 Organization Structures: The project organization

structure identifies the relationship between the

project participants, together with defining their
duties, responsibilities and authority.

 There are three forms of organization structure in

project management. These are:

◦ Functional Organization
◦ Divisional Organization
◦ Matrix Organization
 Projects are managed within the existing functional hierarchy
of the organization.

 The different segments of the project are delegated to the

respective functional units with each unit responsible for
completing its segment of the project .

 The functional organization is commonly used when, given

the nature of the project, one functional area plays a
dominant role in completing the project or has a dominant
interest in the success of the project. In such cases, most of
the project work would be done within the specified
department and coordination with other departments would
occur through normal channels.
 The major advantages of this structure are the following
 No Change. Projects are completed within the basic
functional structure of the parent organization.

 Flexibility. There is maximum flexibility in the use of

staff. Appropriate specialists in different functional units
can temporarily be assigned to work on the project and
then return to their normal work.

 Easy Post-Project Transition. Normal career paths within a

functional division are maintained.
 The functional organization suffers from the following
drawbacks.
 Lack of Focus. Each functional unit has its own core routine work to do;
sometimes project responsibilities get pushed aside to meet primary obligations.

 Poor Integration. There may be poor integration across functional units.

Functional specialists tend to be concerned only with their segment of the project
and not with what is best for the total project.

 Slow. It generally takes longer to complete projects through this functional

arrangement. This is in part attributable to slow response time—project
information and decisions have to be circulated through normal management
channels.

 Lack of Ownership. The motivation of people assigned to the project can be weak.
The project may be seen as an additional burden that is not directly linked to their
professional development or advancement.
 This involves the creation of dedicated project teams that
operate as separate units from the rest of the parent
organization.

 A full-time project manager is designated to pull together

a core group of specialists who work full time on the
project.

 The project manager recruits necessary personnel from

both within and outside the parent company.

 The subsequent team is physically separated from the

parent organization and given marching orders to
complete the project.
 This structure has the following merits
 Fast. Projects tend to get done more quickly when participants
devote their full attention to the project and are not distracted by
other obligations and duties. Furthermore, response time tends
to be quicker under this arrangement because most decisions
are made within the team and are not deferred up the hierarchy.

 Cohesive. A high level of motivation and cohesiveness often

emerges within the project team. Participants share a common
goal and personal responsibility toward the project and the team.

 Cross-Functional Integration. Specialists from different areas

work closely together and, with proper guidance, become
committed to optimizing the project, not their respective areas
of expertise.
 Some of the cons of the divisional structure include:

 Expensive. Not only has a new management position (project

manager) been created, but resources are also assigned on a
full-time basis. This can result in duplication of efforts across
projects and a loss of economies of scale.

 Internal Strife. Sometimes dedicated project teams take on an

entity of their own and this creates a we–they syndrome. A
strong divisiveness emerges between the project team and the
parent organization.

 Difficult Post-Project Transition. Assigning full-time personnel to

a project creates the dilemma of what to do with personnel after
the project is completed
 Matrix arrangement is a hybrid organizational form in which a horizontal
project management structure is “overlaid” on the normal functional
hierarchy.

 In a matrix system, there are usually two chains of command, one along
functional lines and the other along project lines.

 Instead of delegating segments of a project to different units or

creating an autonomous team, project participants report
simultaneously to both functional and project managers.
 The matrix structure is designed to optimally utilize resources by
having individuals work on multiple projects as well as being
capable of performing normal functional duties.
Different Matrix Forms
 Weak Form
◦ The authority of the functional manager predominates
and the project manager has indirect authority.
 Strong Form
◦ The project manager has broader control and functional
departments act as subcontractors to the project.
 Balanced Form
◦ The project manager sets the overall plan and the
functional manager determines how the work is to be
done.
 Here are some of the advantages of the matrix structure
 Efficient. Resources can be shared across multiple projects as well as within
functional divisions. Individuals can divide their energy across multiple projects
on an as-needed basis. This reduces duplication required in a divisional (or
projectized) structure.

 Strong Project Focus. A stronger project focus is provided by having a formally

designated project manager who is responsible for coordinating and integrating
contributions of different units.

