Designing Effective Project Organisations

Developed by Qi de Zhao

When designing effective project organisations a lot of different factors and actors have to be considered, for instance the responsibilities and management options of the client. How to organise through the life cycle of a project, determination of the organisational breakdown structure and creating optimal and efficient project teams. The article will first introduce the project management concept and the different actors that occur within construction management, afterwards some general knowledge about organising through the life cycle will be presented. Lastly, the strong owner concept will be presented, it is a framework looking at projects from the client's perspective.

The implementation of the project management concept

Figure 1: The implementation of the project management concept.

Winch has presented three different actors within construction management; The client, the project manager and the resource-bases. The resource bases provide competences required to execute different task within the project. Paul Gaddis has characterised the project manager as the 'manager in the middle', in this context it is between the client and the resource bases. The goal of the project manager is to act as an interface between the client's desires and the capabilities of the resource bases. In addition the project manager has the responsibility to coordinate during the project life cycle in order to fulfil the client's needs and goals. Across different industries an extensive review of research regarding the application of the project management concept has identified a range of applications, which is presented in figure 1. The distinction between the applications depend on whether the manager of the resource-bases have more control or the project manager has more control. When resource-base managers are in complete control, or the project manager has a liaison role, then it is defined as a functional organisation. Finally, when the project manager is in complete control, including the authority to hire staff directly, then it is defined as a cell organisation. Therefore, according to the concept the more control the project manager has, the organisation will go from functional to a cell organisation.

Winch states that, as the project progresses so does the project organisation, the different responsibilities of the resource-bases and project managers become more clearly, the different responsibilities are illustrated on figure 2.

Figure 2: Different responsibilities that the project and resource-base managers have.

The responsibilities of the client

The client assembles a coalition of firms to execute the project mission, and the contractual documents between the firms define the project organisation structure. However the client possess important responsibilities towards leading the project coalition, the responsibilities are:

• Promoter – defining the need for the project and ensuring that it meets that need;
• Financier – obtaining the capital required to finance the project;
• Decision-maker – making those decisions required to push the project through the life cycle;
• Recruiter – mobilising the most appropriate and capable firms to realise the project. This is a legal obligation under European health and safety legislation.

It is difficult to fulfil all the responsibilities and usually not all the clients have the proper organisational capabilities. Due to the need for these organisational capabilities it has led to a development of firms who provide project management services. These firms are called 'project managers', but in practice, they do not manage and provide co-ordination between resource bases, instead they help the client fulfil its responsibilities towards the project coalition.

Organising the project through the life cycle

Henry Mintzberg has characterised project management as 'adminstrative adhocracies', therefore he suggest that it is an adhocracy with bureaucratic tendencies. Furthermore, project organisation is not constant through the project life cycle but dynamic. In the early stages of the life cycle the levels of uncertainty are very high, whereas the levels of uncertainty reduce towards zero as the project nears its completion. Another aspect is that project organisation grows in size through the life cycle. In the beginning, the work is usually done by a few highly skilled people, when the project moves on site a lot of less skilled people come into play. On the biggest projects, thousands of people are working concurrently both on site and off site with the design and providing resources to execute the project. The changes in size and level of uncertainty that the project organisation needs to adjust to lead to important changes within the organisation, Winch describes the changes as:

"..as it moves from divergent to convergent iterative information processing, and on through reciprocal flows to much more of a pooled co-ordination with tasks running in parallel through the life cycle."

According to Winch a basic tenet of designing effective organisations is: "that organisations facing high levels of uncertainty need to be relatively adhocratic in organisation and cannot be large, while organisations facing lower levels of uncertainty can be both relatively bureaucratic and large".

The strong owner concept

This section will present some of the most relevant definitions and points from Winch and Leiringer's paper regarding owner project capabilities for infrastructure development. First the paper defines the 'strong owner' and the 'owner project capabilities'. Secondly, a framework has been developed from reviews of "existing literature complemented by pilot empirical research which provides the basis for a research agenda on the role of the owner of the infrastructure assets in achieving high performance on transportation infrastructure projects". Finally, the paper suggest that the generated framework is applicable to other major projects and programmes.

In the paper some case studies has identified the importance of a 'strong owner' as a dimension of project success. However, Winch and Leiringer state that the case studies only discuss the legal and contractual matters, and therefore the owner can be described as a mere contract-giver and have no relation regarding stakeholder management, institutional context and project strategy. Winch and Leiringer defines the success as: "in terms of the achievement of the expected benefits of the investment project for the owner rather than the broader set of criteria encompassing other stakeholder interests (Cooke-Davies, 2002; DeWit, 1988)."

Project and commercial capabilities

Winch and Leiringer differentiate between dynamic and operational capabilities. Operational capabilities are the ability of the organisation to utilise its resource bases to provide effectively and efficiently goods and services to its customers. Dynamic capabilities, are the ability "of an organisation to purposefully create, extend, or modify the resource base”. Winch and Leiringer state that, when a purchasing firm has a dynamic capability it may only be an operational capability for a supplying firm. Therefore, most of the project-based firms have operational capabilities, whereas the purchasing owner organisation almost always will have dynamic capabilities because they extend the resource-base of the organisation.

