project management prof. dr.-eng. А.А. dulzon prof. dr.-eng. А.А. dulzon tomsk polytechnic...

Project ManagementProject Management

Prof. Dr.-Eng. Prof. Dr.-Eng. А.А. А.А. DulzonDulzon

Tomsk Polytechnic University Tomsk Polytechnic University

International Management Insitute International Management Insitute

Project Management organizational Project Management organizational Structures and standardsStructures and standards

Content of the Module 4Content of the Module 4• 4.1 Introduction4.1 Introduction• 4.2 Organizational theory and structures4.2 Organizational theory and structures• 4.3 Examples of organizational 4.3 Examples of organizational

structuresstructures• 4.4 Project management standards4.4 Project management standards

IntroductionIntroduction

• The organizational structure defines the arrangement of The organizational structure defines the arrangement of resources within an organization.resources within an organization.

• The organizational structure of a given company or The organizational structure of a given company or project is sometimes summarized in the format of an project is sometimes summarized in the format of an organizational breakdown structure (OBS).organizational breakdown structure (OBS).

• An OBS shows the main components of the organization An OBS shows the main components of the organization and how they relate to each other in terms of control and how they relate to each other in terms of control and communication and in terms of any other linkages and communication and in terms of any other linkages or connections that cement the various components or connections that cement the various components together.together.

• Project management may appear in numerous different Project management may appear in numerous different forms depending on the type of organization that is forms depending on the type of organization that is being considered.being considered.

4.2 Organizational Theory and 4.2 Organizational Theory and structuresstructures

• The people within an organization work as part of the overall The people within an organization work as part of the overall organizational structure of the system.organizational structure of the system.

• This defines the position of each individual within the system in This defines the position of each individual within the system in terms of authority, span of control and the other classic terms of authority, span of control and the other classic organizational variables. The organizational structure is therefore organizational variables. The organizational structure is therefore critical to the operation of the project.critical to the operation of the project.

• Different types of organizational structure are more or less Different types of organizational structure are more or less appropriate for different types of project.appropriate for different types of project.

• There are numerous ways of forming project teams within and There are numerous ways of forming project teams within and outside existing organizational structures.outside existing organizational structures.

• The most common project-management form is of a project team The most common project-management form is of a project team working within an existing functional organization.working within an existing functional organization.

• For most organizations undertaking projects the fundamental For most organizations undertaking projects the fundamental consideration is how the project should exist within the organization consideration is how the project should exist within the organization and what the relationship between the organization and the project and what the relationship between the organization and the project will be.will be.

The project within an existing The project within an existing organizationorganization

1. The functional structure1. The functional structure

• Most projects are carried out within the traditional Most projects are carried out within the traditional organization set out along the functional lines.organization set out along the functional lines.

• Although projects carried out in this environment might Although projects carried out in this environment might be strategically important to the organization, they are be strategically important to the organization, they are highly unlikely to be the reason for its existence. They highly unlikely to be the reason for its existence. They are likely to be developmental in nature and would tend are likely to be developmental in nature and would tend to be projects to improve, methods or products.to be projects to improve, methods or products.

• The functional structure is typical of large organization, The functional structure is typical of large organization, and it has some well known sufficient benefits:and it has some well known sufficient benefits:– Functional systems offer good flexibility in the use of Functional systems offer good flexibility in the use of

people. Staff are primarily employed to perform a functional people. Staff are primarily employed to perform a functional job but may be temporarily assigned to a project that job but may be temporarily assigned to a project that requires their particular expertise.requires their particular expertise.



– Functional systems allow individual experts to be effectively Functional systems allow individual experts to be effectively used on a number of projects. If there is a broad base of used on a number of projects. If there is a broad base of expertise within a functional department, they can be expertise within a functional department, they can be employed on different projects with relative ease.employed on different projects with relative ease.

– Functional systems allow specialist knowledge to be easily Functional systems allow specialist knowledge to be easily shared within the function and effectively utilized by the shared within the function and effectively utilized by the project team. This assists in the development of continuity project team. This assists in the development of continuity in the sense that expertise, procedures and administration in the sense that expertise, procedures and administration are maintained within the function despite any personnel are maintained within the function despite any personnel changes that may occur.changes that may occur.

– The function provides the most secure carrier path for an The function provides the most secure carrier path for an individual. Whilst projects may generate a degree of individual. Whilst projects may generate a degree of satisfaction, the functional department probably offers satisfaction, the functional department probably offers more prospect of promotion.more prospect of promotion.



• From a project perspective there are also a number of From a project perspective there are also a number of disadvantages associated with the functional structure. disadvantages associated with the functional structure. The main of them:The main of them:– It is inflexible. The strict lines of accountability and It is inflexible. The strict lines of accountability and

specialization tend to channel approaches and attitudes specialization tend to channel approaches and attitudes toward clearly defined functional roles. As a result toward clearly defined functional roles. As a result functional units often find it difficult to innovate and functional units often find it difficult to innovate and respond to change.respond to change.

– The functional outputs tend to be primary objective of the The functional outputs tend to be primary objective of the organization. Any project structure that attempts to operate organization. Any project structure that attempts to operate within the functional structure will tend to be considered as within the functional structure will tend to be considered as of secondary importance.of secondary importance.

– Cross-functional activities are discouraged.Cross-functional activities are discouraged.– Functional people tend to see the function as their future. Functional people tend to see the function as their future.

Their carrier path are nearly always tied to the function Their carrier path are nearly always tied to the function rather than to any individual project.rather than to any individual project.


2. Pure project structure2. Pure project structure

• Pure project structures are typically used for projects that are Pure project structures are typically used for projects that are difficult to plan accurately and where resource requirements difficult to plan accurately and where resource requirements and provision levels cannot be accurately established and provision levels cannot be accurately established beforehand. Typical examples would include R&D projects.beforehand. Typical examples would include R&D projects.

• In its simplest form a pure project system would have a “pool” In its simplest form a pure project system would have a “pool” of available labour resources that is maintained by the of available labour resources that is maintained by the organization as a whole. The individual project managers can organization as a whole. The individual project managers can dip into this pool and draw a team of people together to become dip into this pool and draw a team of people together to become the project team. In large research and development the project team. In large research and development organizations, there might also be a “pool” of project managers.organizations, there might also be a “pool” of project managers.