 Easier Post-Project Transition. Because the project organization is overlaid on

the functional divisions, specialists maintain ties with their functional group, so
they have a homeport to return to once the project is completed.

 Flexible. Matrix arrangements provide for flexible utilization of resources and

expertise within the firm.
 Some of the problems that are peculiar to the matrix structure
include:

 Dysfunctional Conflict and Infighting. Worthy discussions

between functional managers and project managers can
degenerate into heated arguments that engender animosity
among them. In addition, any situation in which equipment,
resources, and people are being shared across projects and
functional activities lends itself to conflict and competition for
scarce resources.
 Stressful. Matrix management violates the management
principle of unity of command. Project participants have at
least two bosses—their functional head and one or more
project managers. Working in a matrix environment can be
extremely stressful.
 Slow. In theory, the presence of a project manager to
coordinate the project should accelerate the completion of the
project. In practice, decision making can get bogged down as
agreements have to be forged across multiple functional
groups.
 Organization (Form) Considerations
◦ How important is project management to the firm’s
success?
◦ What level of resources (human and physical) are
available?
 Project Considerations
◦ Size of project
◦ Novelty and need for innovation
◦ Need for integration (number of departments involved)
◦ Environmental complexity (number of external interfaces)
 Almost all projects, because of their relatively short duration and
often prioritized control of resources, require formal, detailed
planning.

Planning serves the following functions

 It’s a means of organizing work and allocating responsibilities to

individuals
 It’s a means of co-ordination between those involved in the project

 It induces people to look ahead

 It induces time consciousness

 It serves as basis to monitoring and control

Project planning covers:

 The project work

 The manpower and organization

 The money

 Information system
 In planning a project, the project manager must
structure the work into small elements (called work
breakdown structure-WBS) that are:
 Manageable, in that specific authority and
responsibility can be assigned
 Independent, or with minimum interfacing with and
dependence on other ongoing elements
 Integratable so that the total package can be seen
 Measurable in terms of progress
 Development of a WBS starts with the defining the Project Scope in terms
of its:
◦ Objectives,
◦ Deliverables,
◦ Milestones,
◦ Technical requirements.
◦ Limits and exclusions and,
◦ Reviews with customer.
Once the scope and deliverables have been identified, the work of the
project can be successively subdivided into smaller and smaller work
elements.
 The WBS is a map of the project. Use of WBS helps to assure project
managers that all products and work elements are identified, to integrate
the project with the current organization, and to establish a basis for
control.
 A simplified WBS for development of a new personal computer
project is shown in the following slide. At the top of the chart
(level 1) is the project end item— a deliverable product or
service.

 Level 2 shows a partial list of deliverables necessary to

develop the personal computer. One deliverable is the disk
storage unit (shaded), which is made up of three
subdeliverables—external USB, optical, and hard disks.
Finally, the hard disk requires four subdeliverables—motor,
circuit board, chassis frame, and read/write head.

 Each subdeliverable requires work packages that will be

completed by an assigned organizational unit. Each
deliverable will be successively divided in this manner. It is
not necessary to divide all elements of the WBS to the same
 The lowest level of the WBS is called a work package. Work
packages are short duration tasks that have a definite start and
stop point, consume resources, and represent cost

 Thus, the work package is the basic unit used for planning,
scheduling, and controlling the project. Each work package in the
WBS

1. Defines work (what).

2. Identifies time to complete a work package (how long).
3. Identifies resources needed to complete a work package (how
much).
4. Identifies a single person responsible for units of work (who).
5. Identifies monitoring points for measuring progress (how well).
 Integrating the WBS with the Organization
 The WBS is used to link the organizational units
responsible for performing the work. The outcome of
this process is the organization breakdown structure
(OBS).

 The OBS depicts how the firm has organized to

discharge work responsibility. The purposes of the OBS
are to identify organization units responsible for work
packages, and tie the organizational unit to cost control
accounts. Integration of WBS and OBS is shown in the
following slide for the previous example.

 In the execution phase of the project, OBS enable control

from two directions—outcomes and responsibility.
 Network Techniques
 Project networks are developed from the WBS. The project
network is a visual flow diagram of the sequence,
interrelationships, and dependencies of all the activities that
must be accomplished to complete the project.

