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Unit 6 - project management unit 6

Project Management Context (Addis Ababa University)

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UNIT 6: MANAGEMENT & ORGANIZATION APPRAISAL

Contents
6.0 Aims and Objectives
6.1 Introduction
6.2 Project Organization
6.3 Project as Special Organization
6.4 Alternative Approaches to Project Organization
6.5 The Entrepreneurship
6.6 Board of Directors/Management Set Up
6.7 Chief Executives
6.8 Departmental Heads
6.9 Summary
6.10 Answer to Check Your Progress Exercise

6.0 AIMS AND OBJECTIVES

The objective of the unit could be

- to understand the need for having management
- to identify alternative approach to project organization
- to understand how to evaluate the management elements of the organization.

6.1 INTRODUCTION

Management is one of the most vital input for the success of a business enterprise. It is the
backbone of a project from appraisal stage to successful implementation and future growth. It
is the quality of management that makes all the difference between success and failure of a
project. Though management is the most important factor, yet it is the most difficult to assess
and evaluate because it is abstract, intangible and non quantifiable.

Assessment of management is more an art than a science. In management appraisal we are

concerned with integrity, caliber, resourcefulness, and quality of management. The aim is to

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identify management gap and inadequacies and supplement them wherever necessary having
regard to the background, experience and managerial capability to the entrepreneurs. There
are not set rules or procedures as to how the background of a promoter is to be investigated.

Besides making references to his bankers, most of the time the officers of financial
institutions call on promoters and other persons connected with industry and trade to get first
hand information on the antecedents of a promoter. But, by and large a view on promoter’s
ability is formed during detailed discussion with the promoter’s in the course of appraisal.

Before we proceed to discuss on how to evaluate the management elements of organization let
first look at on the need for having project types of organization.

6.2 PROJECT ORGANIZATION

The attainment of goals involves effective organization of task than lead towards these ends.
There are various forms of organization. A type of organization, which is efficient or
appropriate for one task may not be suitable for other. Project in particular require particular
attention in terms of organization, since they involve scarce resources.

Project type objectives cannot always be achieved within regular organizational structure.
Some job requires particular attention, scarce resources, limited time, special skills etc.

Routine and repetitive jobs are often carried out within the regular line organization, hence
they do not need to be organized as projects. The project approach (project type of
organization) is required when the task:
- is complicated and light must be shed from several direction
- is entirely new and there is uncertainty about how to handle it
- involves several organization or units and demands cooperation
- is cost intensive and requires special follow up
- is to be carried out within a definite period of time
- is limited and specified; and
- demands broad and active participation.

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6.3 PROJECT, AS SPECIAL ORGANIZATION

Projects are instruments of change. The need for change may come for various reasons such
as:
- a solution to a particular problem
- taking advantage of a new situation or opportunities
- the need to address a crisis etc

In order to introduce change and attain the desired goal, the project needs to be organized in a
particular way that can facilitate an effective and efficient way of carrying out planned
activities and discharge set duties and responsibilities.

Since jobs that require the project approach are unique, they also demand special types of
organizations. Change could be accomplished through the project approach by using
temporary organization with simple and quicker decision making process and flexibility in
planning, monitoring and executing the project activities. These are opportunities that are not
normally available in regular line organization, as these generally tend to be more
bureaucratic.

Advantage of Temporary Project type Organization

The operational modalities of temporary organizations provides the following opportunities.
 Planning and structuring the work in a manner that flexibly responds to new
conditions and needs.
 Pooling together skills and experiences from different organizations units, etc.
 Establishing line of communication and work approaches tailored to the problem.
 Close follow-up of task and review of expected results at appropriate time or phase
and getting timely decisions.
 Encouraging collaborative effort to accommodate change as easily as possible.

Although the project (temporary organization) approach has a number of advantages, it cannot
guarantee success and the attainment of set objectives unless the appropriate and most
efficient type of organization is put in place to execute the project.

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6.4 ALTERNATIVE APPROACHES TO PROJECT ORGANIZATION

Forms of Project Organization

There are different forms of project organization. Each form of project organization has its
own merits and drawbacks. Although there are several forms of project organization, here we
shall consider only the basic types.

A. Functional Organization
The functional forms of organization is one of the commonest types of vertical organizations.
In this system of organization each branch reports a person specially qualified for a particular
function. According to the functional forms of organization peoples are grouped on the basis
of similarities in skills, activities, expertise, experiences etc. Employees working in the
various departments of the organizations are assigned with parts of the project activities that
relates to their departments’ work. In this type of project organization the responsibility of
coordinating the project activities usually rests on the shoulder of the general manager.

