How Organizational Structures Affect Projects and Project Management

It is true that the structure of an organization can have a major impact on project management.

Think about your own experience. Is it difficult to get traction on your projects? Are there numerous layers of authority that you have to navigate to get approvals for basic tasks? Does your budget get cut because of competition for limited funding? Do your projects lose out in favor of day-to-day routine operations? And you thought it was something you were doing, or failing to do! Well it may have been, but it’s more likely that you are feeling the effects of the organizational structure within which you work. Understanding your working environment better will help you to rise above organizational issues and smooth the way to successful project management.

By looking at three different organizational structures – functional, matrix and projectised – we will discover how each distinct organizational style affects project management.

  1. Functional Organizational Structure. These firms are organized into functional divisions based on primary functions such as engineering, human resources, finance, IT, planning and policy. Each different functional division operates independently and isolated groups of workers in a division report to a functional manager. The functional manager generally both allocates and monitors the work and carries out tasks such as performance evaluation and setting payment levels. In this model project managers have very limited authority. Functional organizations are set up for ongoing operations rather than projects and so this organizational structure is often found in firms whose primary purpose is to produce standardized goods and services.
  2. Matrix Organizational Structure. In a matrix organization control is shared. The project manager shares responsibility for the project with a number of individual functional managers. Shared responsibilities can include assigning priorities and tasks to individual team members. But functional managers still make the final decisions on who will work on projects and are still responsible for administration. Project managers take charge of allocating and organizing the work for the designated project team. In this type of structure there is a balance between ongoing operations and projects, so it is a common structure for organizations that have these dual roles. For instance, local body organizations that are responsible for both maintaining existing infrastructure (ongoing operations) and commissioning the construction of new infrastructure (projects) often have matrix structures.
  3. Projectised Organizational Structure. In a projectised organization the project manager has full authority over the project. This includes the authority to set priorities, apply resources, and to direct the work of the project team. All members of the team report directly to the project manager and everybody is assigned to a project. After completion of the project, resources will be re-assigned to another project. This type of structure is common in firms that work on size-able, long-term projects, such as in the construction industry.

Take a moment to reflect on which type of organizational structure you work in before we move on to discuss how these organizational structures affect projects. Then see if you recognize any of the issues raised.

So what are the implications for project management?

In a functional organization, projects that exist within a single functional division generate no particular organizational issues, but projects that cut across functional divisions can be challenging to manage. Why? Because the project manager has no direct functional authority and must obtain continual cooperation and support from functional managers of other divisions in order to meet project objectives. This can get complicated.

Because the matrix structure gives authority to both project managers and functional managers the outcome is to provide a more seamless division of labor and ultimately to build a stronger team culture. However, the potential for conflict between functional managers and project managers still exists because there is still resource conflict. Everyone who is on a project team has two bosses – their functional manager as well as their project manager.

In a projectised organization authority is centralized. Because projects are removed from functional divisions the lines of communication are shortened. Both these factors enhance the ability to make swift decisions. Project teams develop a strong sense of identity which in turn creates a high level of commitment from team members. Due to their involvement in consecutive projects of a similar nature projectised organizations can develop and maintain a long-term body of experience and skills in specialized areas.

It is clear that projectised organizations make it easier to run projects because the entire structure is set up for that purpose. But if you are managing a project within other organizational structures, then recognizing and understanding the impacts will raise your awareness of the potential project management pitfalls, so that you can be proactive about resolving them. Communication, conflict resolution and team building will be key to your success.

IT Project Management – Setting Up and Delivering IT Projects

Once upon a time, 30 years ago, I accidentally got involved with IT Project Management. I didn’t know it at the time, I was just in a place, at a time, and my work became a project. I didn’t even realize it was IT Project Management that I was doing then, I just had a job to do and did it.

Over many years and many continents my work has become much more formalized as a project mgr. Not that many years ago, I decided to get some proper training and took a Prince 2 course, and certified. Of course, I thought I knew it all. I knew enough to be dangerous and a little more to stay on top of things and no more than that. Taking a Prince 2 course 25 years after I started working was an eye opener. I recommend it to everyone!

Don’t under estimate the value of good training in IT project management, but just as importantly, don’t over estimate its value either. Too many people that pass through project training are never guided into the real-life application of their new found knowledge. Certification is not proof of a capable IT Project Manager.

Just Good Common Sense?

I always thought basic IT project management skills were little more than good common sense. I still believe that. Over the years I’ve become a little jaded and have come to realise that one of the rarest things in this world is good old common sense, especially in the world of IT Prj. mgt.

