Module 4 Project Management Organizational Structures and Standards

4.1 Introduction

Organizational structure is sometimes summarized in the format of an organizational breakdown structure (OBS)

An organization breakdown structure (OBS) shows the main components of the organization and how they relate to each other in terms of control and communication and any other linkages or connections that cement the various components together.

Project management looks at existing organizational structures, look at proposed or required project structure, adapting and modifying the two structure to produce a new project containing structure

Project teams are therefore established that are

·        Wholly internal to the organization

·        Wholly external to the organization

·        Partly internal to the organization but with external specialist support

Internal project management known as operational or non-executive project management – characteristic of larger organization with constant high volumes of repetitive work

External project management known as executive project management – used by smaller more responsive project teams such as professional consultancies

4.2 Organizational Theory and Structures

4.2.1 Introduction

Project succeed or fail based on people.

Most common project management form is of a project team working within an existing functional organization.  The project team draws member from various functional sections and uses them to work on the project until it is completed.

4.2.2 The Project within an Existing Organization Introduction

Project team working within an existing organization structure, once completed project team disbanded or absorbed back into main organization.

Function of many elements including: The Functional Structure

In functional arrangement, power or status is defined by a vertical hierarchy through the OBS

Projects are likely to improve systems, procedures, methods or products, and they would tend to be internal rather than external projects. May be established for limited periods in order to address specific demands

Functional structure common in large organizations typical examples

Typically of large organizations have continuous rolling programmes of similar repetitive or semi-repetitive work.

Benefits of functional structure:

Disadvantages of function structure:

The main drawback with a pure functional structure is the development of operational or organizational islands. 

Organizational Island is a segment of the organization within the overall organizational structure, tend to act as a semi-independent sector .  Control and communication tend to flow down through various functional divisions. Little communication and co-operation across the functional divisions, this is inefficient as cross-transfer of co-operation allow formation of horizontal units. Pure Project Structure

Self contained section or unit within an otherwise purely functional structure. 

Typically used for projects that are difficult to plan accurately and where resource requirement and provision levels cannot be accurately established beforehand.

Project team disbanded upon completion of its project and individual project team members will return to the pool for use on other  projects.

Benefits of Pure project structure:

·        System is flexible and responsive to change

·        Innovation and evolution are not restricted

·        Operational cost quickly adjusted

·        Project manger in charge of any particular project is sole charge of project complete authority and control over project resources.  No requirement for negotiating with functional manager or project sponsor

·        Project staff clear reporting change

·        Communication lines much shorter

·        Informal communication lines shorter develop more quickly and efficiently

·        Authority with the project

·        Project team member do not have any functional loyalties

·        Centralized support much simpler and the overall sizes of support function smaller

·        Easier to incorporate external consultants

·        Possible to execute a series of related projects.

Projects point of view, pure project system appears to be the best supporting structure

Disadvantages of Pure Project structure:

·        Several projects running concurrently duplication of effort

·        Initial operating costs may be high considerable time before projects completed

·        Centralize direction is needed, from of command hierarchy.  Higher levels of authority may have difficulty interfacing

·        Project mangers (by definition) tend to think ahead

·        A sense of competition develop between various project teams

·        Project team members tend to have underlying concern about long term commitment

·        Project deadlines may create a culture ‘cut corners’; maintain good performance records

·        Difficult to compare the performance of individual projects

·        Most staff in project structure has some form of original functional specialization prolonged absence from functional section lead to specialization becoming diluted over time. Matrix structure (Internal or Non Executive Project Management Structure)

Compromises between pure project and pure functional forms.  It encourages horizontal communication and accountability.  Popular structure for organizations undertaking projects.  Combines benefits of the functional organization with those of the pure project organization, same time eliminating the disadvantages.  Matrix structure is the pure project structure overlaid on the functional divisions.


Main characteristic of an internal project management structure are:

Functional boundaries

Run vertically through the system, defines the border or line of delineation between the engineering faculty and other faculties act as barrier to communication only gateway is through interfaces



Power or status boundaries

Run horizontally through the system, represented as a triangle



Organizational islands

Vertical (functional) and horizontal (power) boundaries



Project sponsor

Internal system the project manger and the functional manger are both using individual employees as a shared resources.  Risk direct competition between the project manger and functional manger over such resources, this conflict can be controlled through a project sponsor – moderator on any potential conflict



The project management chair

Three different organizational interfaces

Project manager – project sponsor (subordinate-boss)

Project manager – functional manger (peer-peer)

Project manger – project team ( boss-subordinate)




Horizontal and vertical boundaries act as barrier to communication and co-operation.  Interfaces are like gateways through barriers.

