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Chapter 2 of Project Management for Supplier Organizations (978-1-4724-1109-9) by Adrian Taggart

Structure of Project Delivery Organizations

Chapter 2

What empowers one individual to exert influence (to have authority over) another? Consider society prior to the Industrial Revolution when most of us would have been peasants, working the land to eke out sufficient for ourselves and our families. The most influential people then were the feudal lords and the source of their power was largely derived from who they were since entitlement to such positions was a birthright.

Others did exert influence. Hollywood would have us believe that characters like Robin Hood exerted at least as much influence as the local feudal lord, but unlike them, Mr Hood derived his ability to influence fellow peasants from his own talents and, in particular, his charisma.

Both of these sources of authority were recognized by Max Weber (1947). This famous German sociologist and philosopher was interested in power and authority within groups and in addition to these two he recognized a third type - legal authority.

By this, one is able to exert influence over others simply by dint of one’s office, or position. A rational and legal system of regulations specifies positions with defined powers of authority attributed to them. Individuals are then appointed to these positions and can assume the authority over specified others, that is vested in that position. It is this that underpins the concept of ‘bureaucracy’ and hence the iconic hierarchical structures that so many of us recognize in our ‘Organizational Charts’, ‘Organizational Breakdown Structures’ or ‘Organigrams’.

It is this source of power, and the structures it leads to, that provides the primary means by which the companies and public bodies that constitute the modern industrial society (or indeed post-industrial) can operate.

Communication Flows in Hierarchical Organizational Structures

Let us consider such a hierarchical structure (see Figure 2.1).

 
Figure 2.1 Communication within a bureaucracy

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The diagram consists of solid lines and boxes, but what do these boxes represent and what flows up and down the lines?

We tend to think of the boxes (the ‘nodes’) as people, but a more accurate description would be a role, or position. Such a description is in keeping with Weber’s analysis that differentiates between the individual and the office that they hold. We commonly use these diagrams to determine who the manager is and who their subordinates are. Tracing the line upwards from any node will identify the incumbent’s manager, tracing it downwards identifies their subordinates. Formal or ‘legal’ authority can be said to flow downwards, through the organization, along the lines.

The fact that each role has only one manager is in accordance with what is sometimes referred to as the ‘unitary chain of command’. Such a simple scenario removes any ambiguity and is consistent with one of Weber’s characteristics of a bureaucracy whereby there must be a clear chain of command.

The lines also represent a major route of communication. We spend a considerable amount of time communicating with either our Manager or our subordinates and so significant amounts of information flow up and down the lines. It is, however, a special communication type since, consistent with the authority flow described above, one party always has ‘legal’ authority over the other. Let us label this as communication Type A.

However not all communication involves mangers and subordinates. Much of it is between peers and this does not run along the chart’s lines; it runs across them. Let us consider such communication, where neither party has formal authority over the other, as Type B communication.

The significance of these different types is best addressed in an example. Let us consider the following situation.

Imagine you occupy role ‘X’ within the accounts department of our factory making washing machines described in Chapter 1. Your role involves processing ‘Goods Received Notes’ that are generated within the warehouse, which come under the jurisdiction of the Operations Director. Imagine that, while attempting to process a note generated by one of the forklift truck operators, you realize the form is missing some vital information that is preventing you from completing the task. The forklift truck driver needs to complete the form with the missing information. How is the driver to be communicated with, Type A or Type B? Figure 2.2 relates.

 
Figure 2.2 Communication options within a bureaucracy

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Let us imagine it is a nice sunny day and a walk over to the warehouse appeals so you elect to challenge the driver directly and opt for Type B.

On arrival at the warehouse you quickly locate the driver in question and point out his omission.

‘Please accept my unreserved apology. The fault is wholly mine and I shall rectify it immediately’ is their reply.

The swift resolution points to the many advantages associated with Type B communication.