IT Project Management is NOT a black art, contrary to public opinion. It’s a simple process of gathering requirements, developing a solution or road map to deliver that solution and then delivering it.

Obviously there’s a bit more to it than that. The devil is in the detail as they say, but in principal that’s it. Imagine being asked to go out and buy some milk because you’ve just used the last of it at home. The requirement is easy to understand – a new bottle of milk should end up in the fridge.

But you have to know where you’re going to get it, how much it will cost and roughly how long it will take you to get it. IT project management, indeed any form of project work is just an elaboration on this process. This elaboration is a necessity when it comes to complex projects and projects where significant amounts of money are to be invested.

So what’s in the road map? The basic road map looks something very similar to this;

  1. Scope – get the requirements and agree them with the customer
  2. Plan – Sequence of tasks, timing, resources needed and costs – get these agreed by customer too.
  3. Control – manage the delivery according to the plan, within the schedule and budget.
  4. End – make sure your customer agrees what you have delivered is what was asked for.


Years ago I worked for a consulting practice and they had their own methodology for IT project management. They called it PACE – Plan, Activate, Control, End. They later updated it and called it EPACE – Engage, Plan, Activate, Control, End. In essence this and all the variations of IT project management methodologies – PMI, Prince etc., all cover the same ground. IT Project management is a well defined set of processes combined with common sense and experience. Applying these processes in IT Project Management is what most Project Managers fail to do well.

What was interesting then, was that the this IT Project Management methodology singled out the “Activate” stage as a special attention task. Having done the Prince 2 course and having written several professional development courses for PMI in the past, the “Activate” stage is one of those steps that often get insufficient attention, if any, in the real world. More on this in another article.

Each of the 4 main areas is a skill to manage in its own right.

  1. Understanding exactly what the customer wants. Developing a clear and concise scope of work, and getting it agreed can take a lot of effort and time. Sometimes it’s very quick and relatively easy, for example, a number if investment banks I’ve worked for have templates for new offices, data centres, trading floors etc., so when it came to developing a scope and associated costs and schedule it was quick, accurate and easy – “just tell me how many people as our spreadsheet tool will do the rest..”. On other projects – getting any form of agreement on the customer’s scope has been almost impossible – all the way to the end of the project. Life is never simple, projects are about people. Period.
  2. Producing a schedule, budget, risk assessment, communications plan, quality plan, reporting templates, and engaging the right resources – internal and external staff, is time consuming but vital if the project is to run smoothly.
  3. Managing the delivery or controlling the project delivery is where 75% of the IT Project Management time is spent. This phase also includes having a process and procedures for incident management, change management, inventory or configuration management and resource management. If you don’t do any one of these you’ll be in deep trouble.
  4. Closing out the project – making sure you get agreement on the quality of deliverables – i.e. they meet the customers expectations. Reporting final spend, carrying out a handover to operations and closing down the project  – invoice payments (or accruals), contracts for external resources, configuration management (inventory and documentation) all passed to the customer.

Can you start to see that within each of these phases there is a world of potential for confusion, disagreement, problems and sleepless nights of stress and worry? When you’re managing millions of dollars of a customer’s investment in a project – you better believe it.

Some projects can take several years to complete and managing the challenges of basic IT Project Management responsibilities becomes something you “live”. It’s not always fun, enjoyable, or pleasant. But there is a great deal of satisfaction to be had if the job is done well and the customer gets what he asked for at the end.

IT Project Management is a real life challenge. Projects are about implement change and managing people to make that change happen. Never under estimate the true value of a good project manager. They never earn their real value compared to the effort, experience and skill they bring to a job. Few people outside the IT Project management industry understand what they do.

IT Project management is “the application of common sense and pragmatism to facilitate people to make defined change”.

The Phased Approach to Project Management Implementation

Implementing a PMO can present significant challenges. For that reason, a phased approach to PMO implementation is not only crucial but also a distinguishing characteristic of successful project management consulting firms. Experienced project management consultants know that a phased approach:

(1) helps to overcome resistance to change,
(2) allows for lessons learned in early phases to be incorporated in systems installed in later phases and
(3) establishes a solid foundation of available project-level data prior to rolling-up enterprise-level information. Second, successful project management consultants also know that, when it comes to designing a PMO, there is no such thing as a “universal solution.” To be effective, a PMO must be tailored to your organization’s project types, management/staff capabilities, and organizational culture. A phased approach to implementation allows the necessary time (in the initial phases) to gather first-hand information about project characteristics, personnel, and cultural nuances so that the delivered solution can be tailored appropriately.

