Organizational Context for Project Management

How Organizational Structure Impacts Project Executions

Written by: Casey Jenkins, Owner of Eight Twenty-Eight Consulting LLC

Project executions don’t exist in a vacuum. Operating as a change agent for an organization, projects are a giant process within the broader organizational context. “For successful project management, the organizational setting matters – its culture, its structure, and its strategy play an integral part, and together they create the environment in which a project will flourish or flounder (Pinto, 62).”

While the verbiage here will focus on project executions, this is actually applicable for organizations as a whole. Because organizations and projects are both processes, the concepts are translatable and will actually be interconnected regardless of the sphere they’re applied to.

“For many organizations, projects and project management practices are not the operating norm (Pinto, 62).” With projects being one-time activities that exist outside of the day-to-day activities, “many companies are simply not structured to allow for the successful completion of projects in conjunction with other ongoing corporate activities (Pinto, 62).” This means that for project managers and other business leaders driving change, understanding the organizational context will allow for determining which project management practices can be best employed, regardless of the framework of the organization.

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ORGANIZATIONAL CONTEXT – THE PROJECT ENVIRONMENT

Organizational context refers to the internal and external factors that influence how a company operates and how it approaches projects. It includes the company’s strategy, culture, structure, policies, and operating systems, all of which shape the way that projects are planned, executed, and managed. These factors are key components that can either promote project management effectively, or work against the ability to run projects. The context of the organization provides the baseline for project activities to operate, so understanding these factors is crucial for ensuring that the project aligns with broader organizational goals and operates efficiently within the existing framework.

• Strategy. A company’s strategy defines its long-term goals, competitive positioning, and priorities. Acting as agents of change, projects are used to drive strategic initiatives. This means that the project’s objectives must be closely aligned with the organization’s broader strategy. For example, if a company’s strategy focuses on market expansion, projects may be centered around innovation and growth initiatives.
• Structure. The structure of an organization refers to its hierarchical arrangement, including reporting lines, departmental divisions, and the flow of decision-making authority. This structural framework determines how tasks are distributed, who holds decision-making power, and how teams collaborate and communicate. For project managers, navigating this structure effectively is crucial to managing resources and achieving project objectives.
• Culture. Organizational culture comprises the values, beliefs, and behaviors that guide how work is conducted within the organization. This culture influences decision-making processes, collaboration between teams, and the overall work environment. A collaborative culture fosters open communication and teamwork, while a hierarchical culture may require adherence to formal protocols and decision-making chains.
• Policies. Policies are the formal rules and guidelines governing operations within the organization. These encompass human resource policies, financial regulations, compliance standards, and project management frameworks. Adherence to these policies ensures that project activities align with corporate standards and legal requirements.
• Operating Systems. Operating systems refer to the tools, processes, and technologies that facilitate the organization’s day-to-day operations. This includes project management software, communication platforms, and workflow systems. Proficiency in these systems is essential for project managers to ensure efficient communication and project workflow.

An understanding of these components arms project managers with the ability to approach project execution with potential risks related to organizational context in mind.

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ORGANIZATIONAL STRUCTURE

While the project environment or context play a role in projects, it also dictates the structure of the organization. Organizational structure plays a key role in how projects are managed by establishing the framework for authority, decision-making, resource allocation, and communication channels. For project managers, a thorough understanding of this structure will help to navigate internal processes, understand stakeholders, and lead teams effectively.

The three key elements of organizational structure include resource grouping, formal reporting relationships, and supporting mechanisms.

• Resource Grouping. “Organizational structure identifies the grouping together of individuals into departments and departments into the total organization (Pinto, 71).” Resource grouping refers to how employees, departments, and functions are organized within the company to accomplish tasks. These groupings may be based on function, product line, geography, or project focus. For project managers, resource groupings cand dictate how to mobilize and allocate resources appropriately.
• Formal Reporting Relationships. “Organizational structure dictates the formal reporting relationships, including the number of levels in the hierarchy and the span of control of managers and supervisors (Pinto, 71).” This refers to the hierarchy of authority within an organization, outlining who reports to whom, how decisions are made, and the flow of communication. In some organizations, reporting relationships may be more rigid than in others. Understanding these reporting relationships is vital for project managers in identifying key decision-makers and securing necessary approvals.
• Supporting Mechanisms. “Organizational structure includes the design of systems to ensure effective communication, coordination, and integration of effort across departments (Pinto, 71).” Supporting mechanisms include the systems, tools, processes, and structures that enable an organization to function efficiently. These include communication systems, project management tools, and performance tracking mechanisms, all of which are critical for project managers to coordinate tasks, monitor progress, and align project outcomes with organizational goals.

The structure of an organization directly influences how projects are executed, but it’s important to note that within the project management context there are two structures that operate in tandem; the overall organizational structure and the structure within the project team. Understanding how the to navigate concurrent structures is important for the project manager to ensure that the project team is effectively being utilized.