 Some Terminologies

I. Activity. For project managers, an activity is an element of

the project that requires time. It may or may not require
resources. Typically an activity consumes time—either while
people work or while people wait. Examples of the latter are
time waiting for contracts to be signed, materials to arrive,
drug approval by the government, budget clearance, etc.
Activities usually represent one or more tasks from a work
package. Descriptions of activities should use a verb/noun
format: for example, develop product specifications.
II. Merge activity. This is an activity that has more than one activity
immediately preceding it (more than one dependency arrow
flowing to it).
III. Parallel activities. These are activities that can take place at the
same time, if the manager wishes. However, the manager may
choose to have parallel activities not occur simultaneously.
IV. Path. A sequence of connected, dependent activities.

V. Critical path. When this term is used, it means the path(s) with
the longest duration through the network; if an activity on the
path is delayed, the project is delayed the same amount of time.

VI. Event. This term is used to represent a point in time when an

activity is started or completed. It does not consume time.

VII. Burst activity. This activity has more than one activity
immediately following it (more than one dependency arrow
flowing from it).
 The two approaches used to develop project networks are
known as activity-on-node (AON) and activity-on-arrow
(AOA).

 Both methods use two building blocks— the arrow and the
node. Their names derive from the fact that the former
uses a
node to depict an activity, while the second uses an arrow
to depict an activity.

 Since, in practice, the activity-on-node (AON) method has

come to dominate most projects, we will deal primarily with
AON.
 There are three basic relationships that must be established
for activities included in a project network and can be found
by answering the following three questions for each activity:

I. Which activities must be completed immediately before this

activity? These activities are called predecessor activities.
II. Which activities must immediately follow this activity? These
activities are called successor activities.
III. Which activities can occur while this activity is taking place?
This is known as a concurrent or parallel relationship.
 The above AON diagram presents a graphic map of the
project activities with sequences and dependencies.

 However, estimating the duration for each activity will further

increase the value of the network. A realistic project plan and
schedule require reliable time estimates for project activities.

 The addition of time to the network allows us to estimate

how long the project will take. When activities can or must
start, when resources must be available, which activities can
be delayed, and when the project is estimated to be complete
are all determined from the times assigned.
 Drawing the project network places the activities in the right
sequence for computing start and finish times of activities. Activity
time estimates are taken from the task times in the work package
and added to the network

 Performing a few simple computations allows the project manager

to complete a process known as the forward and backward pass.
Completion of the forward and backward pass will answer the
following questions:

 Forward Pass—Earliest Times

1. How soon can the activity start? (early start—ES)
2. How soon can the activity finish? (early finish—EF)
3. How soon can the project be finished? (expected time—TE)
 Backward Pass—Latest Times

The backward pass starts with the last project activity(ies) on the
network. You trace backward on each path subtracting activity times to
find the late start (LS) and finish times (LF) for each activity. Before the
backward pass can be computed, the late finish for the last project
activity(ies) must be selected. In early planning stages, this time is
usually set equal to the early finish (EF) of the last project activity (or in
the case of multiple finish activities, the activity with the largest EF).
 The backward pass is similar to the forward pass; you need to
remember three things:
1. You subtract activity times along each path starting with the project
end activity (LF - DUR = LS).
2. You carry the LS to the next preceding activity to establish its LF,
unless
3. The next preceding activity is a burst activity; in this case you select
the smallest LS of all its immediate successor activities to establish its
LF
 Determining Slack (or Float)
 When the forward and backward passes have been computed, it
is possible to determine which activities can be delayed by
computing “slack” or “float.” Total slack tells us the amount of
time an activity can be delayed and not delay the project. Stated
differently, total slack is the amount of time an activity can
exceed its early finish date without affecting the project end date
or an imposed completion date.

 Total slack or float for an activity is simply the difference

between the LS and ES (LS – ES = SL) or between LF and EF (LF -
EF 5 SL). For example, the slack for activity C is 5 days, for
activity D is 10 days, and for activity G is zero.

 If slack of one activity in a path is used, the ES for all activities

that follow in the chain will be delayed and their slack reduced.
Use of total slack must be co-ordinated with all participants in
the activities that follow in the chain
 After slack for each activity is computed, the critical path(s) is
(are) easily identified. The critical path can be identified as those
activities that have LF = EF or a slack of zero (LF - EF = 0 or LS -
ES = 0). The critical path is the network path(s) that has (have)
the least slack in common.

