Skip to content
Context·Field Guide
DARK
SE423 · Software Project Management · Chapter 2

Every project lives inside an organization.
Strategy, structure and culture decide how it goes.

A project is never managed in a vacuum. The organization's strategy decides which projects exist, its structure decides who the project manager can command and who they have to borrow people from, and its culture decides whether departments cooperate or quietly work against the project. This chapter is the context every later chapter assumes.

Projects implement strategy
Functional · Project · Matrix
PMO forms, levels and models
Culture's 4 effects on PM
THE ORGANIZATIONAL CONTEXT PROJECT STRUCTURE STRATEGY CULTURE shapes all three
§ 01 — PROJECTS AND ORGANIZATIONAL STRATEGY

Projects are how strategy actually happens

Strategy is a plan on paper until a project turns it into something real.

Strategic management

definition

The science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives. Projects are the key ingredients in strategy implementation.

Memory hook — the 4 elements
"Vision, then Formulate, then Cross the departments, then Achieve."
Vision and mission statements · Formulating, implementing and evaluating · making Cross-functional decisions · Achieving objectives
ELEMENT 1

Developing vision and mission statements

What the organization hopes to accomplish, or what top managers hope it will become.

ELEMENT 2

Formulating, implementing, and evaluating

Assess internal strengths and weaknesses and external opportunities and threats, set long-range objectives, choose among strategic alternatives. Projects carry it out.

ELEMENT 3

Making cross-functional decisions

ELEMENT 4

Achieving objectives

Table 2.1 · Projects reflect strategy
Strategy Project that carries it out
Technical or operating initiatives (new distribution strategies, decentralized plant operations) Construction of new plants or modernization of facilities
Products for greater market penetration and acceptance New product development projects
New business processes for greater streamlining and efficiency Reengineering projects
Changes in strategic direction or product portfolio reconfiguration New product lines
Creation of new strategic alliances Negotiation with supply chain members (suppliers and distributors)
Matching or improving on competitors' products and services Reverse engineering projects
Improvement of cross-organizational communication and supply chain efficiency Enterprise IT efforts
Cross-functional interaction, faster new product introduction, better departmental coordination Concurrent engineering projects
Case · What went wrong for the A380?
Airbus and Boeing saw the same facts: air traffic doubling every 15 years, four billion travelers by 2020. Airbus concluded the future needed much bigger planes for congested airports. Boeing bet on medium-sized wide-body jets for more frequent travel between growing cities. The A380's failure came from that strategic decision, not from how the project was run.
TOWS matrix · four strategy types
Strengths (S) Weaknesses (W)
SO · Maxi-Maxi
Use strengths to maximize opportunities 		WO · Mini-Maxi
Minimize weaknesses by taking advantage of opportunities
ST · Maxi-Mini
Use strengths to minimize threats 		WT · Mini-Mini
Minimize weaknesses and avoid threats
Read it as internal × external: the first letter is what you have (S/W), the second is what you face (O/T). "Maxi" = use a strength, "Mini" = shrink a weakness or a threat.
PDF page 5The TOWS matrix: SO maxi-maxi, ST maxi-mini, WO mini-maxi, WT mini-mini.
§ 02 — STAKEHOLDER MANAGEMENT

Everyone with a stake can push the project either way

Organizations and project teams cannot ignore the external effects of their decisions. Stakeholder analysis exposes the seemingly irresolvable conflicts a new project creates.

Project stakeholders

Pinto's definition

All individuals or groups who have an active stake in the project and can potentially impact, either positively or negatively, its development.

Internal stakeholders
  • Top management
  • Accountant
  • Other functional managers
  • Project team members
External stakeholders
  • Clients
  • Competitors
  • Suppliers
  • Environmental, political, consumer, and other intervenor groups
Intervenor groups have the power to effectively intervene and disrupt a project. Hydraulic fracturing turned the US from a net importer of natural gas (2012) into a net exporter (2016), yet environmental groups used litigation and lobbying to halt the Dakota Access Pipeline for a time and to delay the 1,700-mile Keystone XL pipeline for years.
Figure 2.3 · How each stakeholder relates to the project manager
Stakeholder Relationship
Top management Controls project managers and regulates their freedom of action
Accountant Supports and actively monitors project budgets
Other functional managers Most project staff are essentially on loan from their functional departments
Clients Want the project delivered as quickly as possible so the money invested starts generating returns
External environment Competitors, suppliers, and so on
Parent organization · Project team The other two spokes around the project manager
PDF page 8Figure 2.3: the project manager at the center of stakeholder relationships.
§ 03 — ORGANIZATIONAL STRUCTURE

Who reports to whom decides how much power the PM has

ELEMENT 1

Formal reporting relationships

Who reports to whom: the number of levels in the hierarchy and the span of control.