Tool for control communication – Interface management system (IMS)



Interface management

Is management of the processes of communication and action across and within the various organizational interfaces.  Good communication systems are set up so information flows rapidly and accurately



The process of bidding

Resource allocation proposal calculate the approximate cost of labour, plant and material required for the project to be executed.



Time recording and cost-centre charging

Time spent on individual actives charged to the correct project or functional cost centre


Good points of an internal project management system include:

·        Project operates as a self-contained unit and project manger has executive control over its operation and development

·        Reasonable access to various functional units can access specialist input to the project

·        Flexibility and adaptability .  respond quickly to change

·        Project stays in touch with operational objective of the functional units.

·        Internal project management within a matrix structure offers the best of both the project and functional system to some extent

·        Effectively spreads the risk between project and functional profitability

·        Allows efficient balancing of functional and project resources provided the necessary control systems in place.  Resources can be switched between one aspect and the other to absorb changes in demand

·        Internal project management promotes innovation and evolution with organization while retaining the functional foundation

Weaknesses of internal project management

·        Balancing project and functional responsibilities, conflict can occur where relationship is not so good

·        Team member often do not like having two bosses

·        Matrix overlap means some responsibilities are effectively shared between the project and functional units

·        Project management is complex specialist range of skills, reporting to a project sponsor only makes the job more complex

·        Project tends to be depleted of resources toward the end of the implementation life cycle. Make completion very difficult

·        Project team member have difficulty re-adjusting to functional units

·        Project sponsor introduces new and additional level of authority and control Mixed and Hybrid Structure

This type of organization results in the project being spun off as a subsidiary company as it develops. Summary comment on Internal Projects

Choosing the most appropriate structure for a particular project depends on many elements and these should be considered :

4.2.3 The Project External to the Existing Organization Introduction

External Project teams can be comprised as follows:

Surrogacy in this sense refers to the extent to which the client whishes to delegate control or authority to running the project. External (Executive) Project Management Structure

External project mangers more applicable to smaller organizations with variable workload.

Project manager is the only team lead full authority and control over all components of the project team. Including control and co-ordination of the design team

Number of distinctive characteristics:

Multidisciplinary and shared loyalty group characteristic

Form of fees for their external project management system  tend to be strongly multidisciplinary.  Susceptible to shared loyalty characteristics, working for his own practice or company not the same as the objectives of the client conflict of loyalties between individual parts of the system more susceptible to the problems of differentiation and sentience than internal project management teams



Fee structures

Open competitive fee structure, negotiated fee are now generally accepted.  Use fee bid package approach

Look at a outline of project make a bid in form of a plan or proposal.

Hourly or percentage basis

Typical fee schedule

  • Completion of pre-contract works
  • Completion of post-contract work
  • Completion of final account



External contractual linkages

Wide range of contractual agreement systems, higher degree of risk of non-performance.

Take one of 3 primary forms

Completion contracts – one-off contract specified goods, service agreed cost by specified date.

Term contracts – long term agreement agrees to supply good agreed rate to an agreed standard for a fixed term.

Service-level agreement – (SLAs) where level of service is set rather than the performance.

Priced and arranged in 2 primary ways

Competitive contract – put out tender

Negotiated contract - not involved in direct competition, client negotiates price and condition with contractor.

Contracts can take a number of different forms:

Fixed price contract - cost of project agreed and fixed in some way in advance

Cost or cost-plus contract - fixed fees vs. price used insufficient design or product information cost plus -  contract fee is % of overall cost on final account,

Reimbursement contract.  Contractor perform the project at contractor expense and claim amount plus a fee every month 

Target Price contract – target price plus a fee

Contract types can take number of different forms

Standard forms of contract – Precise terms & conditions relate clearly to specific performance, aim establish absolute requirement form completion of the contract

- Clauses carefully worded to cover all aspects of the contract layout established procedures for virtually all eventualities

- Specific provisions within standard forms of contract, such as direct terms and conditions relating to loss and expense and extensions of time.