• Project systems can operate as pure projects within a Project systems can operate as pure projects within a functional organization. A pure project would comprise a group functional organization. A pure project would comprise a group of specialists who where drown from functional units but of specialists who where drown from functional units but allocated sole (as opposed to shared) responsibility for working allocated sole (as opposed to shared) responsibility for working on the project.on the project.



• Pure project systems may be a “satellite” of a parent Pure project systems may be a “satellite” of a parent that has been set up specifically to deliver projects and that has been set up specifically to deliver projects and could be linked to the parent company by a reporting could be linked to the parent company by a reporting system. Project organizations often have total freedom system. Project organizations often have total freedom within the limits of final accountability; others have within the limits of final accountability; others have functional support assigned to them by their parent functional support assigned to them by their parent company.company.

• Pure project structure can also exist as separate Pure project structure can also exist as separate organization. This type of arrangements tends to exist organization. This type of arrangements tends to exist for relatively large, one-off projects where project team for relatively large, one-off projects where project team members have responsibility solely to the project. The members have responsibility solely to the project. The project itself is usually of relatively long duration.project itself is usually of relatively long duration.



• The benefits of the pure project structure:The benefits of the pure project structure:– The system is flexible and responsive to change.The system is flexible and responsive to change.– The project manager not only has full authority over the The project manager not only has full authority over the

project but has a dedicated project team working under, and project but has a dedicated project team working under, and reporting only, to him.reporting only, to him.

– The project team members report only to the project The project team members report only to the project manager. They are not responsible to a functional manager. They are not responsible to a functional department.department.

– Pure project systems tend to have shorter and clearer formal Pure project systems tend to have shorter and clearer formal (and informal also) communication linkages as there is no (and informal also) communication linkages as there is no functional structure to navigate. The project manager reports functional structure to navigate. The project manager reports directly to senior management.directly to senior management.

– These systems can be particularly effective when there are a These systems can be particularly effective when there are a number of projects operating at any one time within an number of projects operating at any one time within an organizations. This allows the project organization to build organizations. This allows the project organization to build specific skills and expertise in these areas, which can result in specific skills and expertise in these areas, which can result in distinct competitive advantages.distinct competitive advantages.



– In pure project systems, the project team can In pure project systems, the project team can develop a strong sense of identity and motivation; develop a strong sense of identity and motivation; commitment to the project is often high.commitment to the project is often high.

– Authority is centralized and the project team can Authority is centralized and the project team can therefore make quick decisions and react rapidly to therefore make quick decisions and react rapidly to changing circumstances.changing circumstances.

– It easy to see the project as a whole, with less of a It easy to see the project as a whole, with less of a tendency to focus on sub-systems thus losing touch tendency to focus on sub-systems thus losing touch with the whole project.with the whole project.

– It is generally much easier to incorporate external It is generally much easier to incorporate external consultants than in a functional structure.consultants than in a functional structure.



• From the project’s point of view, the pure project system From the project’s point of view, the pure project system appears to be the best supporting structure. However, it appears to be the best supporting structure. However, it has a number of disadvantages:has a number of disadvantages:– Several projects running concurrently may lead to a Several projects running concurrently may lead to a

duplication of effort in some areas.duplication of effort in some areas.– Staffing costs may be very high because each project has full-Staffing costs may be very high because each project has full-

time functional capability whether required or not.time functional capability whether required or not.– Some degree of centralized direction is needed and there has Some degree of centralized direction is needed and there has

to be some form of command hierarchy. Higher levels of to be some form of command hierarchy. Higher levels of authority may have difficulty in interfacing with various authority may have difficulty in interfacing with various programs and projects.programs and projects.

– Project managers (by definitions) tend to think ahead. There is Project managers (by definitions) tend to think ahead. There is often a tendency to bring in key resources early in order to often a tendency to bring in key resources early in order to ensure that they will be available when required and with no ensure that they will be available when required and with no delay. This may lead to increased costs.delay. This may lead to increased costs.



– A sense of competition can sometimes develop between the A sense of competition can sometimes develop between the various project teams.various project teams.

– Project team members tend to have an underlying concern Project team members tend to have an underlying concern about long term commitment. Project deadlines may create a about long term commitment. Project deadlines may create a culture where team members attempt to “cut corners” in order culture where team members attempt to “cut corners” in order to maintain good performance records.to maintain good performance records.

– Pure project staff may become highly competent project Pure project staff may become highly competent project workers, but prolonged absence from a corresponding functional workers, but prolonged absence from a corresponding functional section could result in their losing touch with developments section could result in their losing touch with developments within the functional disciplines. The functional department may within the functional disciplines. The functional department may be better positioned to keep up to date with developments.be better positioned to keep up to date with developments.


3. Matrix structure3. Matrix structure

• A matrix structure represent a compromise between pure project A matrix structure represent a compromise between pure project and pure functional forms. It attempts to combine the benefits of and pure functional forms. It attempts to combine the benefits of the functional organization with those of the pure project the functional organization with those of the pure project organization, whilst at the same time eliminating the organization, whilst at the same time eliminating the disadvantages.disadvantages.

• The matrix structure is the pure project structure overlaid on the The matrix structure is the pure project structure overlaid on the functional divisions of the parent organization.functional divisions of the parent organization.

• The matrix structure is suitable for projects of all sizes and The matrix structure is suitable for projects of all sizes and natures, where team members can be employed on, or assigned natures, where team members can be employed on, or assigned to, projects on either a full-time or a part-time basis whilst to, projects on either a full-time or a part-time basis whilst retaining their home in the functional discipline.retaining their home in the functional discipline.

• This arrangement is often referred to asThis arrangement is often referred to as internalinternal, or , or non-non-executive, project management. executive, project management. It is internal because all aspects It is internal because all aspects are within the organizational boundary. It is non-executive in that are within the organizational boundary. It is non-executive in that the project manager has limited (non-executive) authority within the project manager has limited (non-executive) authority within the system.the system.



Senior managers

Functional manager

Resource

Resource

Resource

Functional team

Functional manager

Resource

Resource

Resource

Functional team

Project team

Project team

Project Manager

Project Manager

Projectboundary

Functional boundaryOrganizational boundary Power

boundary



• Matrix structures may be very strong or very weak, or Matrix structures may be very strong or very weak, or anywhere in between, depending upon the nature of the anywhere in between, depending upon the nature of the projects undertaken. projects undertaken.