It involved only the two people directly affected and so there was no delay by relaying the message; there was no opportunity for corruption of the message through a chain of intermediaries; it did not become conflated with other extraneous issues; and the errant party was not embarrassed by others being made aware of their error. The communication was effective and efficient.

However, let us consider the situation when our challenge led to the following very different reply from our driver: ‘You’re damn right it’s not filled in and I’m sick of you lot moaning about it from a comfortable office. It’s easier for you to get the information yourselves so why don’t you just go and do that now and get out of my way before I run you down’.

Faced with such intransigence you will revert to Type A communication. In its purest form, this will involve you pushing the issue up to your manager. In turn they may have to push it even further up the organization since it must reach a role that has authority over both the accounts and operations departments, and able to issue the relevant instruction.

The disadvantages to this are numerous and mostly derive from the ample opportunity for corruption of the message, delay in its transmission, drawing in other issues, and suchlike.

It does however have one significant advantage since when the message does arrive with the final recipient it will do so as an instruction from someone who has ‘legal’ authority. The argument will be over.

The point to be made is that although the organizational structure is ostensibly designed around Type A communication, there are many advantages of Type B communication. However, these advantages are only open to those who are prepared to collaborate with their colleagues and not insist on formal instruction from above. In doing so they are accepting influence derived from charisma and persuasion rather than just formal power derived from one’s position.

The ‘Silo Effect’

There is often a reluctance to embrace Type B communication, especially when it involves communicating with others who we perceive as being outside of our immediate peer group.

In an organizational context, the identity of our peer groups is most readily defined by the particular branch of the hierarchy in which we reside. The effect is to divide the organization structure into vertical slices and this phenomenon is well known as the ‘Silo Effect’. Within each peer group (or vertical slice or ‘silo’) there is much collaborative Type B communication but between the different peer groups there is little or none (see Figure 2.3).

 
Figure 2.3 The ‘silo effect’

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Division of any aggregation of people into peer groups has a potent effect on the interpersonal dynamics within. Put very simply, it provokes a ‘them and us’ mentality whereby, although cohesiveness exists amongst members within the same peer group, there is often conflict between the groups. In the event of any such inter-group conflict, individuals often feel the need to ‘take sides’ which can further reinforce the division between different groups, which in turn can lead to further alienation and opportunity for conflict. The outcome can be extreme with each rotation reinforcing commitment to one’s own group and hostility to others. (Consider the hostility between opposing groups of sports fans, between different nationalities, different religious groups and the like.)

In an organizational context, inter-group rivalry can be very destructive. At your place of work is the relationship between personnel from different departments or locations always harmonious and mutually respectful? Alternatively, does a degree of envy, disrespect and even naked competition creep into proceedings?

Knowledge of this dynamic, however, can be used to our advantage when designing our organizational structures. We can choose the basis upon which the organization is decomposed into peer groups, and by doing so anticipate where cohesiveness will exist, and where it will not.

One of two approaches is generally taken, giving rise to the two structures described below.

Functional Organizations

Consider the organization making the washing machines described in Chapter 1. Below the head of the organization (the Managing Director) we would expect to see the other directors with titles such as:

  • Operations Director.

  • Procurement Director.

  • Sales Director.

  • Research & Development Director.

 

Each of these titles contains a verb that relates to the function that is carried out in the group so formed. This is the feature that all members of this group have in common and even though it is highly likely that different members of the same group are working on different tasks (products), they all perform the same function. For this reason it is known as a Functional Organization.

The superior, collaborative, Type B communication will take place amongst those with a common interest in just one specialism. It is for this reason that this type of group is renowned for its ability to promote excellence in that specialism. In particular, it provides an ideal learning environment where apprentices of the specialism in question can access many role models and tutors.

