The importance of Organizational Structures in Portfolio Management
From apppm
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== Abstract == | == Abstract == | ||
| − | The success of any organization – being a commercial company, public or non-profit organization – is highly dependent on the level of alignment the organization is able to execute on. The mission and vision statement of an organization expresses the end goal – the North Star. In order to achieve these goals, a strategy – the game plan of how to get there – is formulated. In order to execute on the strategy, a carefully selected collection of capabilities that suits and enables the strategy most be established - the organizational setup and design is critical. The success criteria’s of and the organizations ability to execute right projects is closely linked to their ability to design and structure the organization <ref name="Kates"/>. | + | The success of any organization – being a commercial company, public or non-profit organization – is highly dependent on the level of alignment the organization is able to execute on. The mission and vision statement of an organization expresses the end goal – the North Star. In order to achieve these goals, a strategy – the game plan of how to get there – is formulated. In order to execute on the strategy, a carefully selected collection of capabilities that suits and enables the strategy most be established - the organizational setup and design is critical. The success criteria’s of and the organizations ability to execute right projects is closely linked to their ability to design and structure the organization <ref name="KatesKesler"><ref name="Kates"/>. |
The purpose of introducing Project Portfolio Management (PPM) is to establish and formalize an entity that provides insight and transparency for the senior management to constantly align the activities (projects) with the strategy and thereby utilizing the limited economic and human resources of the organization in the best possible way <ref name="PPM"/>. | The purpose of introducing Project Portfolio Management (PPM) is to establish and formalize an entity that provides insight and transparency for the senior management to constantly align the activities (projects) with the strategy and thereby utilizing the limited economic and human resources of the organization in the best possible way <ref name="PPM"/>. | ||
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<ref name="Temo"/>The functional structure is the structure of an organization composed of the departments of the organization, that is required in order to fulfill the services and/or manufacturing of an enterprise. The function in this context is a grouping of employees, who hold the same knowledge or field of work. The functional organization structure is typically the first the manager looks into and groups jobs into departments. The individual department usually works independently and isolated from the other departments and report to a functional manager. The functional manager are the one in control of project budgets and allocation of resources, which means the project managers will have limited authority and more act as coordinators than ‘leaders’. | <ref name="Temo"/>The functional structure is the structure of an organization composed of the departments of the organization, that is required in order to fulfill the services and/or manufacturing of an enterprise. The function in this context is a grouping of employees, who hold the same knowledge or field of work. The functional organization structure is typically the first the manager looks into and groups jobs into departments. The individual department usually works independently and isolated from the other departments and report to a functional manager. The functional manager are the one in control of project budgets and allocation of resources, which means the project managers will have limited authority and more act as coordinators than ‘leaders’. | ||
| − | ''Advantages of a Functional oriented organization''<ref name="Temo"/><ref name="Kates"/> | + | ''Advantages of a Functional oriented organization''<ref name="Temo"/><ref name="KatesKesler"><ref name="Kates"/> |
* Good for small teams or projects since the function has control over the team members and resources required. | * Good for small teams or projects since the function has control over the team members and resources required. | ||
* Easy access to “experts” - since they are in same functional unit. | * Easy access to “experts” - since they are in same functional unit. | ||
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* Centralized resources – ensures sustainability in the organization (the knowledge remain in the individual department) | * Centralized resources – ensures sustainability in the organization (the knowledge remain in the individual department) | ||
| − | ''Disadvantages of a Functional oriented organization''<ref name="Temo"/><ref name="Kates"/> | + | ''Disadvantages of a Functional oriented organization''<ref name="Temo"/><ref name="KatesKesler"><ref name="Kates"/> |
* The organizational structure is primarily applicable for ongoing operations rather than projects | * The organizational structure is primarily applicable for ongoing operations rather than projects | ||
* The work is kept to the individual functional division and isolated to the others. | * The work is kept to the individual functional division and isolated to the others. | ||