Owner project capabilities

Winch and Leiringer's starting point is based on "three domains" viewpoint regarding project organising. "The domains approach starts from the premise that project organising is fundamentally about the creation of new value (Winch, 2010) in the form of assets that can be exploited for beneficial use.". The three domains are: the supplier domain, the domain of the temporary project or programme organisation and the owner domain of the investor organisation, this article will only present the owner aspects.

Figure 3: Owner project capabilties.

The project organising domains model has identified three areas where the owner might need capabilities, and these are:

• Strategic capabilities - The owner himself needs to have these in order to successfully implement the investment projects, it involves missions defition, capital raising stakeholder management, etc.
• Commercial capabilities - These capabilities are used to administer the interface between the owner organisation and the project-based firm, it involves contractual and relational matters.
• Governance capabilities - These capabilities are used to manage the interface between the owner organisation and the temporary project organisation, it involves project coordination and asset integration.

Figure 3 shows an outline of the required owner project capabilities.

Strategic capabilities

Defining the project mission is an important thing to do, basically it answers the question why is the project being done? Winch and Leiringer state that if the owner cannot articulate the project mission clearly then the stakeholders can end up free riding on the project. Raising the capital is another vital owner capability, owners who cannot raise the capital will not have any projects. In addition if the investment cannot be sustained the project will default. Managing stakeholders is another essential aspect within project management, by managing the stakeholders you prevent the stakeholders to free ride during the project.

Commercial capabilities

Winch and Leiringer state that packaging capabilities have received little research attention, however they state that it is the first step in developing an owner contracting strategy through Work Breakdown Structure (WBS). Winch and Leiringer elaborate the packaging capabilties in accordance to contracting strategy terms:

"..this translates into clustering together tasks in the WBS which require relatively intensive levels of coordination into packages for external contract. The interfaces between the packages thereby define what the owner itself needs to manage, whilst interfaces within the packages are the responsibility of the supplier for that element of scope and formally “blind” to the owner. Packaging is therefore fundamental to commercial capabilities because contracts can only be issued for what suppliers can supply, and hence underpins contracting capabilities."

Contracting capabilities is about identifying, selecting, and motivating potential suppliers, furthermore it is crucial that the owner has a good understanding of the supply market.

Relational capabilities, contracts define the formal relationship between the owner and the suppliers. An effective owner is able to select and use an appropriate mix of formal and informal (trust-based relations) relations with their supply chain.

Governance capabilities

Assurance capabilities answer the questions "who, when, what", who should make the decisions during the project lifecycle and on what grounds. Winch and Leiringer state that as the project moves from the design phase into the execution phase an active owner role remains vital. They suggest the three "lines of defence" as an assurance: 1) Perform effective project controls within the owner project team; 2) execute internal assurance independent of project team provided by the programme management office; and 3) internal audit.

Project coordination capabilities, it involve general coordination through the project life cycle but also project controls regarding collection and comparing schedule and budget plans on the executed processes with the original plan. The data can then be used to check up on the project progress and conduct forecasting schedules. The foundation for control is the schedule and budget conducted in project execution planning (PEP). "A study of the UK construction engineering sector (Merrow et al., 2009) showed that performance of projects in execution significantly improves when the owner team implements its own PEP process and manages its own project controls, independently of the contractors, so that the owner team can independently validate estimates provided by the contractor. More generally strong, fully staffed owner teams are vital to successful project execution (Hui et al., 2008; Merrow, 2011)."

Limitations and opportunities

Winch and Leiringer state that the strong owner concept does not explicitly address risk and uncertainty because uncertain events will always occur in projects and it will also influence the practice of three project owner capabilities. In addition Winch and Leiringer state that the current literature regarding project risk management are not up to date and that more research is required in order to illuminate this problem.

Winch and Leiringer argue that the strong owner concept is applicable beyond infrastructure projects. The argument is based on recent research showing that energy infrastructure projects, and in social and business infrastructure has also identified the importance of a owner role.

Reflection upon the strong owner concept

Personally I think that a lot of the mentioned capabilities could be useful in the construction industry, first of all the construction industry has a lot of similarities with the infrastructure industry. In both industry the projects have a project owner and a lot of contractors and sub-contractors, a lot of different processes and stakeholders that need to be managed, and there are public and private projects.

Annotated bibliography

1. Moore R. David, 2002, "PROJECT MANAGEMENT: DESIGNING EFFECTIVE ORGANISATIONAL STRUCTURES IN CONSTRUCTION"

The book presents how to design effective organisational structures in construction. The book examines diversity of factors that has to be considered in determining an initial overall organisation structure. The book also illuminates the possibilities for varying organisation structure in different project environments through the life cycle of a project. Chapter 3 (Establishing a Project’s Relevant Environmental Forces: Recognise the Relevant – Ignore Everything Else?) and chapter 4 (Further Factors in a Possible Model for Organisation Structure Design) is highly recommended.

2. Neilson L. Gary, Estupiñán Jaime and Sethi Bhushan, 2015, "10 Principles of Organization Design" https://www.strategy-business.com/article/00318?gko=c7329

This paper provides a different framework for organisational design.