can take action on the spot without asking 5 functional units permission
  • flexible structure leads to proactive to uncertainties

The article has now presented to two most important characteristic of the PBO; project driven business, a structure that favors project work ie. a PM with high level of authority. This paragraph will present these in more detail, and explain the underlying mechanisms and principles of the characteristics.

% Furthermore, because projects are the main driving force, each project organisation structure looks different. This is because projects drive the business and therefore also shapes the organizational structure. 

% PBO are contextual: level of product or system innovation influences the given organisational structure as well as the project management

• project shape the organisation
  • kownledge capabilites resources are achieved and shaped through the project
  • prime contractors can look very different - this shapes the communication etc.

Overgang_______________________________________________________________________________________________________________________________

• • PM has huge power over project and this also leaves the PM with huge responsibility - Project management becomes of vital importance

Project, program and portfolio management in the PBO

Organisational strategy - et program bliver sat in for at løse komplekse problemer og bliver fote en del af operations - i en PBO sammenhæng vil dette ske hvis PBO'en er en del af en functional organisation

"An investigation of the influence of organizational design on project portfolio success, effectiveness and business efficiency for project-based organizations Yacoub Petro a,⁎, Paul Gardiner b"

https://www.pmi.org/learning/library/project-based-organizations-strategic-objectives-8119#

Furthermore, PBOs operate mainly in two distinct levels of activities, the organisation level and project level - Organisational capabilities and project organising research Roine Leiringer a , Sujuan Zhang b,∗

Project organising vs. project management - R. Leiringer and S. Zhang

______________________________________________________________________________________________________________________________-

Application

The context of Project based organisations

Pure vs. sub organisation in a mechanistic (do not use this word or use it with description)

Existing strategies for transforming orgnisations

8 step thingy

Limitations

of PBO strcuture

• pure PBO or diluted to PLO
  • PBO can exist within a static organisation
  • Some of the weaknesses of PBO can be lessened or converted to strengths by "diluting" the pure PBO
  • What does the PBO look like when embeeded in a static organisation - describing the mechanisms between the flexibility of the PBO and the static nature of the parent organisation (Mahura og Birillo) (læs op på denne)

Knwoledge sharing and organisational learning:

• Knowledge sharing is one of the key limitations of PBO's - because the PBO handles everything in a flexible way the formal structures for knowledge sharing and developing skills The underlying mechanism are the formal structure eg. that reporting is missing or done in different ways from project to project. Reporting is adapted to the projects' needs but makes it harder to communicate across projects
  • In PBO there are no structures integrated that incentivise cross project learning . Therefore actions needs to be taken explicit to help these constraints and to effectivise project work.
  • No time set aside for learning and skill development . This is further strenghtened in pure PBO's where you always need to be moving to the next project as the business depends on it. Therefore, there is no formal time set aside to learn from the previous projects.

• Learning is not only internally in the PBO or organisation, but learning how to establish good collaboration relationsships is missed. Here lies potential for improving collaboration processes .

• Projects within the PBO, or if part of a static organisation become isolated and have a hard time communicating their benefits etc. to senior management and learn across projects this can create tension acroos the company wide processes. This can furthermore make project teams become disconnected, which again adds to the tension across projects, that should learn from eachother and not diconnect from one another.
• Hard to show the importance and impact of the project

The paradox of flexibility and structure

• how the framework has flexibility as a core, and this can also be a limitation because project-based organisation can differ so much it becomes more difficult to understand and generalise across project based organisations

• Pure PBO may be risky - it depends on project which means you always need to be moving to the next project to keep being in business .

• For employees PBO's can create anxiety and uncertainty because they do not know where to go next .

• The domain specific leadership is dispersed - this means two things:

1. The project is dependent on a project manager who is highly skillfull in project management
   1. becasue there are no functional units - it is hard to divide in domains - everybody needs to know a little bit of everything - you do not utilise specialities as much

One of the key opportunities that arise from the limitations found in the litterature is that project and programme management are of vital importance to target some of the limitations of the PBO. The PBO has a lot of valuable characteristics and advantages. By targeting some of the limitations

• organisational structures instead of operational project management – the framework and context of the project management has an influence on the management and the success of the project
• how PBO's can help stabilize specific factors whilst keeping flexibility for the changing nature of projects. (

• How PBO's can be a supportive framework for program and portfolio management and its success, due to several tasks being streamlined across project

• how knowledge sharing and learning can happen within the organisation to help learn across the project - and when this is is relevant and when it is not

Application limitation

- difficult to understand it is a complex field that goes across several domains - management , organisation and project management practices

- PBO har mange definitioner og det skal man være opmærksom på når man søger efter det - og de er alle i en lidt anden sammenhæng her vil vi holde os til

ikke alle forklarer den organisatoriske struktur som ligger bag    

Annotated bibliography

Davies, A., Hobday, M., 2005. The project-based organisation, in: The Business of Projects: Managing Innovation in Complex Products and Systems. Cambridge University Press, pp. 117–147. https://doi.org/10.1017/CBO9780511493294.007

This book is a great resource for understanding the core principles of project based organisations. The book is about projects and complex products and systems and suggests a form of PBO for the development of such complex and uncertain systems. In it you will find project management and organisational theories in general with a specific chapter dedicated to project based organisations. Here a case study compares the PBO to a functional organisation.