• Strong matrix structures veer towards pure project Strong matrix structures veer towards pure project structures and tend to be used on large projects where structures and tend to be used on large projects where employees are assigned to projects on long-term, full-employees are assigned to projects on long-term, full-time basis.time basis.

• Weak structures exist where the only full-time employee Weak structures exist where the only full-time employee on a project is the project manager and everyone else on a project is the project manager and everyone else used on the project is commissioned on short-term basis. used on the project is commissioned on short-term basis. This is common on smaller, shorter-term projects.This is common on smaller, shorter-term projects.



• The main characteristics of an internal project The main characteristics of an internal project management structure are:management structure are:– functional boundaries;functional boundaries;– power or status boundaries;power or status boundaries;– organizational islands;organizational islands;– a project sponsor;a project sponsor;– the project management chair;the project management chair;– interfaces;interfaces;– interface management;interface management;– the process of bidding;the process of bidding;– time recording and cost-center charging. time recording and cost-center charging.



• Advantages:Advantages:– In matrix systems the project has a single person (i.e. the project In matrix systems the project has a single person (i.e. the project

manager) responsible for its success.manager) responsible for its success.– The project has reasonable access to the total capability of each of The project has reasonable access to the total capability of each of

the functional areas and is well placed to draw on the services of the functional areas and is well placed to draw on the services of any of the specialists across all the organization’s departments.any of the specialists across all the organization’s departments.

– Team members are generally assured of their place back in the Team members are generally assured of their place back in the functional department.functional department.

– The project within the matrix structure is flexible and can respond The project within the matrix structure is flexible and can respond rapidly to demands of the client.rapidly to demands of the client.

– Close links to the functional departments ensure that organizational Close links to the functional departments ensure that organizational procedures and systems are well adhered to and are consistent procedures and systems are well adhered to and are consistent across all projects.across all projects.

– Where there are several projects running simultaneously, a matrix Where there are several projects running simultaneously, a matrix structure enables better balancing of resources to meet the structure enables better balancing of resources to meet the demands of the organization as well as the demands of each of the demands of the organization as well as the demands of each of the projects.projects.



• Disadvantages and problems:Disadvantages and problems:– In the case of the power struggle between project manager In the case of the power struggle between project manager

and functional managers, the project will suffer.and functional managers, the project will suffer.– Team members often do not like having two bosses Team members often do not like having two bosses

because it can lead to confusion and conflict.because it can lead to confusion and conflict.– Project management is a complex task in general and the Project management is a complex task in general and the

matrix structure adds a new dimension to that complexity.matrix structure adds a new dimension to that complexity.– Project team members can sometimes have difficulty in re-Project team members can sometimes have difficulty in re-

adjusting to working back in a rigid functional unit on adjusting to working back in a rigid functional unit on completion of the project.completion of the project.

– Projects tend to be depleted of resources towards the end Projects tend to be depleted of resources towards the end of the implementation life cycle. This can make completion of the implementation life cycle. This can make completion very difficult.very difficult.

The project external to the existing The project external to the existing organization organization

• External project management tends to be more External project management tends to be more applicable to smaller organizations. It is a far more applicable to smaller organizations. It is a far more flexible approach and is much more suited to flexible approach and is much more suited to organizations with variable workloads.organizations with variable workloads.

• External project management structures are sometimes External project management structures are sometimes referred to as “executive” project management referred to as “executive” project management structures. The term “executive” refers to the fact the structures. The term “executive” refers to the fact the project manager in this case is the only team leader and project manager in this case is the only team leader and has full authority and control over all components of the has full authority and control over all components of the project team. He does not have to negotiate for project team. He does not have to negotiate for resources with functional managers.resources with functional managers.

The project external to the existing The project external to the existing organizationorganization

• An external project management system could comprise only An external project management system could comprise only internal people but be managed by an external project internal people but be managed by an external project management consultant; it could also comprise a mixture of management consultant; it could also comprise a mixture of internal people and external consultants, all of whom are internal people and external consultants, all of whom are managed by the consultant project manager; or it could managed by the consultant project manager; or it could comprise only external consultants, some or all of whom have comprise only external consultants, some or all of whom have been appointed by the consultant project manager.been appointed by the consultant project manager.

• In external system, different consultants act as agents on In external system, different consultants act as agents on behalf of a client. Some or all of the consultants could work for behalf of a client. Some or all of the consultants could work for different organizations.different organizations.

• External project management systems are susceptible to the External project management systems are susceptible to the problems of differentiation and sentience.problems of differentiation and sentience.

• External project management systems also tend to be subject External project management systems also tend to be subject to more open and competitive fee structures than internal to more open and competitive fee structures than internal systems.systems.


• External project management systems tend to have External project management systems tend to have much more developed organizational linkages than any much more developed organizational linkages than any of the internal forms.of the internal forms.

• Authority links define the power and control structure Authority links define the power and control structure that operates within the system. Authority links are not that operates within the system. Authority links are not the same as contractual links; they need not necessarily the same as contractual links; they need not necessarily follow the same routes through the organizational follow the same routes through the organizational structure.structure.

• Communication links define the lines of communication Communication links define the lines of communication in the system. They might follow the same paths as in the system. They might follow the same paths as contractual authority links, but they may also follow contractual authority links, but they may also follow different paths.different paths.

The project external to the existing The project external to the existing organization organization

• External project management systems tend to have a External project management systems tend to have a much wider range of formal contractual arrangements much wider range of formal contractual arrangements than internal systems.than internal systems.

• In most cases, there would be a formal interacting body In most cases, there would be a formal interacting body to act as a gateway between the organization and the to act as a gateway between the organization and the outside world.outside world.

• The project manager would generally interface with the The project manager would generally interface with the externals through a legal service section. There may be externals through a legal service section. There may be also a change control section, which would monitor also a change control section, which would monitor variation orders and give approval for changes as variation orders and give approval for changes as required by internal regulations or contracts.required by internal regulations or contracts.