The Four Phases of Project Management Implementation

I. Initiation Phase: Throughout the Initiation Phase, project management consultants use pilot projects to build process momentum, overcome natural resistance to change, and gain first-hand knowledge of your organization. This goal of this phase is to successfully mobilize your organization, remediate any current at-risk projects, and set the stage for the next two Installation phases. During this phase, the project management methodology is introduced and software training is conducted; but only for those individuals who will be specifically associated with pilot project teams. Also, a plan for the Project-Level Installation phase is developed and key tools are created that will be utilized during the remaining Installation phases.

II. Project-Level Installation Phase: The second phase utilizes information gathered from pilot projects in the Initiation phase to roll-out structured project planning and control processes for all remaining projects, as well as to formally establish the Project Management Office. This phase can include the creation of PMO job descriptions, formal guidelines for project planning/control, a project web site, and a web-based activity update system – basically the necessary infrastructure to support the consistent, successful application of project management techniques by the PMO. Project Management Training is also rolled-out to the entire organization during the Project-Level Installation Phase. By the conclusion of this phase, the nucleus of a Project management Office is in-place, all project team members have been trained, and the project management consultants are ready to begin transitioning from their role of supporting project team requirements to supporting the PMO staff.

III. Enterprise-Level Installation Phase: During the Enterprise-Level Installation phase, tools are implemented that are focused on managing an organization’s entire portfolio of projects. Examples of these tools include; enterprise performance metrics, a management “dashboard” to gain summary-level visibility to project status, and project scheduling based on limited resources and project priority (enterprise resource leveling). The intent of these types of tools is to (1) provide management with timely and accurate information about the status of the all the projects being undertaken by the organization and (2) support business decision-making that impacts the successful completion of projects such as: changes to staffing, funding, project prioritization, and workload.

During the Enterprise-Level Installation Phase, the Project Management Office staff has already begun to assume some of the day-to-day responsibilities for developing and maintaining ongoing project plans. In doing so, the PMO staff is able to free-up the project management consulting firm to focus on the design and implementation of the enterprise-level tools. By the end of this phase, all responsibility for developing and updating individual project plans have been transitioned from the Project Management Consultants to the PMO staff.

IV. Maintenance Phase: The final phase marks the important transition of the Project Management Office from the project management consultants back to the organization. In addition to supporting the day-to-day responsibilities for planning and controlling individual projects, the PMO staff will now become the focal point for providing the enterprise-level information and analysis required by management. At this point in the project management implementation process, the organization has been well trained, numerous success stories have been created and communicated, virtually all projects have well-developed project plans, and there is widespread support for investing in a formal project planning and control process. Also, the Project Management Office infrastructure is in place, the PMO staff has been trained, and management has necessary visibility to the key project portfolio-level information. Successful completion of this phase creates long-term continuity by implementing the necessary policies and incentives to permanently inculcate project management into the culture of the organization. Ideally, formal project planning and control processes will become recognized as a required core competency and an essential function within the organization.

Deliverables to Expect From Your Project Management Consulting Company Phase 1 – Initiation Phase

  • Initial communication(s) to management and assistance in the identification of pilot projects
  • Project Management methodology and software training for identified pilot team members
  • Project plans and formal control processes in place for all identified pilot projects
  • A library of project “templates” for use during the Installation phases
  • Standardized project coding structures and project-level report formats
  • Finalized requirements and a plan for the Project-Level Installation phase

Phase II – Project-Level Installation Phase

  • Network-based, structured project plans and formal control process for all targeted projects
  • Rollout of PM/software training to all project leaders and team members
  • Training and mentoring of PMO personnel
  • Implementation of the initial PMO infrastructure
  • Finalized requirements and a plan for the Enterprise-Level Implementation phase

Phase III – Enterprise-Level Installation Phase

  • Implementation of the enterprise-level PMO infrastructure
  • Turnover to PMO staff of the day-to-day responsibility for developing and maintaining individual project plans
  • Finalized requirements and a plan for the Maintenance phase

Phase IV – Maintenance Phase

  • Turnover to Project Management Office staff the responsibility for supporting all of the project management requirements of the organization
  • Recommendations to management for policies and incentives required to permanently establish project management as a core competency and essential function


Without a doubt, the design of a Project Management Office must be tailored to the specific needs of its organization in order to be effective. A universal “cookie cutter” approach does not recognize differences in project types, management, or staff capabilities. As a result, standardized solutions tend to have a low probability of success. A phased approach not only maximizes the effectiveness of the project management consulting firm, but also of the organizations that they serve. It allows time in the initial phases to gather crucial, first-hand information, overcomes resistance to change, and leads to a well defined and successful Project Management Office at the end.