ELEMENT 2

Groupings

Individuals into departments, and departments into the total organization.

ELEMENT 3

Systems design

Systems that ensure effective communication, coordination, and integration of effort across departments.

Memory hook — the 3 forms
"Functional = by skill. Project = by project. Matrix = both at once."
The further you move from functional toward project, the more authority the project manager gets.
Functional

Group people performing similar activities into departments

Marketing, production, finance, research. A project lives inside one department and borrows from the others.

Project

Group people into project teams on temporary assignments

Each project is a self-contained business unit with a dedicated team; the firm assigns resources from functional pools for as long as they are needed. Construction companies, Boeing and Airbus, pharmaceutical firms, and many software consulting and R&D organizations work this way.

Matrix

A dual hierarchy where functions and projects have equal prominence

A vice president of projects controls the project managers, who must work closely with functional departments to staff their teams through loans of personnel.

PDF page 11Figure 2.4: a functional organization grouped by department.
PDF page 13A project organization: each project draws resources from the functional pools.
PDF page 15Figure 2.7: a matrix organization staffing projects through loans from each function.
§ 04 — STRENGTHS AND WEAKNESSES

Tables 2.2, 2.3 and 2.4 in one place

These three tables are the most testable part of the chapter. Learn the weaknesses: they are what exam scenarios describe.

Functional structure
Strengths for PM Weaknesses for PM
No disruption or change to the firm's design Functional siloing: unwillingness to consider other viewpoints or collaborate, so cross-functional cooperation is hard
In-depth knowledge and intellectual capital Lack of customer focus
Standard career paths Longer time to complete projects (structural problems, slower communication)
Varying interest or commitment
Project structure
Strengths for PM Weaknesses for PM
Project manager has sole authority Expensive to set up and maintain teams
Improved communication Loyalty to the project rather than the firm
Effective decision making Hard to keep a pooled supply of intellectual capital (contractors leave when the project ends)
Creation of project management experts Team members worry about their future once the project ends
Rapid response to market opportunities
Matrix structure
Strengths for PM Weaknesses for PM
Suited to dynamic environments Dual hierarchies mean two bosses
Equal emphasis on project management and functional efficiency Negotiation required to share resources
Promotes coordination across functional units Workers caught between competing project and functional demands
Maximizes scarce resources
Shortcut: a strength of one structure is usually a weakness of another. Functional keeps knowledge pooled but is slow; project is fast but loses the pool; matrix shares scarce people but gives everyone two bosses.
§ 05 — HEAVYWEIGHT PROJECT ORGANIZATIONS

When the organization goes all-in on the project

Lockheed's "Skunk Works"

fully dedicated project organization

A small, autonomous team of highly skilled, hand-picked people given complete freedom. The project manager gets full authority, status, and responsibility.

PM authority expanded Functional alignment abandoned for market opportunism Direct reporting to top executives Focus on the external customer

Figure 2.8 · Managers' perceptions of effectiveness

survey study

Rated from functional organization → functional matrix → balanced matrix → project matrix → project organization. Effectiveness generally rises as the structure becomes more project-based. For new product development the project organization scored highest; for construction (civil engineering) the project matrix scored highest.

PDF page 18Figure 2.8: perceived effectiveness rises from functional toward project-based structures.
§ 06 — PROJECT MANAGEMENT OFFICES

PMOs: forms, levels and models

Centralized units that oversee or improve the management of projects. Keep the three lists of three apart.