Domestic subcontractors

Nominatedsubcontractors

External supplier

Other external service providers

External consultant

External subcontractors

External contractors

External consultant

Senior management

Functional manager

Resource

Resource

Functional team

Functional manager

Resource

Resource

Functional team

Interface manager

Change control section

Legal services section

External project manager


• External project management systems have a External project management systems have a number of distinctive characteristics, which can number of distinctive characteristics, which can be summarized as:be summarized as:– multidisciplinary and shared loyalty group multidisciplinary and shared loyalty group

characteristics;characteristics;– fee structures;fee structures;– external contractual linkages;external contractual linkages;– external non-contractual linkages.external non-contractual linkages.


Multidisciplinary and shared loyalty group characteristicsMultidisciplinary and shared loyalty group characteristics

• This type of a project management structure is usually a This type of a project management structure is usually a conglomeration of different companies and organizations that conglomeration of different companies and organizations that are working together as an alliance to satisfy the project are working together as an alliance to satisfy the project objectives.objectives.

• They are usually paid in the form of fees for their project They are usually paid in the form of fees for their project management systems and therefore tend to be strongly management systems and therefore tend to be strongly multidisciplinary.multidisciplinary.

• They are also susceptible to shared loyalty characteristics. Each They are also susceptible to shared loyalty characteristics. Each consultant and contractor is working for his own practice or consultant and contractor is working for his own practice or company.company.

• The objectives of the practice or company are not the same as The objectives of the practice or company are not the same as the objectives of the client. There will therefore sometimes be a the objectives of the client. There will therefore sometimes be a conflict between parts of the system.conflict between parts of the system.

• External project management systems more susceptible to the External project management systems more susceptible to the problems of differentiation and sentience than internal project problems of differentiation and sentience than internal project management systems.management systems.

The project external to the existing The project external to the existing organizationorganization Fee structuresFee structures

• External project management systems tend to be External project management systems tend to be subject to much more open and competitive fee subject to much more open and competitive fee structures than internal systems.structures than internal systems.

• Negotiated fees are now generally accepted as normal Negotiated fees are now generally accepted as normal for most applications. The client might require the for most applications. The client might require the various consultants to look at the project and make a bid various consultants to look at the project and make a bid in the form of a plan or proposal. This plan or proposal in the form of a plan or proposal. This plan or proposal shows the bidder’s intended method of executing the shows the bidder’s intended method of executing the project, together with a fee breakdown showing what project, together with a fee breakdown showing what fees would be payable and on what basis.fees would be payable and on what basis.

The project external to the existing The project external to the existing organizationorganization Fee structuresFee structures

• External fee structures can be based on either hourly External fee structures can be based on either hourly rates or percentages. Percentage fees are are usually rates or percentages. Percentage fees are are usually based on some predetermined project cost total. based on some predetermined project cost total. Designer fees are often based on the measured works Designer fees are often based on the measured works total.total.

• Percentage fees may also be based on other totals, such Percentage fees may also be based on other totals, such as final account total, which includes all measured as final account total, which includes all measured works, and additionally includes elements such as works, and additionally includes elements such as variation order totals, expended prime cost and variation order totals, expended prime cost and provisional sums, etc. On large projects, the final provisional sums, etc. On large projects, the final account total can be double the measured works total.account total can be double the measured works total.


External contractual linkagesExternal contractual linkages

• External project management systems tend to have a External project management systems tend to have a much wider range of contractual arrangements than much wider range of contractual arrangements than internal systems. This is because the external approach internal systems. This is because the external approach has a wider range of external team members and has a wider range of external team members and therefore a higher degree of risk of non-performance. therefore a higher degree of risk of non-performance.

• External involvement can be more or less risky depending External involvement can be more or less risky depending on the degree of trust that is present.on the degree of trust that is present.

• Contracts are the most common approach to controlling Contracts are the most common approach to controlling risk where there is a significant external element.risk where there is a significant external element.

• The types and range of contracts used will depend on the The types and range of contracts used will depend on the specific application within the external system.specific application within the external system.



• Generally, contractual linkages can take one of three Generally, contractual linkages can take one of three primary forms:primary forms:– Completion contracts.Completion contracts. Completion contracts are generally Completion contracts are generally

one-off contracts where the contractor agrees to supply one-off contracts where the contractor agrees to supply specific goods and services, usually at some kind of agreed specific goods and services, usually at some kind of agreed cost and by a specific date.cost and by a specific date.

– Term contracts.Term contracts. Term contracts are long-term agreements. Term contracts are long-term agreements. The supplier agrees to supply goods at an agreed rate to an The supplier agrees to supply goods at an agreed rate to an agreed standard for a fixed term.agreed standard for a fixed term.

– Service-level agreements.Service-level agreements. These are contracts where the These are contracts where the level of service is set rather than the performance of a level of service is set rather than the performance of a specific outcome.specific outcome.

– All three forms of contracts can be priced and arranged All three forms of contracts can be priced and arranged through a competitive contract or through negotiation. through a competitive contract or through negotiation. Negotiated contracts are often used as extensions to Negotiated contracts are often used as extensions to existing contracts or where the work is highly specialized.existing contracts or where the work is highly specialized.



• Within the classifications above, individual contracts Within the classifications above, individual contracts may be of different types:may be of different types:– Fixed-price contracts.Fixed-price contracts.– Cost or cost-plus contracts.Cost or cost-plus contracts.– Reimbursement contracts.Reimbursement contracts.– Target-price contracts.Target-price contracts.

• Fixed price and cost contracts account for the majority of Fixed price and cost contracts account for the majority of contracts issued in most industries. They represent the contracts issued in most industries. They represent the two extremes of risk for clients and contractors. The two extremes of risk for clients and contractors. The client’s risk is clearly greatest in the case of cost-plus client’s risk is clearly greatest in the case of cost-plus contract, while it is lowest in the case of a fixed-price contract, while it is lowest in the case of a fixed-price contract. The contractor usually compensates for this by contract. The contractor usually compensates for this by increasing tender prices.increasing tender prices.



• Individual contract types can take a number of different Individual contract types can take a number of different forms:forms:– Standard forms of contract.Standard forms of contract.– Professional services contracts.Professional services contracts.– Supply contracts.Supply contracts.– Subcontract agreements.Subcontract agreements.

• Domestic subcontractor agreements.Domestic subcontractor agreements.• Nominated subcontractor agreements.Nominated subcontractor agreements.