In this arrangement the restrictions of the ‘Silo Effect’ prevents incumbents ‘seeing the big picture’, beyond the needs of their own function. As such it seriously inhibits co-operation and integration between different functions. This problem is not too serious if the same overall operation is being repeated constantly as, say, within a factory mass-producing the same identical product, where the needs of each function are well understood and, over time, incorporated into the established ways of working. Indeed, in these circumstances a Functional Organization is capable of remarkable performance, especially in terms of the efficiency of its use of resources. However, when the required products are not identical and changes to established ways of working are required, the Functional Organization will struggle.

Other pros and cons of the Functional Organization are summarized in the following table.

 
Table 2.1 Pros and cons of Functional Organizations

Pros

Cons

Functional Organization

(Note: pros of Functional Organizations tend to be cons of Projectized, and vice versa)

  • Excellent environment for promoting functional excellence.

  • In concert with above, very good opportunities for training and learning.

  • Obvious career path.

  • Excellent communication within team (manager usually did subordinates’ job at some point in career).

  • Capable of very efficient use of resources.

  • Strong team identity.

  • Excellent for retaining corporate knowledge and experience.

  • Encourages ‘silo mentality (dedicated to own team and tendency to conflict with other functional teams).

  • (Hence) Very poor for crossfunctional integration.

  • Poor for development of broad perspective and hence general management skills.

  • Very resistant to change.

  • Very little focus on, and service of, individual customer.

  • Very poor at dealing with unusual circumstances.

  • Poor for developing general management skills (crossfunctional perspective).

Task Force Organizations

Consider the organization creating the Olympic stadium, also described in Chapter 1. Below the head of the organization we would expect to see roles with titles such as:

  • Power Supply Manager.

  • Structures Manager.

  • Seating and Customer Accommodation Manager.

  • Track & Sport Facilities Manager.

 

Each of these titles contains a noun that relates to the element of the overall product that is being created by the group so formed.

The feature that all members of this group have in common is that they all work to complete the same task and this task is defined as the completion of a specific product, or fragment thereof. Each group will contain sufficient designers, manufacturers and installers to achieve this task and for this reason the organization is referred to variously as a Task Force, a Projectized Organization or a Project Team.

Because each of the different functions is represented within each group the superior, collaborative, Type B communication will take place across functions. It is for this reason that this type of organizations excel at complex and innovative endeavours that require close liaison between different functions.

It is this enhanced cross-functional integration and the motivational benefits of focusing a team around a specific output, that are the primary reasons why this type of structure is favoured by organizations delivering high profile projects.

In this arrangement the restrictions of the ‘Silo Effect’ inhibit those aspects which require integration between groups delivering different tasks. These can be associated with integration, for instance when two groups are making subproducts which must ultimately interface with each other, but more usually they are associated with inefficiency and an absence of ‘economies of scale’. This is because different groups are often performing tasks with similar functional elements and this can lead to duplication of effort.

Another very attractive feature of these types of organization to project work is that once a task has been completed, the group responsible can be dispensed with. Helpfully, this avoids the need, (and hence costs) of maintaining expensive resources beyond when necessary, but, unhelpfully, it also means that knowledge and expertise is being continually lost. It also means that the overall structure is always changing as tasks are completed and new ones started. In this respect we can see how this is consistent with the ‘temporary’ and ‘transient’ aspects of projects that were discussed earlier in Chapter 1. It can be said that the overall organization has a ‘revolving door” with groups (and individuals) constantly entering and leaving.

Other pros and cons of the Task Force Organization are summarized in Table 2.2.

 
Table 2.2 Pros and cons of task force organizations

Pros

Cons

Task Force (or Projectized Organization)

(Note: pros of Projectized Organization tend to be cons of functional, and vice versa)

  • very strong dedication to project purpose.

  • Flexible.

  • Effective at dealing with various challenges.

  • Strong team identity.

  • Develops broad perspective and good management skills.

  • Excellent for crossfunctional integration.

  • facilitates ‘revolving door’ aspect.

  • Poor at retaining expert skills and experience.

  • Poor at retaining historical knowledge.

  • Inefficient use of resources.

  • Little opportunity for the long term and hence long-term commitment of members.

