Project based organisations
Contents |
Introduction
In recent years more and more industries are moving towards project based approaches [1]. 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 [2]. 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 [1] [3] [4]. 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[5] has been a key source of inspiration for many researchers to build on [3] [6] [7][8][9][10]. 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.[2] [4] 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.. [11] 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. [2] [11] The functional managers thus have to make sure that initiatives within their department align with these to keep the support of Senior Management.[12] 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.[4] 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. [13] [4]
The project based organization
The Project Based organization attempts to create a structure that favors the dynamic and flexible environment of projects. The Project Based Organization (PBO) is an organizational structure where[4][2][13];
- projects are the main driver of business
- the project manager has high control over all functions and
- flexibility enhances the ability to be proactive towards uncertainty
- openness enhances collaboration with external partners making it easier to be proactive toward e.g. client uncertainty
1. Project based organizations are driven projects.[4] Figure X, illustrates how 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 different specializations. Furthermore, when working project based contrary to function based the knowledge and capabilities are created and build throughout the project. [14] This means that project based organizations requires that the employees not only know their specializations but also have the competences to acquire new knowledge and capabilities [9]. However, employees will only have the project to work, and therefore do not have to prioritize between operational and project work. This frees up time and mental space for building these capabilities. [2]
2. The project manager is the main responsible for the projects in. This means they have high control over all functions of the projects including resources, with only senior management to refer to, as seen in figure X. 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. Furthermore, because the project manager (PM) only refers to senior management and not several other departments first, the PM is given high authority over the project. This is the key to agility and flexibility that is inherent to PBO's.
3. 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.[13] [2] 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.
4. One of the ways of dealing with complexity is stakeholder engagement.[15] The authority of the PM is advantage when working with external partners and working across several organizations, because it leads to an organizational openness.[13] This is because the point of contact is reduced to just the PM, instead of the PM and a number of other departments. [2] This organizational openness makes it easier to include external stakeholders and bring them close to the project process. [13] The enhancement of communication this brings leads to a PM that can ensure that external partners are properly informed, and even part of decision-making processes throughout the project, often leading to higher satisfaction with the client. Thus the PBO becomes an enabler for co-creation in projects. PBO's are therefore beneficial when dealing with complex project where the clients' needs may change through the progression of the project as they gain more knowledge. [2]
The context of the PBO The project based organizations are build on project as the main driver for business. According to the PMBOK Guide 2021 a project is " [...]a temporary endeavor undertaken to create a unique product, service, or result."[16] The definition refers to uniqueness, and even though not all standards agree on this factor, it can still be concluded that projects are often different and need different types of structures to support them, to get the best result. Thus, because PBO's are driven by projects the organization can look very different both from organization to organization, but also from project to project within an organization.
The PBO creates temporary organizations each time a new project is initiated. This means that the objectives of the project will partly define the organizational structure within that project. For example; the level of complexity or innovation of the project will have an impact on; the size of the project, the amount of stakeholders involved, the uncertainty of the project etc. These are all factors that will influence the temporary organization that is created with initiating a project.
Another factor that will influence the organization is the contractor or client of the given project. These will often have different need and requirements for the project and its collaboration or partnership structures, thus shaping the communication structures of the project. This is exactly the benefit of PBO, they are so flexible that they can adapt to the given context of the project; they can adapt to the best possible way of operating with the specific client, project team, project content, project complexity etc.
The PBO can as mentioned also look different from organization to organization. The "pureness" of the PBO can be altered, to fit the need of the organisations' needs. In some industries it is possible to create more or less pure PBO's. The example here could be the film industry. [1] [3] However, a PBO can also exist within a functional organization as a sub organization as shown in figure X. [13] [4] Lastly, the PBO can exist as a so called Project Led Organisation. This is the most common form of the PBO in practice, it has weakly linked functional units that run across the projects, helping to create some structure and coherence between the individual project in the organization, but keeping the main decision authority with the PM.[3] [2] [13]This structure is shown in figure X.
Summing up, the PBO is a project driven business and therefore changes with its environment. It is capable of doing so because of its flexibility and the authority that lies with the PM, creating an open organizational structure and a proactive approach towards uncertainty and risk. The authority that lies with the PM is thus a positive characteristic of the PBO. However, with the authority follows a responsibility. Therefore good management, and especially good Project, Program and Portfolio management, is of vital importance for success in such organizations.
Project, program and portfolio management theory in the PBO domain
The following paragraph will help give an overview of the relationship between the PBO and Project, program and portfolio management.
PBO's operate in two distinct levels of activities; the organizational level and the project level. [9] These levels are represented in figure X; The strategy and business models are developed on the organizational level (green), and the project program and portfolio levels should support that strategy (purple). [17] This relationship between the organizational level and project level is further described in the PMI stanard for portfolio and program management, where strategy implementation is one of the main activities of portfolio management and defining program outputs that support organizational strategy is one of the main activities of program management. [18]
In the context of the PBO, the project manager becomes the link and enabler of the strategies developed on organizational level, to integrate them on project, program and portfolio level. Petro and Gardiner, 2015 suggest that the PBO framework even enhances the effectiveness of project portfolio management, because of the authority of the PM. This shows the importance of both the PBO structure and project, program and portfolio management. It shows the reciprocal support which is found between the two levels, where one cannot succeed without the other, and where the project, program and portfolio management practices are the tools that support and drive the effectiveness and thus success of the projects. [4] [7] It has now been established that project, program and portfolio management is important for organizational success in PBO's.
Application
The context of Project based organizations
It has been explained how the context and "pureness" of the PBO, can vary greatly. The application of the PBO structure will vary depending on this pureness and the context of the organization. Furthermore, to be able to apply this organizational model, an organizational change is necessary, meaning one should be familiar with the good practices and theories of organizational change management. Transforming organizational structures is a big task that needs to be planned carefully, as it involves not only structures but people and the mindset of those.
Theories on change management is vast. This paragraph will present one change theory and elaborating on it in the context of the PBO. This gives the reader an overview of the steps in a change process and can help to make a small test of the PBO structure, by applying it in small scale on one or two teams. For full application the reader is referred to the annotated bibliography, to further reading on organizational change, as there is a manifold of theories that could potentially be used for transitioning to a PBO form, depending on the organizational form one wants to transform from. The PBO specific considerations should be adaptable in some form to most change theories.
Questions to ask if you are ready - [11]
Existing strategies for transforming organizations in the PBO context
An existing and well known strategy of change is Lewin, K.'s three step model (1952). [19] Here it is presented with the expansion made by Lippet, R. et. al. 1958. Cite error: Closing </ref> missing for <ref> tag [2] [5] [20] [21] [9] [10] [7] [22] [6] [23] [3] [8] [24] [12] [18] [16] [11] [14] [15] [25] [26] [27] [28] [29] [4] [13] [17] [30] [19] [31]
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Thiry, M. (2006). A paradoxism for project-based organizations. Paper presented at PMI® Research Conference: New Directions in Project Management, Montréal, Québec, Canada. Newtown Square, PA: Project Management Institute.
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