– Pro-forma contracts.Pro-forma contracts.



• Typical contractual links in an external system would Typical contractual links in an external system would include the following:include the following:– Client to project manager and other design team members.Client to project manager and other design team members.– Client to main contractor.Client to main contractor.– Client to service authorities.Client to service authorities.– Client to nominated subcontractors and suppliers.Client to nominated subcontractors and suppliers.– Client to local authority. These contracts are primarily Client to local authority. These contracts are primarily

regulated by statutory requirements. They include regulated by statutory requirements. They include requirements such as mandatory inspections and the issue requirements such as mandatory inspections and the issue of certification such as a safety certificate. Most of certification such as a safety certificate. Most construction projects, for example, will generate a construction projects, for example, will generate a requirement for some form of planning permission and requirement for some form of planning permission and other statutory consents.other statutory consents.


External non-contractual linkagesExternal non-contractual linkages

• The contracts form the basic structure of the external system. The contracts form the basic structure of the external system. However, external management systems cannot work However, external management systems cannot work effectively without additional links. These are authority links effectively without additional links. These are authority links and communication links.and communication links.

• Authority links define the power and control structure that Authority links define the power and control structure that operates within the system.operates within the system.

• In most external management structures the client would be at In most external management structures the client would be at the head of the structure., and would relate instructions the head of the structure., and would relate instructions directly to the project manager.directly to the project manager.

• In some cases, the client might devolve all authority to the In some cases, the client might devolve all authority to the project manger, in which case responsibility for all authority project manger, in which case responsibility for all authority would be transferred. In other cases, the client might transfer would be transferred. In other cases, the client might transfer 90% of authority, but retain strategic or milestone control over 90% of authority, but retain strategic or milestone control over key stages.key stages.



• Authority links are not the same as contractual links, and they need not Authority links are not the same as contractual links, and they need not necessarily follow the same routes through the organizational structure.necessarily follow the same routes through the organizational structure.

• An example of possible authority and contractual links for external An example of possible authority and contractual links for external consultants:consultants:

Client representative

Legal services section

External project manager

External consultant

External consultant

External contractor

External supplier

External subcontractor

External subcontractorAuthority linksContractual links



• Communication links, depending on the application, might Communication links, depending on the application, might follow the same paths as contractual and authority links, but follow the same paths as contractual and authority links, but they may also follow different paths.they may also follow different paths.

• The project manager is generally the focus of the authority and The project manager is generally the focus of the authority and communication links. communication links.

• In most external project-management scenarios, the project In most external project-management scenarios, the project manager would expect to retain communication and authority manager would expect to retain communication and authority control over the other external team members.control over the other external team members.

• It would generally be inadvisable to allow a communication It would generally be inadvisable to allow a communication link to exist between the client and the other externals. This link to exist between the client and the other externals. This would lead to the risk of communications being made that would lead to the risk of communications being made that bypass the project manager. The classic result of this would be bypass the project manager. The classic result of this would be the introduction of creeping scope and cost escalation.the introduction of creeping scope and cost escalation.

• Some organizations introduce a change control section.Some organizations introduce a change control section.

External non-contractual linkagesExternal non-contractual linkagesPossible authority, contractual and communication

arrangement for external consultants, with change control

Advantages of the external project Advantages of the external project management management

• It is flexible and adaptive.It is flexible and adaptive.• It can respond rapidly to change.It can respond rapidly to change.• The use of external specialists can bring new ideas and The use of external specialists can bring new ideas and

approaches into the organization.approaches into the organization.• Areas of work where there is no in-house specialization Areas of work where there is no in-house specialization

can be outsourced to appropriate external specialists.can be outsourced to appropriate external specialists.• An appropriate structure can be established relatively An appropriate structure can be established relatively

quickly and easily and it can be staffed with the optimal quickly and easily and it can be staffed with the optimal range of specialists.range of specialists.

• The team can be disbanded quickly and easily if The team can be disbanded quickly and easily if workload or demand changes.workload or demand changes.

• Internal risks such as key people being unavailable can Internal risks such as key people being unavailable can be avoided. be avoided.

Disadvantages of the external project Disadvantages of the external project managementmanagement

• External specialists tend to be expensive.External specialists tend to be expensive.• External specialists have no loyalty to the organization or commitment to External specialists have no loyalty to the organization or commitment to

the project.the project.• Recourse against poor performance can be difficult and the level of Recourse against poor performance can be difficult and the level of

authority and control that can be exercised over external specialists is authority and control that can be exercised over external specialists is limited.limited.

• A whole new administrative and control system is required. The involvement A whole new administrative and control system is required. The involvement of additional internal sections (such as legal services) may be required.of additional internal sections (such as legal services) may be required.

• More rigid and controlled communication systems are required where More rigid and controlled communication systems are required where communications cross the organizational boundary. Communications with communications cross the organizational boundary. Communications with external specialists can have contractual implications.external specialists can have contractual implications.

• The risk profile of the organization in general and the project in particular The risk profile of the organization in general and the project in particular changes significantly. The possibility of arbitration and litigation enters the changes significantly. The possibility of arbitration and litigation enters the risk equation.risk equation.

• The already complex job of the project manager becomes more complex The already complex job of the project manager becomes more complex still.still.

Criteria for selecting the Criteria for selecting the organizational structureorganizational structure

• Authority.Authority.– The pure functional form uses a traditional reporting The pure functional form uses a traditional reporting

structure with a clear line of authority running down structure with a clear line of authority running down through the structure. Everybody has a clear set of through the structure. Everybody has a clear set of objectives and there is a clear reporting line.objectives and there is a clear reporting line.

– In the matrix structure individual team members have more In the matrix structure individual team members have more than one reporting line. There is an immediate risk of than one reporting line. There is an immediate risk of confusion and contradiction. This means that more confusion and contradiction. This means that more stringent communication and coordination systems are stringent communication and coordination systems are required. A new level of control through the project sponsor required. A new level of control through the project sponsor is required. The performance of individual sections is required. The performance of individual sections becomes more difficult to assess.becomes more difficult to assess.

– A pure project system offers shorter lines of communication A pure project system offers shorter lines of communication andand


• Communication.Communication.– Formal communication is the easiest in a functional Formal communication is the easiest in a functional

structure, but functional boundaries restrict the informal structure, but functional boundaries restrict the informal communication. Authority boundaries may restrict both communication. Authority boundaries may restrict both formal and informal vertical communication.formal and informal vertical communication.