Resource center for
Technical details Expertise Repository Center for excellence
Using a PMO as a resource center shifts some of the burden of PM activities (scheduling, resource allocation, monitoring, control) from the project manager to dedicated support staff.
Levels · where the PMO sits
Level Placement
Level 3 Corporate: an overall corporate support function
Level 2 Functional: serves the needs of one business unit
Level 1 Project: direct support for each project
Memory hook — forms vs models
"Forms are about control. Models are about purpose."
Forms go up in control: Supportive (low) → Controlling (moderate) → Directive (high). Models describe what the PMO is for: Weather station watches, Control tower protects the craft, Resource pool supplies people.
FORM · LOW

Supportive

Consultative; provides PM resources and training.

FORM · MODERATE

Controlling

Requires compliance with adopted PM standards and processes.

FORM · HIGH

Directive

Directly manages projects.

MODEL

Weather station

Only monitors and tracks status; management watches without trying to influence or control projects.

MODEL

Control tower

Project management is a skill to protect and support: improves methodology and practices and helps PMs apply them.

MODEL

Resource pool

Maintains and supplies a cadre of skilled project managers and professionals to the company's projects.

PDF page 20PMO levels: corporate (3), business unit (2), and project (1).
§ 07 — ORGANIZATIONAL CULTURE

The unwritten rules every project runs into

The third key contextual variable, after strategy and structure.

Organizational culture

definition

The unwritten rules of behavior, or norms, used to shape and guide behavior, that are shared by some subset of organizational members and taught to all new members of the company.

PART 1

Unwritten

Often not written down anywhere.

PART 2

Rules of behavior

Guidelines on how best to react to events.

PART 3

Held by some subset

May or may not be companywide.

PART 4

Taught to new members

Picked up by watching others behave.

7 factors that shape a culture
TechnologyEnvironmentGeographical locationReward systemsRules and proceduresKey organizational membersCritical incidents
Critical incidents are the moments when the real culture becomes visible.
Same product, opposite cultures
GE's jet engine division: competitive, high-pressure, rewards aggressiveness and high commitment, with high burnout among engineers and mid-level managers. Rolls-Royce: paternalistic, rewards loyalty and long job tenure. Both build jet engines for commercial and defense aircraft.
Memory hook — culture's 4 effects on PM
"Departments Expect Planned Performance."
Departmental interaction · Employee commitment to goals · project Planning · Performance evaluation
Departmental interaction
  • Cultures where functional groups actively cooperate with new projects succeed far more than disinterested or adversarial ones.
Employee commitment to goals
  • Commitment and self-sacrifice (extra hours, multiple tasks) beat "going through the motions" as long as you don't get caught.
Project planning
  • Where lateness is punished, people pad their estimates. A culture of trust produces honest estimates.
Performance evaluation
  • If the organization rewards caution and playing it safe, its project management will be cautious too.
§ 08 — CHEAT SHEET

The whole chapter, one table

Concept Core idea
Strategic management Formulating, implementing, evaluating cross-functional decisions; 4 elements: vision/mission, formulate-implement-evaluate, cross-functional decisions, achieve objectives.
Projects and strategy Projects are the key ingredients of strategy implementation (Table 2.1).
TOWS SO maxi-maxi · ST maxi-mini · WO mini-maxi · WT mini-mini.
Project stakeholders Anyone with an active stake who can impact the project positively or negatively. Internal: top management, accountant, functional managers, team. External: clients, competitors, suppliers, intervenor groups.
Org structure (3 elements) Reporting relationships · groupings · systems for communication, coordination, integration.
Functional / Project / Matrix Similar activities in departments / temporary project teams / dual hierarchy with equal prominence.
Heavyweight organization Fully dedicated (Lockheed Skunk Works): PM authority expanded, market focus, reports to top executives, external customer.
PMO Resource center for technical details, expertise, repository, excellence. Levels 3 corporate / 2 functional / 1 project.
PMO forms Supportive (low) · Controlling (moderate) · Directive (high).
PMO models Weather station (monitor) · Control tower (protect and improve PM) · Resource pool (supply PMs).
Culture Unwritten rules, shared by a subset, taught to new members. 7 factors; 4 effects on PM.
§ 09 — COMMON MISTAKES