-Set out specific level of damages for non compliance with various events ie late completion

-Breaches - Clearly state remedial action & right in the event of non compliance (damages clause)

Professional services contract – implied terms interpret according to professional body, actual loss incurred
  • Supply contracts
  • Subcontract agreements
  • Proforma contracts

- Damages not set out beforehand & based on actual loss incurred

- Less protection to the client therefore more risk

- Carry professional indemnity insurance in event of negligence

- either state directly or imply a liability for the consultant to act within the professional standards that are set by the relevant professional body.

- Breaches / negligence or other act professional failed to act according to standards set out by the professional body

- Most professional bodies produce a book of professional practice, which lays out the minimum standards and codes of conduct that members must observe

- consultant is commissioned under a professional services contract that pertains to a given professional body, then any practice under the contract is deemed to be executed in accordance with that book of standards

typical contractual links in an external system

  • Client to project manager and other design team members
  • Client to main contractor
  • Client to service authorities
  • Client to nominated subcontractors and suppliers
  • Client to local authority
Statutory Contracts Health and Safety

-Implied common law, contract right or 3rd party

-Maybe formal signed

-Heavy favour authority little company do except comply with requirement i.e. Safety features on machinery must copy with HSE

Proforma Contracts

-generally written by one party for imposition on another party.

-Typical examples are contracts for services by monopoly or near monopoly organisations.

-the terms and conditions are largely written up by the service providers.

-The onus of responsibility is therefore borne by the client.

-Very risk clients point of view offer virtually no protection in the event of a default




External no-contractual linkages

Two type of linkage essential these are authority links and communication links

Authority links – define the power and control structure that operates with in system

Communication links – Configuration management system (CMS) define the authority and communication channels within a project system. 

External project management advantages

External project management disadvantages

4.2.4 Criteria for Selecting the Organizational Structure Broad considerations


Pure functional form traditional reporting structure clear line of authority running down through the structure. 




Easiest in functional structure but informal communication encounter blocks.  Authority boundaries may restrict both formal and informal vertical communication

 Matrix structure reduces blocks formal cross-function communication . 

pure project structure  greatest use of informal communications offer flexible communication solution



Knowledge transfer

Easiest type of knowledge  to store and use in future operation.

Matrix structure allows function knowledge to be used in project

Pure project tend to be restricted to areas of commonality between individual projects




Functional structure develop greatest individual loyalty  - career progression with functional section

Matrix structure loyalty shared individual project team member




Functional tend to rely on existing technology to manufacture or produce something

Matrix structure - likely to use existing technology to innovate in addition generate new technological innovations

Pure project greatest demand for innovation technology




Pure functional structure - large fixed cost inflexible to changes in workload and structure

Matrix structure more flexible increase or decreased size depends on workload variations

Pure Project – most flexible approach can produce the lowest running costs




Pure Functional structure – most formal reporting system co-ordination low

Matrix generate higher co-ordination demand enhanced co-ordination is necessary because project run across functional boundaries and potential for destructive competition and conflict increase

Pure project – requires similar high levels of co-ordination in order to avoid the possibility of duplication of effort.



Support functions

Pure functional structure require well-developed centralized support functions  functional manger concentrated on functional objectives in the knowledge decentralized support is areas such as it admin

Matrix structure –similar requirement but some level of support may be devolved to individual project mangers large projects own administration and IT support

Pure project  may require little or no centralized support Project Objectives and Choice of Organizational Structure

A pure functional organizational structure should be chosen in the following circumstances.

A matrix organisational structure should be chosen in the following circumstances.

A pure project organisational structure should be chosen in the following circumstances.


4.2.5 Summary

4.3 Examples of Organizational Structures

4.3.1 Introduction

4.3.2 Example of an Internal Project Management Structure

4.3.3 Example of an External Project Management Structure

4.4 Project Management Standards

4.4.1 Introduction

4.4.2 The APM and the APM Body of Knowledge Introduction

Association for Project Management (APM) in UK is part of the International project management Association (IPMA) and strong links to similar international bodies .