– A matrix structure reduces this blocks to some extent and A matrix structure reduces this blocks to some extent and particularly opens up formal cross-functional particularly opens up formal cross-functional communications.communications.

– A pure project structure makes the greatest use of informal A pure project structure makes the greatest use of informal communications and offers the most flexible communications and offers the most flexible communication solution.communication solution.


• Knowledge transfer.Knowledge transfer.– Functional knowledge is the easiest type of knowledge to Functional knowledge is the easiest type of knowledge to

store and use in future operations.store and use in future operations.– A matrix structure allows functional knowledge to be used A matrix structure allows functional knowledge to be used

in projects, and the projects themselves can develop new in projects, and the projects themselves can develop new knowledge that can be fed back into the functional knowledge that can be fed back into the functional knowledge store.knowledge store.

– Knowledge transfer in a pure project structure tends to be Knowledge transfer in a pure project structure tends to be restricted to areas of commonality between individual restricted to areas of commonality between individual projects.projects.


• Loyalty.Loyalty.– A functional structure tends to develop the greatest A functional structure tends to develop the greatest

individual loyalty, as employees tend to associate their individual loyalty, as employees tend to associate their carrier progression with the functional section. This can carrier progression with the functional section. This can lead to situation in which the project may be seen as lead to situation in which the project may be seen as secondary.secondary.

– In a matrix structure this loyalty can be shared to some In a matrix structure this loyalty can be shared to some extent as individual project team members remain extent as individual project team members remain members of their functional sections.members of their functional sections.

– In a pure project structure individual progression may or In a pure project structure individual progression may or may not be related to the success of individual projects. may not be related to the success of individual projects. Loyalty may become a problem.Loyalty may become a problem.


• Technology.Technology.• Functional sections tend to rely on the use of existing Functional sections tend to rely on the use of existing

technology in order to manufacture or produce technology in order to manufacture or produce something.something.

• In a matrix structure the project teams are more likely to In a matrix structure the project teams are more likely to use existing technology to innovate. In addition, because use existing technology to innovate. In addition, because project teams tend to look at problems in a different way project teams tend to look at problems in a different way they may generate a demand for new technological they may generate a demand for new technological innovations or for the use of existing technology that has innovations or for the use of existing technology that has not previously been used by the organization.not previously been used by the organization.

• Pure project structures tend to produce the greatest Pure project structures tend to produce the greatest demand for innovative technology.demand for innovative technology.


• Cost.Cost.– Pure functional structures tend to have large fixed costs. They Pure functional structures tend to have large fixed costs. They

are inflexible to changes in workload.are inflexible to changes in workload.– The matrix structure is more flexible in that the project teams The matrix structure is more flexible in that the project teams

can be increased or decreased in size depending on workload can be increased or decreased in size depending on workload variations.variations.

– The pure project structure is the most flexible approach and The pure project structure is the most flexible approach and can produce the lowest running costs.can produce the lowest running costs.

• Coordination.Coordination.– Pure functional structures have the most formal reporting Pure functional structures have the most formal reporting

systems and therefore the degree of coordination required is systems and therefore the degree of coordination required is low.low.

– In a matrix structure enhanced coordination is necessary In a matrix structure enhanced coordination is necessary because functional boundaries and increased potential for because functional boundaries and increased potential for destructive competition and conflict.destructive competition and conflict.

– Pure project structures require similar high levels of Pure project structures require similar high levels of coordination in order to avoid the possibility of duplication of coordination in order to avoid the possibility of duplication of effort.effort.


• Support functions.Support functions.– Pure functional structures require well-developed Pure functional structures require well-developed

centralized support functions.centralized support functions.– Matrix structures have a similar requirement. Large projects Matrix structures have a similar requirement. Large projects

may have their own administration and IT support.may have their own administration and IT support.– Pure project organizations may require little or no Pure project organizations may require little or no

centralized support.centralized support.

• In most cases, the organizational structure of the In most cases, the organizational structure of the company is given, and the project manager has to company is given, and the project manager has to design the project structure and then incorporate it into design the project structure and then incorporate it into existing structure.existing structure.

Choice of organizational structureChoice of organizational structure• A pure functional organizational structure should be chosen A pure functional organizational structure should be chosen

where:where:– the workload is constant and only varies slightly;the workload is constant and only varies slightly;– projects are required only infrequently;projects are required only infrequently;– there are well developed centralized support functions;there are well developed centralized support functions;– clearly defined authority structures are required;clearly defined authority structures are required;– informal communication systems are not required;informal communication systems are not required;– there is adequate back-up for key personnel;there is adequate back-up for key personnel;– the functional objectives are the primary concern of the the functional objectives are the primary concern of the

organization;organization;– change is unlikely to be a major consideration;change is unlikely to be a major consideration;– any projects are relatively small or insignificant;any projects are relatively small or insignificant;– fast project response time is not required.fast project response time is not required.

Choice of organizational structureChoice of organizational structure• A matrix organizational structure should be chosen where:A matrix organizational structure should be chosen where:

– workload is variable;workload is variable;– projects are frequently required;projects are frequently required;– a degree of research and innovation is required;a degree of research and innovation is required;– centralized support functions are present or partially outsourced;centralized support functions are present or partially outsourced;– split authority structure are acceptable;split authority structure are acceptable;– informal communication systems are acceptable;informal communication systems are acceptable;– projects are secondary but of significant importance;projects are secondary but of significant importance;– some degree of change has to be accommodated;some degree of change has to be accommodated;– any projects are small to medium size;any projects are small to medium size;– fast project response time is not generally required.fast project response time is not generally required.

Choice of organizational structureChoice of organizational structure• A pure project organizational structure should be chosen A pure project organizational structure should be chosen

where:where:– the workload varies significantly;the workload varies significantly;– projects occur frequently or are dominant;projects occur frequently or are dominant;– a high degree of research and innovation is required;a high degree of research and innovation is required;– there is little or no centralized support function;there is little or no centralized support function;– authority can be almost entirely devolved to project managers;authority can be almost entirely devolved to project managers;– projects are the primary concern of the organization;projects are the primary concern of the organization;– high levels of change are present;high levels of change are present;– projects are large and involve a lot of resources;projects are large and involve a lot of resources;– fast project response time is standard.fast project response time is standard.