  • Constant state of flux.

Organizational Continuum

Although Functional and Task Force organizations share the overall hierarchical pattern of Weber’s bureaucracy, they represent very different organizations in terms of their ways of working, and hence their attractions and detractions. These render each suitable for a particular type of work - Functional Organizations for routine operations, and Task Force Organizations for projects.

They are best thought of as idealized models that help an understanding of what happens within an organization but it is relatively rare to come across pure examples of either because, in an attempt to foster the pros and minimize the cons of both, most real organizations are hybrids; a combination of the two idealized structures. Any such hybrid is described as a Matrix Organization.

As with any hybrid, the relative quantities of the ingredients can be varied to create different outcomes and so it is with Matrix Organizations.

This is best considered by reference to an Organizational Continuum (see Figure 2.4). Within this, the extremes are defined by the two idealized models. Along the continuum in-between, is an infinite range of possibilities for unique blends of the two, and hence an infinite variety of Matrix Organizations. However, only three are generally considered a Balanced, a Weak and a Strong Matrix, as discussed below.

 
Figure 2.4 The Organizational Continuum

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The Matrix Organization

Description

The matrix seeks to simultaneously secure the advantages of both function and task orientated organizations. It does this by combining two authority structures in one organization and having some managers responsible for the function and others the output (the task). When combined they form a matrix. This is represented visually within Figure 2.5, though it is difficult to highlight the two integrated authority structures within one diagram.

 
Figure 2.5 The Matrix organization structure

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As can be seen, the defining characteristic of a Matrix Organization is that those workers in the middle come under the authority of two managers; one responsible for the function, the other the task. Ostensibly this does away with the need for Type B communication since authority can flow along functional and task lines, however as we shall discuss below, the effect can be the exact opposite.

Weak, Balanced and Strong Matrices: Traversing the Organizational Continuum

As suggested, Functional Organizations are most appropriate for delivering repetitive, routine operations whereas Task Force Organizations are more appropriate for project work.

There is therefore a correlation between the ideal type of organization and the type of work at hand. In simple terms, we would expect a consistency between the location of a particular organization on the Organizational Continuum (Figure 2.4), and the location of its work on the Continuum of Creative Endeavours (Figure 1.1). It is therefore helpful to consider the need to traverse the Organizational Continuum from Functional to Task Force, not least because this is the migration that can be expected of an organization that starts to embrace project work.

Imagine a company making assemblies of kitchen units for domestic dwellings using a predominantly manual process. Since each of the packs contains identical kitchen units a Functional Organization is adopted. However, imagine at some point a lucrative deal is struck to supply a house builder with kitchens. The design is almost identical to the standard (some small dimensional changes) but the customer insists on a single person contact with whom they can liaise for progress, delivery and technical queries. The MD sees no difficulties with this and chooses a young graduate, fresh from college and full of enthusiasm to be the project co-ordinator and to liaise with both the customer and the in-house functions.

Appointing someone with responsibility for one overall deliverable and a pan-function interest means it is no longer a purely Functional Organization; it is a Matrix. In this instance when the person with responsibility for the product has very little authority (associated with a project expediter or co-ordinator role) it is referred to as ‘Weak Matrix’.

Many readers will have occupied the role of ‘Project Co-ordinator’ early in their career and probably remember it as one of their most fraught experiences. The established functional managers will, most likely, see them as an unwelcome interference; some youngster telling them how to do a job they have spent years perfecting. The co-ordinator and the changes they attempt to instigate will, most likely, be ignored. It is highly likely that the organization will fail to satisfy the customer, and highly likely that blame will be laid at the foot of the co-ordinator’s door. In this instance the co-ordinator will be held accountable for something they do not have sufficient authority to control.

Imagine, however, that although this contract failed, the MD is attracted by the potential profits in bespoke kitchens and pursues further work of this type. Mindful of the failures of last time he recognizes that the co-ordinator did not have sufficient authority to influence the functional mangers, so next time a similar contract is attempted a ‘Project Manager’ is assigned to the work.