 For our company, the critical path is marked with dashed arrows
and nodes—activities A, B, F, G, and H. Delay of any of these
activities will delay the total project by the same number of days.

 Free slack (FS) is unique. It is the amount of time an activity can

be delayed without delaying any immediately following
(successor) activity. Or, free slack is the amount of time an
activity can exceed its early finish date without affecting the early
start date of any successor(s). Only activities that occur at the
end of a chain of activities, where you have a merge activity, can
have free slack. Free slack is demonstrated in the following slide
with another set of activities labeled 1-7
 What does a slack of 10 workdays for activity D mean for the project
manager? In this specific case it means activity D can be delayed 10 days.

 In a larger sense the project manager soon learns that slack is important
because it allows flexibility in scheduling scarce project resources—
personnel and equipment—that are used on more than one parallel
activity or another project.

 Knowing the four activity times of ES, LS, EF, and LF is invaluable for the
planning, scheduling, and controlling phases of the project. The ES and
LF tell
the project manager the time interval in which the activity should be
completed. For example, activity E (Staff report) must be completed
within the time interval 20 and 200 workdays; the activity can start as
early as day 20 or finish as late as day 200. Conversely, activity F
(Commission approval), must start on day 20, or the project will be
delayed.
 When the critical path is known, it is possible to tightly
manage the resources of the activities on the critical path so
no mistakes are made that will result in delays.

 In addition, if for some reason the project must be expedited

to meet an earlier date, it is possible to select those activities,
or combination of activities, that will cost the least to shorten
the project.

 Similarly, if the critical path is delayed and the time must be

made up by shortening some activity or activities on the
critical path to make up any negative slack, it is possible to
identify the activities on the critical path that cost the least to
shorten.
 Once Work is authorized by the project manager and
allocated to teams or individuals, progress is
measured to ensure the desired results are achieved.

 If there is a shortfall, appropriate recovery action is

taken.

 This may mean doing nothing because the variances

are small, re-planning the work to recover the
original plan, or revising the plan to accept the
current situation. In extreme cases, it may mean
terminating the project.
 Performance Analysis:
 This Method of analysis takes into account the value of that
has been done.
 The status of the project or any portion of it can be assessed
with three variables: BCWS, ACWP, and BCWP.

1. BCWS is the budgeted cost of the work scheduled —the sum

cost of all work, plus apportioned effort, scheduled to be
completed within a given time period as specified in the
original budget.
2. ACWP is the actual cost of the work performed —the actual
expenditure incurred in a given time period. It is the sum of
the costs for all completed work packages plus all “open” work
packages and overhead.
 3. BCWP is the budgeted cost of the work
performed. It is determined by looking at work
tasks already performed (completed and open
work packages, plus overhead) as well as their
corresponding budget to see what they were
supposed to cost.

 Using this figures, these variances and indices

can be determined:

Schedule Variance = BCWP – BCWS

Cost Variance = BCWP – ACWP
Cost-Performance Index (CPI) = BCWP/ACWP
Schedule-Performance Index (SPI) = BCWP/BCWS
 BCWP versus BCWS: an example

The Parmete Company has a $200,000 fixed-cost

contract to install 1,000 new parking meters. The
contract calls for removing old parking meters from
their stands and replacing them with new ones. The
cost for this is $200 per meter. Parmete estimates that
25 meters can be installed each day.

 What is the BCWS as of the 18th day?

 What is the schedule variance if 400 meters were
installed as of the 18th day?
 How many days is the project behind/ahead?
 What is the cost variance assuming Parmate spent
$85000 up to the 18th day?
1. Solution
1. BCWS = 18 days * (25 meters) * ($200) = $90,000

2. BCWP = (400 meters) * ($200) = $80,000

SV= BCWS- BCWP

= 90000-80000
=10,000
3. $10,000 represents 50 parking meters, or 2 days
worth of work, which means that as of Day 18 the
project is 2 days behind schedule. Or, as of Day 18,
this project has made only 16 days worth of work
progress.
4. CV= 80,000-85000
= -5000