4.4. Project management 4.4. Project management standardsstandards

• In the UK there are three major standards that are used In the UK there are three major standards that are used as the basis for professional project management as the basis for professional project management practice:practice:– the IPM Body of Knowledge (BoK);the IPM Body of Knowledge (BoK);– BS6079 and the related ISO10006;BS6079 and the related ISO10006;– PRINCE2 (Project management IN a Controlled PRINCE2 (Project management IN a Controlled

Environment).Environment).• In addition to these generic international documents, In addition to these generic international documents,

there are specific codes of practice and summaries of there are specific codes of practice and summaries of project management practice and application within project management practice and application within large organizations.large organizations.

Project management standardsProject management standardsThe APM and APM body of knowledgeThe APM and APM body of knowledge

• The APM is the professional body for project The APM is the professional body for project management in the UK. It is a part of the IPMA and is management in the UK. It is a part of the IPMA and is therefore an international body.therefore an international body.

• The stated aims and objectives of the APM are:The stated aims and objectives of the APM are:– to act as first point of contact;to act as first point of contact;– to lead the development of professionalism;to lead the development of professionalism;– to champion interest representation;to champion interest representation;– to establish standardization of qualification;to establish standardization of qualification;– to develop a functioning national branch network;to develop a functioning national branch network;– to establish practice and procedures for training.to establish practice and procedures for training.

Project management standardsProject management standardsThe APM body of knowledge profileThe APM body of knowledge profile

• The APB BoK lists four primary ares in which a qualified The APB BoK lists four primary ares in which a qualified project manager must have relevant academic and project manager must have relevant academic and experimental ability and a detailed knowledge and experimental ability and a detailed knowledge and understanding of the theory and practical application:understanding of the theory and practical application:1. Project management.1. Project management. It includes specific aspects such as an understanding of It includes specific aspects such as an understanding of

project life cycles, project strategy and the project project life cycles, project strategy and the project environment.environment.

2. Organization and people.2. Organization and people. It includes leadership, communication and team building.It includes leadership, communication and team building.3. Techniques and procedures.3. Techniques and procedures. It include such areas as scheduling and estimating.It include such areas as scheduling and estimating. 4. General management.4. General management. It includes finance and low.It includes finance and low.

Project management standardsProject management standardsBS6079BS6079

• BS6079 is the British Standard Guide to Project BS6079 is the British Standard Guide to Project Management. It establish guidelines and procedures for Management. It establish guidelines and procedures for project management practice in the UK.project management practice in the UK.

• One of the most important single section in the whole One of the most important single section in the whole document is the standard project plan (SPP).document is the standard project plan (SPP).

• The main elements of the generic SPP:The main elements of the generic SPP:– Preliminaries.Preliminaries.– Project aims and objectives.Project aims and objectives.– Subject specific sections.Subject specific sections.

• The SPP contains all relevant project information. In The SPP contains all relevant project information. In practice the SPP is developed over time during the practice the SPP is developed over time during the planning process.planning process.

Project management standardsProject management standardsPRINCE2PRINCE2

• PRINCE2 is an alternative to BS6079. It is a project PRINCE2 is an alternative to BS6079. It is a project management methodology that covers the organization, management methodology that covers the organization, management and control of projects. It is based on a management and control of projects. It is based on a process model of a project.process model of a project.

• This involves breaking the project down into component This involves breaking the project down into component processes. Each process is then defined in terms of it processes. Each process is then defined in terms of it key inputs and outputs and in terms of the aims and key inputs and outputs and in terms of the aims and objectives for each process. It is therefore based on the objectives for each process. It is therefore based on the lifecycle of the project, with each component evaluated lifecycle of the project, with each component evaluated and analyzed separately.and analyzed separately.

• The process model demonstrates how a project can be The process model demonstrates how a project can be divided up into manageable elements, each handled divided up into manageable elements, each handled separately. This allows more efficient use of resources separately. This allows more efficient use of resources and more accurate measuring of the progress.and more accurate measuring of the progress.

Review questions (Review questions (Module 4)Module 4)Organizational theory and structuresOrganizational theory and structures

• True or false?True or false?• 4.1 The main reason that project management has evolved is 4.1 The main reason that project management has evolved is

because projects have become more complex.because projects have become more complex.• 4.2 The single most important component in whether or not a 4.2 The single most important component in whether or not a

project succeeds is people.project succeeds is people.• 4.3 All projects can operate successfully within existing 4.3 All projects can operate successfully within existing

organizations.organizations.• 4.4 Pure project systems are based on randomized project 4.4 Pure project systems are based on randomized project

groups working towards undefined targets.groups working towards undefined targets.• 4.5 Pure project systems generally have simpler lines of 4.5 Pure project systems generally have simpler lines of

communication than matrix structures.communication than matrix structures.• 4.6 Pure project systems are more prone to groupthink.4.6 Pure project systems are more prone to groupthink.• 4.7 Internal project management systems offer good staff 4.7 Internal project management systems offer good staff

flexibility.flexibility.


• True or false?True or false?• 4.8 In internal systems, the project will tend to have a higher 4.8 In internal systems, the project will tend to have a higher

priority than the function.priority than the function.• 4.9 In internal systems, the project manager and the functional 4.9 In internal systems, the project manager and the functional

manager generally have similar authority.manager generally have similar authority.• 4.10 There is a low potential for conflict in internal project 4.10 There is a low potential for conflict in internal project

management systems.management systems.• 4.11 Interfaces are points where organizational linkages cross 4.11 Interfaces are points where organizational linkages cross

boundaries.boundaries.• 4.12 Functional boundaries tend to run vertically while authority 4.12 Functional boundaries tend to run vertically while authority

boundaries tend to run horizontally.boundaries tend to run horizontally.• 4.13 The project sponsor has executive authority over the project 4.13 The project sponsor has executive authority over the project

manager and the functional manager.manager and the functional manager.• 4.14 There is generally more conflict in a matrix structure. 4.14 There is generally more conflict in a matrix structure.


• 4.15 The project within the matrix structure is flexible and can 4.15 The project within the matrix structure is flexible and can respond rapidly to the demands of the client in a way the respond rapidly to the demands of the client in a way the functional organization cannot.functional organization cannot.