Having both functional and project managers at the same level of authority is known as a ‘Balanced Matrix’. Its failures come into sharp focus if we consider what will happen if they hold opposing views. In practice it is usually necessary for one to have the slightly higher authority. If it is deemed that the functional manager has the higher authority then the organization reverts to a ‘Weak Matrix’, however if the project manager is deemed to have the upper hand then the organization becomes a ‘Strong Matrix’.

The latter situation will involve a dilution of the role of the functional manager. Rather than instructing their workforce on the work at hand they would become more associated with a personnel manager type role. Their departments would become ‘resource pools’ that simply provide individuals to be seconded to the various project teams, as and when required, who would then come under the instruction of the ‘Project Manager’. The need to manage and develop ‘Project Managers’ would become highlighted in such an organization and in all likelihood a ‘Manager of Project Managers’ position would emerge.

In the example offered it is likely that a structure such as this would only be embraced if the organization had started to deliver fewer, higher value kitchens that were very bespoke to individual customers.

From a ‘Strong Matrix’ it is a relatively straightforward step to a ‘Task Force’ structure by, for instance, outsourcing some of the various functions. The effect would be that a temporary team can be assembled for each contract, which will disband once the work is completed.

The Pros and Cons of the Matrix

The first point to make about a Matrix Organization is that it is not a coherent hierarchical structure. A fundamental characteristic of a bureaucracy as defined by Weber is a clarity of authority. Matrix structures fail to satisfy this fundamental requirement since there is a duality of authority. The concept of unitary chain of command is corrupted and abandoned.

As indicated above, this problem is brought into sharp focus if we consider those scenarios when a function and task manager have opposing views on what is to be done. How does a worker respond when their two bosses are offering conflicting instructions?

It is not surprising therefore that the biggest drawback of a Matrix is the confusion and ambiguity it creates in terms of authority structure. It is often the workers in the middle who bear the brunt of this and are subject to considerable stress. Such a problem is not a just modern issue; it was known about in biblical times prompting Matthew (6:24) to observe that ‘No one can serve two masters, for either he will hate the one and love the other; or else he will be devoted to one and despise the other’.

There are also other very practical details that render this structure less attractive. There are, for instance, twice as many managers as the two conventional structures. This not only impacts directly on the overheads of the organization but just involving more people in decisions and communications creates additional complexity.

What, then, is the big advantage that outweighs all of these drawbacks and persuades so many organizations that this is the structure for them?

The answer is that it is the only solution that addresses the conflicting demands made upon those organizations who engage in activities which are neither pure projects nor pure operations. The disadvantages of the two idealized structures discussed above render them unacceptable for such mixed endeavours and inevitably the Matrix is favoured since it offers a compromise that mitigates the impact of these significant disadvantages.

The pros and cons of the Matrix structure are summarized in Table 2.3.

 
Table 2.3 Pros and cons of Matrix organizations

 

Pros

Cons

Matrix

(Note: most of the pros and cons lie in the fact that the Matrix is a compromise between the two other organizational types. For instance a Matrix is better at retaining expert knowledge than a Task Force but not as good as a Functional Organization etc.)

  • Honest representation · of the blend between the routine and the unique aspects of the work of real organizations.

  • Conflict and stress associated with members reporting to two or more managers.

  • Poor team identity.

  • Additional costs associated with ‘doubling up’ of managers associated with function and project.

Making the Matrix Work

How then are the problems of the Matrix to be overcome? The solution does not lie in structure. As suggested the Matrix is an incoherent structure. To address its shortcomings we must look to other aspects of the organizations, specifically the behaviour of the incumbents and how they seek to influence each other. Such aspects are best addressed in the context of organizational culture and the next chapter addresses this.