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COMMON ORGANIZATIONAL STRUCTURE TYPES

Organizations can be structured in many ways and can be anywhere on the spectrum from simple to complex. Typically the structure of an organization “is the result of a reasoned response to forces acting on the firm (Pinto, 72).” In other words, the operating environment drives how the organization will be set-up. This can stem from external forces (competitors, marketplace, regulatory bodies, economic conditions, labor pools, etc.) to internal forces (changes in company size, products, etc.). Organizations typically adopt one of three common structural models, each with its own benefits and challenges for project management.

1. Functional Organizations. In functional organizations, employees are grouped based on their specific expertise or roles. This structure enables departments to specialize in particular functions, such as finance, marketing, or operations, and provides clarity in reporting lines. However, project managers typically have limited authority in such organizations, as functional managers control resources and decision-making. While functional organizations provide clear reporting structures and specialization within departments, this can also act as a weakness and lead to functional siloing. Functional organizations have a clear strength when it comes to efficiency as resources are focused solely on their department’s activities. However for project management this can create challenges with coordinating cross-functionally, slower communication channels, lack of direct project ownership, and competing priorities.
2. Project Organizations. In project organizations, the structure is centered around individual projects, with teams dedicated to specific projects rather than ongoing functional tasks. Project managers in these organizations have full authority over schedules, resources, and decision-making. Once a project is completed, the team is disbanded, and resources are reassigned. While these organizations typically have a strong project focus and flexibility in team assembly, this can pose continuity and inefficiency issues in resource allocation. Along with that, assembling teams with the right expertise can be challenging due to the changing nature of some project needs. Within project organizations, these challenges are combatted as project organizations typically have greater communication across the organization and functional groups, promote effective and quick decision-making, and encourages faster go-to-market executions.
3. Matrix Organizations. Matrix organizations combine elements of both functional and project structures. Employees report to both a functional manager and a project manager, allowing resources to be shared across projects and departments. This structure encourages cross-functional collaboration but requires clear communication to manage dual reporting relationships. There are three types of the matrix structure: weak matrix (functional matrix), balanced matrix, and strong matrix (project matrix). Although matrix organizations often have efficient resource utilization and enhanced cross-department collaboration, there is a complexity that comes with dual reporting relationship and the potential for competing priorities.

The organizational structure can grow and evolve depending on the needs of the organization, the types of projects they are executing, and how the context is changing based upon external factors. For project managers, having the tool to be able to navigate any of these types will be a strength as an organization evolves.

ORGANIZATIONAL CULTURE & IMPACTS ON PROJECT MANAGEMENT

Organizational culture is an important factor in shaping how projects are managed and executed. It influences how teams collaborate, make decisions, and approach challenges. A few ways that a culture impacts projects include:

• Collaboration and Hierarchy: In collaborative cultures, communication is open, and teams work closely across departments. In contrast, hierarchical cultures may prioritize formal decision-making processes, with less interaction between departments. Understanding the culture is essential for project managers to foster collaboration and manage stakeholder expectations.
• Accountability and Performance: In cultures that emphasize accountability, teams are more likely to take ownership of their tasks and strive for high performance. Project managers in such environments can expect teams to be motivated and aligned with project goals. Conversely, in less accountable cultures, project performance may suffer due to lack of commitment.
• Flexibility and Planning: Organizational culture also influences how rigid or flexible project planning processes are. In highly structured and risk-averse cultures, project managers may need to follow strict guidelines and gain multiple approvals before proceeding. In more agile cultures, there may be greater flexibility to adjust plans as the project evolves.
• Measurement of Success: The organizational culture affects how project success is measured. In cultures that prioritize results, project evaluations may focus on key performance indicators (KPIs), timelines, and budgets. In contrast, cultures that emphasize learning may prioritize lessons learned and continuous improvement, even if the project encounters challenges.

CONCLUSION

As a project manager, understanding organizational context will be key for successful project management. That’s not to say that every type of organization needs to be understood. Instead, it’s gathering what comprises the context, what components to be looking out for, and how to navigate those potential challenges as a means to manage a project regardless of the setting. Project managers who are well versed in understanding organizational structure and cultures are better equipped to navigate aligning projects with strategic objectives, managing stakeholders, avoiding potential risks, and delivering a successful outcome.

?References:

1. Pinto, J. K. (2020). Project Management: Achieving Competitive Advantage. Pearson Education Limited.
2. Project Management Institute (PMI) (2017). A guide to the Project Management Body of Knowledge (PMBOK guide). Sixth Edition.

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Casey Jenkins, owner and CEO of Eight Twenty-Eight Consulting LLC, is a supply chain and process improvement advisor and educator. Offering advisory, educational, and project-based services, she adeptly combines education and experience to solve complex supply chain problems. Reach out today to find out how to Take Your Company to the Summit.