• 4.16 The project within the functional structure is flexible and 4.16 The project within the functional structure is flexible and can respond rapidly to the demands of the client in a way the can respond rapidly to the demands of the client in a way the functional organization cannot.functional organization cannot.

• 4.17 A hybrid structure is basically a combination of pure 4.17 A hybrid structure is basically a combination of pure project and pure functional structure.project and pure functional structure.

• 4.18 External project management involves people who all 4.18 External project management involves people who all come from outside the main organization.come from outside the main organization.

• 4.19 Authority links always follow contractual links.4.19 Authority links always follow contractual links.• 4.20 Contractual links always follow authority links.4.20 Contractual links always follow authority links.


• 4.23 At which of the following levels can projects operate?4.23 At which of the following levels can projects operate?A Only within functional units. A Only within functional units. B Only outside functional levels.B Only outside functional levels.C Partially within and outside functional units. C Partially within and outside functional units. D across functional units.D across functional units.• 4.24 Research associates working on a research contract 4.24 Research associates working on a research contract

within an existing department would be an example of which within an existing department would be an example of which structure?structure?

A pure functional. B Pure project. C Matrix. D Hybrid.A pure functional. B Pure project. C Matrix. D Hybrid.• 4.25 4.25 A college department with no research and all teaching A college department with no research and all teaching

would be an example of which structure? would be an example of which structure? A pure functional. B Pure project. C Matrix. D Hybrid.A pure functional. B Pure project. C Matrix. D Hybrid.• 4.26 A team of scientists working only on developing a new 4.26 A team of scientists working only on developing a new

vaccine would be an example of which structure?vaccine would be an example of which structure?A pure functional. B Pure project. C Matrix. D Hybrid.A pure functional. B Pure project. C Matrix. D Hybrid.


• 4.27 Flexibility of human resources is generally best achieved 4.27 Flexibility of human resources is generally best achieved in which structure?in which structure?

A pure functional. B Pure project. C Matrix. D Hybrid.A pure functional. B Pure project. C Matrix. D Hybrid.• 4.28 Individual team-member motivation is likely to be the 4.28 Individual team-member motivation is likely to be the

greatest in which structure?greatest in which structure?A pure functional. B Pure project. C Matrix. D Hybrid.A pure functional. B Pure project. C Matrix. D Hybrid.• 4.29 In a matrix system, the authority of the project manager 4.29 In a matrix system, the authority of the project manager

in relation to the authority of the functional manger is likely to in relation to the authority of the functional manger is likely to bebe

A greater B lesser C equal.A greater B lesser C equal.• 4.304.30 In a matrix system, the authority of the project manager In a matrix system, the authority of the project manager

in relation to the authority of the project sponsor and in relation to the authority of the project sponsor and functional manger is likely to befunctional manger is likely to be

A greater B lesser C equal.A greater B lesser C equal.


• 4.31 In a matrix system, operational or organizational islands 4.31 In a matrix system, operational or organizational islands represent areas that are separated byrepresent areas that are separated by

A functional boundaries. B Operational boundaries.A functional boundaries. B Operational boundaries.C functional and operational boundaries. D neither.C functional and operational boundaries. D neither.• 4.32 In terms of operational efficiency, operational islands are 4.32 In terms of operational efficiency, operational islands are

which of the following?which of the following?A Good. B Bad. C Neutral.A Good. B Bad. C Neutral.• 4.33 In general, a matrix system tends to make the project 4.33 In general, a matrix system tends to make the project

manager functionmanager functionA more complex. B less complex. C neutral.A more complex. B less complex. C neutral.• 4.34 In general, in a matrix system, which of the following will 4.34 In general, in a matrix system, which of the following will

be the most important interactive skill of a project manager?be the most important interactive skill of a project manager?A Negotiation skills. B Aggression. C Submission.A Negotiation skills. B Aggression. C Submission.


• 4.35 Fee structures are central to the establishment of most 4.35 Fee structures are central to the establishment of most external project management systems. Generally, fees are based external project management systems. Generally, fees are based on which of following?on which of following?

A Published scales. B Negotiated rates. A Published scales. B Negotiated rates. C Fair and reasonable rates. C Re-measurement on completion.C Fair and reasonable rates. C Re-measurement on completion.• 4.36 Design fees are generally payable4.36 Design fees are generally payableA weekly. B monthly. C annually. D at pre-agreed stages.A weekly. B monthly. C annually. D at pre-agreed stages.• 4.37 Typical external project management fees for managing a 4.37 Typical external project management fees for managing a

$3m housing association refurbishment project be which of the $3m housing association refurbishment project be which of the following?following?

A 0.1 – 0.5%. B 0.5 – 1.0%. C 1.0 – 5.0%. D Over 5%.A 0.1 – 0.5%. B 0.5 – 1.0%. C 1.0 – 5.0%. D Over 5%.• 4.38 Standard forms of contract contain mainly4.38 Standard forms of contract contain mainlyA direct terms. B implied terms. C assumed terms. D default terms. A direct terms. B implied terms. C assumed terms. D default terms.

Review questions (Review questions (Module 4)Module 4)Project management standardsProject management standards

• True or false?True or false?• 4.21 There are no international codes of practice for project 4.21 There are no international codes of practice for project

management.management.• 4.22 ISO9000 is a European standard for project management.4.22 ISO9000 is a European standard for project management.• 4.39 Which of the following is the international regulatory 4.39 Which of the following is the international regulatory

body for global project management services?body for global project management services?A IPMA. B APM. C PMI. D PMS.A IPMA. B APM. C PMI. D PMS.• 4.40 The various project management professional bodies 4.40 The various project management professional bodies

structure their professional standards aroundstructure their professional standards aroundA a code of practice. B a project management charter.A a code of practice. B a project management charter.C a body of knowledge. C a body of knowledge. D a national standard. D a national standard.• 4.41 BS6079 is a British standard. This means that it has4.41 BS6079 is a British standard. This means that it hasA regulatory authority. B advisory authority.A regulatory authority. B advisory authority.C statutory authority. D no authority.C statutory authority. D no authority.

project management prof. dr.-eng. А.А. dulzon prof. dr.-eng. А.А. dulzon tomsk polytechnic...

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