Other Matrix Options

Implicit within the descriptions above is the assumption that the two types of organizational structure combined with the Matrix are defined by the roles, i.e. whether they are responsible for a function or a task. This is the most important scenario and the only one addressed in the text above but it should be acknowledged that there are other scenarios that give rise to Matrix Organizations, for instance geography.

Consider an international company that has facilities in a number of different countries. Collectively these different facilities form a coherent structure that allows the organization to offer a full range of functions, even though each country on its own may offer a limited functional capability. From a legal perspective, however, these organizations need to be companies incorporated in their host country and this requires them to have a local authority structure. An incumbent can find themselves reporting to their functional manager who may be located in another country and yet have a line manager located in the same building.

Further, this introduces the prospect of a Matrix of multiple dimensions. The author recalls working on a project being managed in one country, belonging to a function that was managed in a second country, whilst having to report for legal reasons to a director of his host country; a three-dimensional Matrix in action.

This complexity is an increasing aspect of organizations as globalization gathers pace and is largely facilitated by sophisticated electronic-based communication and the evolution of Virtual Teams. In turn this is creating some very real challenges for organizations.

Notes

[1] Usually, the product is the unique element of a project but this is not always the case. For instance a project may be initiated to create a standard product but to do so using a different manufacturing technique, or by using alternative equipment, or in a different location. In each of these cases the challenge is to do something which has not been attempted before and as such the word ‘unique’ is applicable and hence the use of the word ‘project’ justified.

[2] The troubled facility created for the 1976 Olympic Games in Montreal, the chaotic preparation of the stadia for the FIFA World Cup in Brazil in 2014 and the reconstruction of Wembley Stadium in 2007 are notable examples in this respect.

[3] Many readers will be employed by organizations that deliver successive projects and the completion of one project does not lead to termination of employment. These types of organizations are referred to as ‘matrix’ organizations and have special characteristics, some of which they share with organizations engaged in non-project work. They will be addressed in some detail in Chapter 2 but for the purposes of this chapter it is appropriate to consider what may be referred to as a ‘pure project’, like our stadium project, a characteristic of which is its temporary management structures.

[4] In practice, the involvement of individual project team members is even more volatile than the life of the overall project team. Most likely, an individual will be a member of a sub-team which will only exist until the fragment of the project for which the sub-team is responsible, is complete. For this reason the make-up of the overall project team is always changing.

[5] This may stretch the historical knowledge of some of our younger readers but suffice to say that after vinyl records, the favoured medium for storing music was a spool of magnetic tape contained within a plastic case; the cassette tape.

[6] The various levels of project success and the interplay between products and benefits is addressed in detail in Chapter 16.

[7] There are instances where organizations may choose to move in the opposite direction, and for good reason, but this book does seek to address their concerns.

[8] Ultimately, all expenditure is for the engagement of people since all material comes out of the ground (either mined or harvested) and at this point is free of charge.

[9] For the mathematically minded it is the integral of the earlier curve (area under the curve) and its gradient, or steepness is equal to the value of the previous curve, at any individual point in time.

[10] The name derives from ‘S’ being an abbreviation for ‘Summation’, since these curves are most properly referred to as ‘Summation Curves’. This explains why, very often, real ‘S-curves’ do not look much like an ‘S’. The important features are, firstly, that it is always ascending (the cumulative expenditure never reduces) and, secondly, the gradient, on a large scale, is shallow-steep-shallow, even though locally, on a finer scale, there may be some variation in gradient.

[11] The decision made at the gates involves the marginal benefit and marginal cost. Actual expenditure to date is ignored on the basis that it is a ‘sunk cost’ and cannot be recovered in any case. This is a reason why, especially at the later Decision Gates, a project may be continued with, even though the total benefits may be exceeded by the total costs.

[12] Further detailed analysis and comparison of strategic and tactical control is offered in Chapter 16.

