Chapter 3 Project Organization-Presented are alternate organizational structures for

projects. Organizing multinational projects are discussed. A checklist of factors to

consider when organizing international projects and some recommendations.

Organizational Breakdown Structure

o Where a Project Breakdown Structure PBS refers to the breaking down of
tasks the Organizational Breakdown Structure OBS refers to the
organization of an environment within which a project is to be carried out.
o The OBS model provides a way of organizing resources into groups for
better management into an organization.
o Provides a method to track resources and specific work assignments.
o Good team organization is essential. Below are some requirements of a
good OBS team:
Background of the team leader: experience, education, technical
knowledge.
Scope of work to be accomplished: hours, skills, locations.
Estimate of the number and type of personnel required.
Equipment and work space requirements
Reporting procedures.

Selecting an Organization Structure.

o Primary function is to facilitate effective information flow.

o Before its selection, the team should make an assessment of the nature of
the job to be performed and its requirements.

o Traditional organization structure is one that is still used by many

organizations today. Some of the positive attributes are:
Availability of broad personnel base.
Identifiable technical line of control.
Grouping of specialist to share knowledge.
Collective line of responsibility.
Possible assignment of personnel to several different projects.
Clear hierarchy for supervision.
Continuity and consistency of functional disciplines.
Possibility for departmental policies, procedures, and missions.
o Some negative attributes:
No one individual is directly responsible for the total project.
Project-oriented planning may be impeded.
There may not be clear line of reporting up from the lower levels.
Coordination is complex.
A higher level of cooperation is required between adjacent levels.
The strongest functional group may wrongfully claim project
authority.
Formal Versus Informal Structure
o Both structures are practiced in every project environment.
o Informal structure develops when people organize themselves in an
unofficial way to work towards an objective. Can be subtle, i.e., not
everyone is aware of its existence. A functional area that may appear as a
formal structure may have some informal elements.
o Formal is the officially sanctioned structure.

Span of Control
The span of management (control) can be wide or narrow.
o Wide span of management permits several
subordinate units report to the same boss.
Can be effective in a favorable project
environment.
Workers tend to relate better with upper
management because of fewer layers.
More economical because of fewer layers of
supervisors or middle managers.
More professional growth because workers
have more responsibilities.
o Narrow span of management in an organization is
beneficial where there are several mutually
exclusive skill levels.
o Influences that decide a type of control
Level of planning required.
Level of communication desired.
Effectiveness of delegating authority.
Dynamism and nature of the subordinates
job. (Type A personality, low skill, high
skill)
Competence of the subordinate in
performing their job.

Functional Organization. A formal org. is a.k.a. functional org. whereby people

are organized into groups dedicated to particular functions. Projects that are
organized along functional lines are normally resident in a specific department or
area of specialization, i.e. manufacturing operations are under the control of the
vice president of manufacturing.
o Advantages:
Improved accountability
Discernible line of control
Flexibility in manpower utilization
Enhanced comradeship of technical staff
Improved productivity of specially skilled personnel
Potential for staff advancement along functional path
Use of the company home office can serve as a refuge for project
problems.
o Disadvantages of functional organization structure:
Divided attention between project goals and regular functions
Conflict between project objectives and regular functions
Poor coordination of similar project responsibilities
Unreceptive attitude by the surrogate department
Multiple layers of management

Lack of concentrated effort

Table 3-1 shows a comparison of the views of the functional and project
environments. Though it is difficult to sometimes separate a project environment
from the traditional functional environment there must be integration.

Product Organization. This approach organizes a project to use the end product or
goal of the project as the determining factor for personnel structure. You have a
unique entity within a parent organization. It has a dedicated staff and
administration focused on the mission. Linked to the parent via progress reports,
policies, procedures and funding.
o Advantages are:
Simplicity of structure
Unity of project purpose
Localization of project failures
Condensed and focused communication lines
Full authority in the project manager
Quicker decisions due to a centralized authority
Skill development due to project specialization
Improved motivation, commitment and concentration
Flexibility in determining time, cost and performance trade-offs
Accountability of project team to one boss (project manager)
Individual acquisition and maintenance of expertise on a given
project
o Disadvantages are:

Narrow view of project personnel (as opposed to global

organization view)
Mutually exclusive allocation of resources (one man to one
project)
Duplication of efforts on different but similar projects
Monopoly of organizational resources
Concern about life after the project
Reduced skill diversification

Matrix Organization Structure- exists where there are multiple managerial

accountability and responsibility for a job function. It combines the advantages of
traditional structure (time and schedule are sacrificed) and the product
organization structure (limited technology utilization and resource sharing
because no single group is responsible for overall project planning). The project
manager has total responsibility for the project success. The functional managers
have the responsibility to achieve and maintain high technical performance of the
project.
o Advantages:
Good team interation
Consolidation of objectives
Multilateral flow of information

 Lateral mobility for job advancement

Opportunity to work on a variety of projects
Efficient sharing and utilization of resources
Reduced project cost due to sharing of personnel
Continuity of functions after project completion
Stimulating interactions with other functional teams
Cooperation of functional lines to support project efforts
Home office for personnel after project completion
Equal availability of company knowledge base to all projects.
o Disadvantages:
Slow matrix response time for fast paced projects
Independent operation of each project organization
High overhead cost due to additional lines of command
Potential conflict of project priorities
Problems of multiple bosses
Complexity of structure

Mixed Organization Structures is a combination of the functional, product and

matrix structures. An advantage is better flexibility in a special problem situation
and that it can adapt to the needs of the project and a disadvantage difficulty in
identifying responsibility within a project
New Organization Structures. Bubble, Market, Chronological, Sequential.

Organizing Multinational Projects

o Some considerations:
Product
Technology
Political and Social Environment
Labor
Market
Plant and residential amenities
Financial Services
o Case Study- A large scale international project that consists of the
engineering, procurement, and construction of 7 liquid natural gas (LNG)
tanks together with their ancillary system and control building in a Middle
Eastern country. The requirements are as follows:
3 LNG tanks of 80,000 cubic meters each
2 LPG propane tanks of 50,000 cubic meters each
2 LPG butane tanks of 50,000 cubic meters each
The ancillary system which are part of the project include:
1 propane and butane vapor recovery system
1 low pressure flare system
1 offsite control room

Project Setting
Technical Requirements
Organizational Relationships
Safety and Environmental Considerations
Analysis of project scenario
Sources of possible problems
Parent-Child relationship
Too many companies involved
Communications
Population increase
Logistics
Factors to consider and suggestions from the author
Strategic Planning
Cost/Benefit Analysis
Technology Assessment
Acquisition
Trade Agreements
Different Labor Practices
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Different Governmental and Political Ideologies

Information Management
Recommendations
Simplify the levels of responsibilities by contracting with
fewer companies.
Minimize the interdependencies of companies by using
nonsubsidiary companies.
Predetermine communication time zones that are
compatible with the timing of project decisions.
Reevaluate the level of technology required for the project.
Arrange for special favorable trade exceptions to facilitate
movement of personnel and materials.

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