APM established a Body of Knowledge(BoK) that act as a standard for evaluated project management expertise and is a self assessment tool for project manager to measure their own professional competence for different levels of membership

The Stated aims and objectives of the APM are:

To act as first point of contact

National authority through internet



To lead the development of professionalism

Further project management practices



To Champion interest representation

Represent interest of UK project management in all sections of industry



To establish standardization of qualifications

Standardize the academic and professional qualification / certificated



To develop a functioning national branch network

Establish and maintain national branch network to facilitate participation



To establish practice and procedures for training

Establish and maintain ongoing training programs The APM Body of Knowledge profile

Body of Knowledge  (Bok) establishes national guidelines and standards for the profession, and is one of three levels of standards that are required for an effective project management system it has  four primary areas qualified project manager must have relevant academic and experiential ability

Project Management

Includes specific aspects of understanding of project life cycle, project strategy and project environment understanding of wide range of issues that relate to project management practiced



Organization and people

Include leadership, communication and team building, Leadership style has to evolve as the project develops



Techniques and procedures

Scheduling and estimating, planning, understand various control and monitoring procedures, latest approaches to planning and control earned value that link one or more success criteria variables



General Management

Finance and law, basic understanding of procedures and approaches involved, basic contract law recognizes actions not permissible under terms and condition of contract. 

4.4.3 BS6079 Introduction

BS6079 is the British Standard guide to project management.  Establishes guidelines and procedures for project management in the UK.  Important single section is the standard strategic project plan (SPP) it is based on standardization. There is no standard requirement for document preparation, recording, cost planning and control or even of quality control .  Projects are set up and executed in numerous ways.

Generic project plan applied to all projects

BS6079 SPP is a standard document operates at one level within project management, run in conjunction with the standards established by the professional association and institution and also in conjunction with sector – or company-specific standards Generic SPP of BS6079

Main element of the generic SPP

Project aims and objectives

Section for project aims, objectives clearly stated, objectives relate to time, cost, quality and a range of other objectives clearly defines everybody involved clear terms of reference to work to.

Sub objectives run in parallel with the project objectives and carry equal importance may require different planning and control techniques.



Subject specific sections

BS6079 gives a proposed numbering system for information presented under each heading.  Laid out in the same way and each subject specific heading should address the same issues and present information in the same format.

Specific sections for scheduling and cost control original plans and update and separate section maintained for the effects of change. 

Project History or diary, record all important communication events that occur during the course of the project, audit trail should the need arise, repository information for subsequent use in post-project review

SPP contains all relevant project information acts as both a record document and as a benchmark for project as originally developed and planned.  Project progress and designs plans are implement,  SPP updated .

Typical contributors to the SPP are:

Assembled to a specific timetable, include all necessary project design and specification information.

National standard for project management practices, it acts as a benchmark particularly in relation to standardizing procedures and documentation.  Most import single standard document within BS6079 is the strategic project plan (SPP).  Allows establish all projects in same basic format

4.4.4 PRINCE2 Introduction

Project management IN a Controlled Environment, version 2 (PRINCE2) is a methodology that covers organization, management and control of projects. Introduced in 1996  original PRINCE first developed by the Central Computer Telecommunication Agency (CCTA) in 1989.  Intended for UK government standard for IT project management. PRINCE2 Methodology

Based on a process model for a project breaking project down into component processes.  Each process is then defined in terms of its key inputs and outputs, and in terms of aims and objectives for each process, based on the life cycle of the project, each component evaluated and analyzed separately.  Allows more efficient use of resource and accurate measuring of progress.


Main advantages offered by a PRINCE2 approach are:

·        Offers a standardized project structure with clear start, middle and end

·        Allows regular and detailed reviews of actual progress against planned progress

·        Allows regular and reviews of actual progress against the business case

·        Identifies and makes use of flexible decision points

·        Identifies and allows automatic control of any deviation from the project plan

·        Ensures that the timing of involvement of management and stakeholders is optimized during the life cycle of the project

·        Encourages and develops good communication channels between the project, project manager and the rest of the organization.

4.4.5 Summary

Highlighted some of the primary standards that apply to project management practice,  Project management highest level is International Project Management Association (IPMA) global body for project management practice.  Attempt to establish and standardize areas of expertise that are required by practitioners in the respective countries.

Level which standards used depend on individual company polices and level of adoption for standards by professional practices.