[13] There is again an analogy to our own lives. Shakespeare once famously wrote about the ‘Seven Ages of Man’ and yet Hinduism talks about the four stages of man. Each is describing the same life; the same journey from cradle to grave, and yet they choose to decompose it in different ways, each to reflect their own understanding and their own emphasis.

[14] Readers may wish to note that in some countries, most notably the United States, the mandate document that bears the authorizing signatures is a ‘Project Charter’. This is a standalone and separate document that will refer to a Business Case.

[15] Some care is required here because there are some obligations of the SO that may not be explicitly stated in the contract. For instance, in any case, the SO is obliged to provide goods of ‘merchantable quality’ and this will confer ‘implied terms’ on the SO.

[16] The analysis is more straightforward if we assume the contract is of ‘Firm Price’ type (see Chapter 13).

[17] Some OO manage major assets and infrastructure (rail, water and telecommunication networks) and are constantly commissioning projects to create or refurbish assets. For them, projects are an ongoing feature, but they are the exception. For most OO their involvement in projects is sporadic.

[18] Like the lifecycle offered in Chapter 5, the lifecycle offered here is a model. To be useful, models need to be simple, however their principal weakness is always their simplicity. The nature of procurement is such that there are a great many combinations and permutations of payment terms, contract types, and the like that can result in variation in the exact Decision Gates and phases that apply. The model is offered as a generic model to assist in the understanding of what appertains to most SO, most of the time. Real examples may, and will, vary.

[19] Some legal obligations of the SO do live on beyond this point, for instance its obligations for latent defects.

[20] It should be noted, however, that this is not always the case. Acme Pool Services is selected on the basis that, unlike the Owner Organization (OO), it is experienced in the construction of pools. It has skills, equipment, knowledge, expertise and contacts that enable it to manage the building of the pool far better than the OO, such that it may well be able to do the work for a considerably cheaper sum and some of this saving may be passed onto the OO in which case the second scenario is both easier and cheaper for the OO.

[21] There are variants that do not contain such an agreement but are less attractive to the OO.

[22] The exact sharing of risk is determined by the wording and quantifications within each specific contract. The arrangement within a continuum offers an approximate guide only.

[23] Ideally such negotiations should be embraced as early as possible and not wait for the final phase but practicalities often result in them being held to the end.

[24] For example some EU legislation imposes constraints on publicly funded projects.

[25] Discrete probability distributions for time or cost of a project are rarely symmetrical. It is almost always the case that it is more likely to cost more, or last longer, than the ‘most likely’ figure, than less, i.e. the mean is very likely to be greater than the mode. This results in a distorted distribution curve with a longer tail to the right of the mode. It is for this reason that the single estimate derived by the three-point estimating technique is usually greater than the mean and a more representative figure of the overall distribution.

[26] Or other entity such as Work Package.

[27] The use of Product Breakdown Structures and Work Breakdown Structures (WBS) will be addressed comprehensively in Chapter 14.

[28] There is an opportunity to withdraw an offer by the offerer, before the expiry of any validity period, but it is limited and different legal systems have different approaches. It is, for instance, an area of inconsistency between English and Scottish law.

[29] For an OO the ‘why’ is addressed within the Business Case and the ‘Project Background’ section of their PMP is informed by this.

[30] This ‘locking’ of the estimate is sometimes referred to as ‘baselining’.

[31] It is the case for project control as it is for planning. ‘Scope creep’ (doing something that was not intended) impacts upon duration and cost and, without a scope baseline, ‘scope creep’ cannot be recognized and hence project cost and duration cannot be controlled.

[32] For projects with very large physical deliverables, such as machinery, many practitioners choose to draw up a PBS (Product Breakdown Structure) that decomposes the deliverable into discrete parts, as a prelude to creating the WBS.

[33] A Work Breakdown Structure Dictionary is a textual document that supports the WBS by containing additional information about individual Work Packages.

[34] ‘Cost’ is a complex entity and care is required here. Chapter 17 refers.

[35] Such ‘house standards’ will be key elements of the project management method adopted by the SO.