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Functional Type of Organization

TOP MANAGEMENT

PRODUCTION MARKETING MAINTENANCE FINANCE

WORKERS

Merits of Functional Organization

The merits of functional organization include the following:
 increased work satisfaction for specialist
 easily understood by most employees
 well-established vertical communication channel
 intensive utilization of specialist
 mass production through standardization and specialization scheme
 minimized duplication of effort and resources
 continued knowledge and experience building in a particular field of specialization
 logical and consistent with the natural division of tasks
 provides better security and confront for employees

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Limitations of Functional Organization

Functional organization has the following limitations
 it doesn’t give the necessary emphasis to organizational objectives
 conflict could arise among functional departments in favor of their specialized
interests and autonomy
 immediate actions are hampered by divided control and competition
 as it is more function focused, it may not give adequate project oriented emphasis
needed to accomplish project tasks
 flexibility and responsiveness to quickly changing requirements is limited
 opportunities for training all round executive is reduced
 employees motivation will be impacted, as they will be overloaded with additional
project task, (especially when the project duration is prolonged).

B. Pure, Project Organization

The pure project approach is a form of organization where a separate, temporary and special
purpose organization is established for the purpose of achieving specific project tasks. In such
a situation a group of people having the required skills are organized into an autonomous set-
up with its own leadership, structure and resources.

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Pure Project Organization

TOP MANAGEMENT

PROJECT PROJECT PROJECT

MANAGER MANAGER MANAGER
A B C

Project & Design Livestock Dev’t

Engineering Soil & water conservation

Purchasing Training & Technical Assistance

Construction Administration and Finance

Like other forms of organizations, the projectized organization has its own advantage and
limitations.

Advantage or Project Organization

Pure project organization has a number of benefits:
 it gives the project manager complete line of authority over the project
 the project staff works directly for the project manager
 the prime objective of the project staff is the attainment of the project objectives and
thus are better customers focused
 the communication channels are strong

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 the reaction item is rapid

 conflict over resources are minimized as the project manager is in control of available
resources
 better evaluation of the performance of each project staff in terms of contribution to
the achievement of the project activities and reward on the basis of such a
performance is possible
 the project staff will have a better chance of working in teams.

Disadvantages of Project Organization

The project organization also has its own limitations.
 if there are various projects under the same organization, the cost could be high due to
duplication of efforts
 as this forms of organization pulls many resources it upsets the smooth operation of
the patent organization
 since there would be no reservoir of specialists, there might be a tendency to retain
experts on the project longer than required
 as there would be no functional group to look forward to future work, establishing new
projects becomes difficult for the organization
 the project staff will suffer from problems of job insecurity threats.

C. The Matrix Organization

The matrix organization or sometimes also known as Grid Structure is a mosaic (intersection)
of task (project) and function (continuous work) of an organization. It is a mix of a temporary
but very important job that needs the quick pooling together of skills and support that are
required from functional departments.

In a situation where a regular organization with functional departments cannot execute the
kind of work that project can accomplish with the desired level of effectiveness and efficiency
and where at the same time projects alone may not be able to have the kind of functional
support they required from other departments of an organization, an innovative kind of
structure known as the matrix organization is required. The matrix organization is therefore a
network of intersections between the project team and the regular functional departments or

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units or elements of the same organization. There are various forms of matrix organization
one example is shown in the diagram below.

TOP MANAGEMENT

PLANNING ADMINISTRATION AGRO FORESTRY LIVESTOCK DEV’T

DEPARTMENT & FINANCE DEPARTMENT DEPARTMENT

PROJECT A

X X X

PROJECT B

X X X

PROJECT C
X X X

In the above diagram each of the above project (A, B & C) have their own entity while at the
same time they obtain support from the four functional departments of the same organization.

Advantage of Matrix Organization

The matrix organization
 produces economy of efforts and expenses
 enable the project manager to draw specialist support of the functional services
 make the project manager accountable for the success of the project and at the same
time to have full control over the project resources
 increases the emphasis given to project objectives thereby increasing project visibility
 it is easy to close down projects once the task is completed
 allow speedy and flexible organization of projects and making of decisions.