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<ref name="Temo"/>The Matrix structure is a structure that groups people and resources by function and by product. This means that the employees of the organization are grouped by their function in order to become more skilled and learn from each other. Furthermore, they are grouped in project or product teams in order to create a diverse group with different skillset and functions that shall develop a specific product. This creates a higher complexity within the reporting network but gives the matrix structure flexibility. | <ref name="Temo"/>The Matrix structure is a structure that groups people and resources by function and by product. This means that the employees of the organization are grouped by their function in order to become more skilled and learn from each other. Furthermore, they are grouped in project or product teams in order to create a diverse group with different skillset and functions that shall develop a specific product. This creates a higher complexity within the reporting network but gives the matrix structure flexibility. | ||
| − | ''Advantages of the matrix structure:''<ref name="Temo"/><ref name="Kates"/> | + | ''Advantages of the matrix structure:''<ref name="Temo"/><ref name="KatesKesler"><ref name="Kates"/> |
* Allow managers to make flexible choices | * Allow managers to make flexible choices | ||
* Authority to both project managers and functional managers – building a strong culture within the teams across divisions. | * Authority to both project managers and functional managers – building a strong culture within the teams across divisions. | ||
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* Team members maintain a home – When a project is finished and they are released, they return to their department and focus on their “business-as-usual” assignments. | * Team members maintain a home – When a project is finished and they are released, they return to their department and focus on their “business-as-usual” assignments. | ||
| − | ''Disadvantages of the matrix structure:''<ref name="Temo"/><ref name="Kates"/> | + | ''Disadvantages of the matrix structure:''<ref name="Temo"/><ref name="KatesKesler"><ref name="Kates"/> |
* Two bosses/managers | * Two bosses/managers | ||
* Conflicts (e.g. resource conflicts, between projects, etc.) between project and functional managers. | * Conflicts (e.g. resource conflicts, between projects, etc.) between project and functional managers. | ||
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<ref name="Temo"/><ref name="PMBok"/>The projectized structure is a structure that groups people and resources by project or product teams. This gives the project manager complete authority of the project and the resources. The projectized organization has rarely a functional manager. This structure work by arranging the different projects into programs or portfolios and execute on them as projects. | <ref name="Temo"/><ref name="PMBok"/>The projectized structure is a structure that groups people and resources by project or product teams. This gives the project manager complete authority of the project and the resources. The projectized organization has rarely a functional manager. This structure work by arranging the different projects into programs or portfolios and execute on them as projects. | ||
| − | ''Advantages of a projectized structure''<ref name="Temo"/><ref name="Kates"/><ref name="PMBok"/> | + | ''Advantages of a projectized structure''<ref name="Temo"/><ref name="KatesKesler"><ref name="Kates"/><ref name="PMBok"/> |
* Efficient project organization – by this is meant that all resources are focused and dedicated to the project assignments. This also eases the scheduling of work | * Efficient project organization – by this is meant that all resources are focused and dedicated to the project assignments. This also eases the scheduling of work | ||
* Loyalty to the project and the project manager – the team only needs to focus on the team’s goals, they do not have other assignments than the project related. | * Loyalty to the project and the project manager – the team only needs to focus on the team’s goals, they do not have other assignments than the project related. | ||
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* The project manager is in control. | * The project manager is in control. | ||
| − | ''Disadvantages of a projectized structure''<ref name="Temo"/><ref name="Kates"/><ref name="PMBok"/> | + | ''Disadvantages of a projectized structure''<ref name="Temo"/><ref name="KatesKesler"><ref name="Kates"/><ref name="PMBok"/> |
* No “home” when project is finished – if there is not a new project after the project has reached its end, the resources are released. Closing a project can mean losing your job. | * No “home” when project is finished – if there is not a new project after the project has reached its end, the resources are released. Closing a project can mean losing your job. | ||
* Lack of professionalism in disciplines – the above mentioned disadvantage can result in lack of professionalism, because when an employee is released, the person’s “know-how” and experience will be lost as well. | * Lack of professionalism in disciplines – the above mentioned disadvantage can result in lack of professionalism, because when an employee is released, the person’s “know-how” and experience will be lost as well. | ||
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== Creating the optimal Project Portfolio Management organizational structure == | == Creating the optimal Project Portfolio Management organizational structure == | ||