[36] Although presented in the context of management of resource, since time and cost are inextricably linked, they can be thought of as time or cost management techniques, depending upon the context.

[37] To many, this four-part cycle is known as the ‘Deming Cycle’ or the ‘Deming Wheel’ on the understanding that it was originated by W. Edwards Deming. However, in his book Out of the Crisis, Deming (1982) himself attributed the original design to W.A. Shewhart.

Others, such as Ronald D. Moen and Clifford L. Norman (2010) differentiate between ‘Deming’s Wheel’ and the PDCA cycle, attributing the latter to a reworking of Deming’s work by a group of Japanese executives after receiving a presentation by Deming in the 1950s.

[38] This can be considered as an example of the ‘Hawthorne Effect’ (Buchanan and Huczynski, 2004).

[39] As discussed in Chapter 7, through the life of a contract the SO has progressively less influence over the gate decisions than the OO. For example, once the contract is signed the opportunity for the SO to terminate the contract is negligible.

[40] For convenience we will consider a Firm Price contract.

[41] If the estimated cost within the baselines of the PMP is less than that within the pre-contract sales estimate it is inconceivable that SO management would not insist on the former being adopted as the target cost.

[42] Although it is easy to refer to just cost, the real goal of the SO is profit and so there is a pressing need to manage and control revenue, both in terms of expediting payments to which the SO is already entitled, and also maximising the amount of entitlement. The latter will involve the SO’s PM acting as a marketer and salesperson seeking out new opportunities within the context of the existing OO and project. Such activity is akin to the ‘farmer’ aspect of selling as opposed to the more conventional ‘hunter’ aspect, as addressed in Chapter 13.

[43] To some extent this is because this strategic level of control is not as easy to exert within an SO because, once a contract is signed, the SO has no option to withdraw.

[44] It is said that project managers spend upwards of 90 per cent of their time simply communicating with others (Heldman, 2009).

[45] Care is required here since some projects will have their own contractual requirements that may not be adequately serviced by the existing facility.

[46] This also helps to manage the risks associated with the unexpected departure of key project staff.

[47] Some practitioners also include the processes and documents required to manage change as being part of the Configuration Management System (CMS).

[48] For instance, to avoid potential for any contradictions such suites should, ideally, ensure that a requirement (such as a dimension) is only stated once, in one document, which is then referenced by the others.

[49] Or alternatively with a CMS imposed by a SO higher in the supply chain.

[50] Some recipients will receive a ‘Controlled Copy’ in which case they will automatically receive any subsequent updated versions. Recipients of ‘Uncontrolled Copies’ do not atomically receive updated versions.

[51] Further enhancement can be adopted when using a spreadsheet’s logic to colour the cells to indicate status (for instance: Green - Work Package has started/finished before its planned date Amber - Work Package has started/finished but after the planned date; Red - Work Package has not started/finished and it is after the planned date).

[52] The size (and hence number) of the smallest fragment into which the project is decomposed.

[53] Implicit within all these discussions of costs incurred by a SO, and their use in the strategic and tactical control of projects, is the assumption that costs can be attributed to each individual bespoke product. Those SO who currently only produce standard products and are looking to embrace the supply of bespoke products may find this requirement surprisingly onerous. This is because, currently, many will operate a cost collection system that uses only functional departments as cost centres and lack the facility to record costs against individual products. Converting such a system can represent a significant amount of work and may, for instance, include the need for employees to create timesheets. Cultural resistance can be expected as well as significant technical difficulties and additional complexity.

[54] Many SO choose to have a ‘Cost Management Plan’, as a subsidiary management plan within the PMP that contains such definitions and conventions.

[55] The precise point of commencement of the warranty period is defined within the contract in question.

[56] In some instances such access is an element within the original supply contract. It can be a useful negotiating token for the OO.

Reference

4 

Weber M., 1947. Legitimate Authority and Bureaucracy. In D.S. Pugh, ed., 1990.

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