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Disadvantage of Matrix Organization

The matrix organization has its own limitations:
 undesired conflicts between functional departments, and project managers may occur
over limited resources
 duplication of efforts may arise between different projects
 a matrix organization could be complex and costly
 it creates ambiguous situations for both employees and managers alike, as employees
are required to respond to the demands/ orders of two or more bosses
 it splits the authority of projects managers and thus making the management of
projects difficult and complex.

There is no one best way of organization, which is best for all projects. We may find one of
the above discussed organization types or a mix of these organization form. We may find all
organization types within one palent organizations on the different projects of the same
organization, or we may even find the three different forms of organization on one project at
different level of the project. There could even be instances where a single form of project
organization may not be best throughout the lifecycle of one project.

After we discussed on the different alternative approach to project organization let’s see with
the appraisal of management. Management appraisal involves the assessment of the
entrepreneur, the board of directors, the chief executive and the departmental heads.

6.5 THE ENTREPRENEUR

While evaluating management, a clear distinction is to be drawn between an entrepreneur and

a manager. The former is builder of an enterprise and an opportunity exploiter while the latter
is an organization developer and problem solver. The characteristics of an entrepreneur are a
high-need for achievement, risk taking behavior, desire to change, ability to identify an
opportunity etc.

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6.6 BOARD OF DIRECTORS/ MANAGEMENT SET UP

The company’s board should be independent, well-balanced and not dominated by any
particular group and should include persons experienced in the particular line of industry. It
should be compact and not unwieldy. It is not enough to have eminent men on the board but
persons who would devote time to the working of the company. If the board is not properly
constituted, the financial institutions stipulate that the company shall broad-base the board of
directors to the satisfaction of the institutions.

The board of directors has a very important role to play but it has its limitations. Hence the
importance of selection of proper chief executive.

6.7 CHIEF EXECUTIVE

He is the nerve center of the unit and he ultimately determines the success or failure of the
unit. the caliber of chief executive is very important. Besides background, experience and
qualifications of chief executives, his style of management and whether he needs to
professional advice and delegates authority or whether he has a tendency to concentrate
everything to himself are looked into. The term of appointment of the Managing Director/
full-time Director are closely scrutinized and got revised where considered necessary. It is
important that the assisted companies acquire professional management and there is
continuity in top management. It is, therefore, stipulated that the appointment, re-appointment
and any change in the office of whole-time directors would be subject to the approval of the
financial institutions. The financial institutions also reserve the right to appoint a nominee on
the Board of the company and this right is exercised when need is felt to keep a close watch
on the affairs of the company.

6.8 DEPARTMENTAL HEADS

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Suitably qualified and experienced persons should be appointed as departmental heads. The
timings of appointment of various executives should synchronize with the need of the unit.
appointment of relatives of chief executive on high salaries be avoided.

The organizational chart should be examined to see that the company develops proper
organizational structure to meet the requirement of the unit during implementation and
production stages and there is proper delegation of authority.

Check Your Progress Exercise

1. Why is important to undertake management appraisal?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
2. When does the project type of organization is required?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
3. What are the merit and demerit for a functional type of organization?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
4. What are the merit and demerit for pure project type of organization?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
5. What are the merit and demerit for matrix type of organization?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
6. How could we evaluate management part of the organization like Entrepreneur, Board
of Directors, Chief Executive Officer, Department Head?

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___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

6.9 SUMMARY

Management is one of the most vital input for the success of a business enterprise. assessment
of management is more an art than a science. Because the management appraisal concerned
with integrity, Caliber, resourcefulness and quality of management which is actually difficult
to measure/evaluate.

Project in particular require particular attention in terms of organization, since they involve
scarce resources. Project type objectives cannot always be achieved within regular
organizational structure. Rather it require special types of organizational structure.

There are a number of different forms of project organization to mention few: functional
organization, pure project organization, the matrix organization. Each forms of project
organization has its own merit and demerits.

Management appraisal involves the assessment of the entrepreneur, the board of directors, the
chief executives and the department heads. Since the success of the project greatly depends on
the quality of manpower, the educational qualification, experience commitment,
resourcefulness etc of members of the project needs to be checked appropriately.

6.10 ANSWER TO CHECK YOUR PROGRESS EXERCISE

1. Refer Section 6.1

2. Refer Section 6.2
3. Refer Section 6.4

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4. Refer Section 6.4

5. Refer Section 6.4
6. Refer to Section 6.5, 6.6, 6.7, and 6.8

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