| − | [[File:AnneD3.png|left|thumb|300px]] The introduction of Project Portfolio Management is a cultural transformation that strong top-level management commitment – walks the talk – and a few highly skilled, respected and committed “ambassadors” that can drive this cultural transformation. However, culture and cultural changes are not a design parameter that can be demanded, it is the outcome of an organizational design <ref name="Kates"/>. | + | [[File:AnneD3.png|left|thumb|300px]] The introduction of Project Portfolio Management is a cultural transformation that strong top-level management commitment – walks the talk – and a few highly skilled, respected and committed “ambassadors” that can drive this cultural transformation. However, culture and cultural changes are not a design parameter that can be demanded, it is the outcome of an organizational design <ref name="KatesKesler"><ref name="Kates"/>. |
The scope of PPM begins with prepared the proposed project (options) against a set of well-defined selection criteria making sure that only relevant project are ranked and presented. It is significant importance that the PPM organization is having the right information and can determine the witch project that will enter the next stage and witch that will be trashed. The PPM organization must liaise and connects the project with the business. The evaluation is determined based on strategic fit, risks/uncertainty and benefits for the corporation; it is essential for the optimal utilization of the financial and human resources of the enterprise. When project is approved and moves to the active stage, the project enters the performance monitoring where the task of the PPM is to evaluate the project against the selection criteria and the project goal. This phase will clarify project uncertainty that along with performance deficiencies could result in postponement, re-shaping and even termination of the project. The tail of the project tend to be under estimated, but is where the project spend is transformed into business opportunities – the product enters the finalization and maintenance phase (project excellence). Depending on the type enterprise/organization, e.g. pharma, software or public service, the steps and procedures are often governed by a stage gate model adapted to the nature of the projects being executed. | The scope of PPM begins with prepared the proposed project (options) against a set of well-defined selection criteria making sure that only relevant project are ranked and presented. It is significant importance that the PPM organization is having the right information and can determine the witch project that will enter the next stage and witch that will be trashed. The PPM organization must liaise and connects the project with the business. The evaluation is determined based on strategic fit, risks/uncertainty and benefits for the corporation; it is essential for the optimal utilization of the financial and human resources of the enterprise. When project is approved and moves to the active stage, the project enters the performance monitoring where the task of the PPM is to evaluate the project against the selection criteria and the project goal. This phase will clarify project uncertainty that along with performance deficiencies could result in postponement, re-shaping and even termination of the project. The tail of the project tend to be under estimated, but is where the project spend is transformed into business opportunities – the product enters the finalization and maintenance phase (project excellence). Depending on the type enterprise/organization, e.g. pharma, software or public service, the steps and procedures are often governed by a stage gate model adapted to the nature of the projects being executed. | ||
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<ref name="PPM"> Levine, H. A. (2005). '''Project Portfolio Management: A Practical Guide to Selecting Projects, Managing Portfolios, and Maximizing Benefits'''. Jossey-Bass.</ref> | <ref name="PPM"> Levine, H. A. (2005). '''Project Portfolio Management: A Practical Guide to Selecting Projects, Managing Portfolios, and Maximizing Benefits'''. Jossey-Bass.</ref> | ||
<ref name="PMBok"> Project Management Institute, Inc.. (2017). '''Guide to the Project Management Body of Knowledge (PMBOK® Guide)''' (6th Edition). Project Management Institute, Inc. (PMI), Chapter 2. Retrieved from https://app.knovel.com/hotlink/pdf/id:kt011DX0C1/guide-project-management/environmen-overview </ref> | <ref name="PMBok"> Project Management Institute, Inc.. (2017). '''Guide to the Project Management Body of Knowledge (PMBOK® Guide)''' (6th Edition). Project Management Institute, Inc. (PMI), Chapter 2. Retrieved from https://app.knovel.com/hotlink/pdf/id:kt011DX0C1/guide-project-management/environmen-overview </ref> | ||
| + | <ref name="KatesKesler"> Kates, A. & Kesler, G. (2011). '''Leading Organization Design: HOW TO MAKE ORGANIZATION DESIGN DECISIONS TO DRIVE THE RESULTS YOU WANT''' (1st edit.). San Francisco: Jossey-Bass. </ref> | ||
</references> | </references> | ||
Revision as of 17:48, 28 February 2019
Abstract
The success of any organization – being a commercial company, public or non-profit organization – is highly dependent on the level of alignment the organization is able to execute on. The mission and vision statement of an organization expresses the end goal – the North Star. In order to achieve these goals, a strategy – the game plan of how to get there – is formulated. In order to execute on the strategy, a carefully selected collection of capabilities that suits and enables the strategy most be established - the organizational setup and design is critical. The success criteria’s of and the organizations ability to execute right projects is closely linked to their ability to design and structure the organization Cite error: Closing </ref> missing for <ref> tag. [1] [2] [3]. [4] [5] [6] [7] [8]
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