Where students lose marks on this chapter

1. Swapping PMO forms and PMO models
✗ WRONG"A weather station PMO has high control."
✓ RIGHTForms (supportive, controlling, directive) are about control. Models (weather station, control tower, resource pool) are about purpose. A weather station only watches.
2. Mixing up the TOWS cells
✗ WRONG"WT is maxi-mini."
✓ RIGHTStrength = maxi, weakness = mini (first word); opportunity = maxi, threat = mini (second word). SO maxi-maxi, ST maxi-mini, WO mini-maxi, WT mini-mini.
3. Calling a strength a weakness
✗ WRONG"Rapid response to market opportunities is a matrix strength."
✓ RIGHTIt's a project structure strength. Matrix strengths are dynamic environments, equal emphasis, coordination, and maximizing scarce resources.
4. Thinking culture is always companywide
✗ WRONG"Culture is the written policy every employee follows."
✓ RIGHTCulture is unwritten and held by some subset of members; it may or may not be companywide.
5. Treating the accountant as an external stakeholder
✗ WRONG"Accountants and suppliers are both external."
✓ RIGHTThe accountant is internal (supports and monitors budgets). Clients, competitors, suppliers and intervenor groups are external.
§ 10 — POP QUIZ

Click a question to reveal the answer

1. (MC) Which TOWS strategy uses strengths to maximize opportunities?
SO, Maxi-Maxi. ST is maxi-mini, WO mini-maxi, WT mini-mini.
2. (Short answer) Name the four elements of strategic management.
Vision and mission statements; formulating, implementing and evaluating; making cross-functional decisions; achieving objectives.
3. (MC) A company wants to match a competitor's product. Which project type does Table 2.1 link to that strategy?
Reverse engineering projects.
4. (MC) Which stakeholder supports and actively monitors project budgets?
The accountant, an internal stakeholder.
5. (Short answer) What are intervenor groups?
External stakeholders (environmental, political, consumer groups) with the power to effectively intervene in and disrupt a project, e.g. groups delaying the Keystone XL pipeline.
6. (MC) Which structure creates a dual hierarchy where functions and projects have equal prominence?
Matrix.
7. (MC) "Workers caught between competing project and functional demands" is a weakness of which structure?
Matrix. Its other weaknesses: two bosses, negotiation to share resources.
8. (Short answer) Give two weaknesses of the project structure.
Any two: expensive to set up and maintain teams; loyalty to the project over the firm; hard to keep a pooled supply of intellectual capital; worry about the future once the project ends.
9. (MC) A PMO that requires compliance with adopted PM standards is which form?
Controlling (moderate control). Supportive is low, directive is high.
10. (MC) A PMO used only to monitor and track project status follows which model?
Weather station.
11. (Short answer) What are the four parts of the definition of culture?
Unwritten; rules of behavior; held by some subset of the organization; taught to all new members.
12. (Short answer) Name the four ways culture affects project management.
Departmental interaction; employee commitment to goals; project planning; performance evaluation.
§ 11 — PRACTICE LAB

Exam-style scenarios, worked through

1. A pharmaceutical firm runs every drug trial as a self-contained unit with its own dedicated team, pulling chemists from functional pools only for as long as each trial needs them. Which structure is this, and what risk should the firm watch for when trials end?
→ Project organization. Watch for team members worrying about their future once the project ends, and for losing the pooled intellectual capital.
Why: in a project organization each project is a self-contained business unit with a dedicated team; those two items are listed weaknesses.
2. A developer reports to the IT manager for performance reviews and to a project manager for daily priorities. The two give conflicting instructions. Which structure, and which weakness is showing?
→ Matrix structure; the weakness is the dual hierarchy (two bosses), leaving workers caught between project and functional demands.
Why: a matrix gives functions and projects equal prominence, so each worker has two lines of authority.
3. Management sets up a PMO whose only job is to publish a weekly status dashboard. It never tells project managers what to do. Name the PMO model and its likely form.
→ Weather station model; a supportive (low-control) form.
Why: a weather station only monitors and tracks; it doesn't influence or control projects.
4. Team members routinely double their estimates because anyone who finishes late is publicly criticized. Which of culture's four effects on project management is this?
→ Project planning.
Why: activity estimation is imprecise, so a culture that punishes lateness pushes people to pad estimates; a culture of trust produces honest ones.
5. A company with strong engineering talent sees a growing market for electric vehicles and launches projects to use its engineering strength there. Which TOWS strategy?
→ SO, Maxi-Maxi.
Why: it uses an internal strength to maximize an external opportunity.