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PROJECT AND CONTRACT MANAGEMENT KNEC NOTES

DCM MODULE 3

 

Topic 1

Introduction to Project Management

What Is A Project?
A project is a complex of activities where resources are used in expectation of returns. It intends to achieve specific objectives. It has a sequence of investments and production activities and a specific group of benefits that can be identified and valued either socially or monetarily.

Key Characteristics of Projects:

  1. Has an objective: A definable result, output or product that is typically defined in terms of cost, the quality and timing of the output from the project activities.
  2. Complexity: many different tasks are required to be undertaken to achieve a project’s objective. The relationship between these tasks can be complex.
  3. Uniqueness: a project is usually a ‘one-off’ not a repetitive undertaking. Even repeat projects e.g. road construction to the same specification, will have differences in terms of resources used & the environment.
  4. Temporary nature: has a start and an end
  5. Life cycle: Conception, planning and organizing phase, implementing, closure and handover.
  6. Customer specific nature: a project is always made to the order of its customer who specifies the requirement
  7. Sub-contracting: the more the complexity of the project ,the more the extent of sub-contracting
  8. Risk and uncertainty: The degree of uncertainty will depend on how a project has passed through its various life cycle phases
  9. Team work: a project calls for team work from members of various disciplines (profession), organizations and sometimes countries all working together to meet the project goals.
  10. Control mechanism: like time schedule, cost, so as to achieve the desired level of quality and reliability.

 

What Is Project Management?
Project Management is the process of achieving project objectives (schedule, budget and performance) through a set of activities that start and end at certain points in time and produce quantifiable and qualifiable deliverables. Successful project management is the art of understanding the projects are properly planned and integrated with other related activities.

  • Ensure that managers of the separate tasks that comprise the project do not optimize the performance of their individual tasks at the expense of the total project.

 

TYPES OF PROJECTS

Various types or categories of projects should be identified so that the mix of projects funded by the parent organization will be spread appropriately across those areas making major contributions to the organization’s goals.

The location, type, technology, size, scope and speed are normally the factors which determine the effort needed in executing a project.

  • Research and development projects-refers to the investigative activities a business conducts to improve existing products and procedures or to lead to the development of new products and procedures
  • Manufacturing projects- aim to produce piece of equipment or machinery or consumable goods like soap, cooking fat etc.
  • Construction projects – Eg. roads, bridges, mining, quarrying
  • Turn-key projects.- a contract under which a firm agrees to fully design, construct and equip a manufacturing/business/ service facility and turn the project over to the purchaser when it is ready for operation for a remuneration. Turnkey means that the PM will only have to turn the key to have the business or project up running. See BEYOND ZERO mobile clinics PROJECT
  • Derivative Projects. These are projects with objectives or deliverables that are only incrementally different in both product and process from the existing offerings. They are often meant to replace offerings or add an extension to current offerings.
  • Platform Projects. The planned outputs of these projects represent major departures from the existing offerings in terms of either the product or service itself or the process used to make and deliver it or both. As such, they become platforms for the next generation of organizational offerings.

(vii) Breakthrough Projects. These projects typically involve a new technology than platform projects. It may be a disruptive technology that is known to the industry or something proprietary that the organization has been developing over time. Eg MPESA

 

PROJECTS ORGANISATION STRUCTURES

Def: Organizational structure which is also referred to as corporate structure refers to the specifying of the format of an organization reporting relationships, procedures, controls, authority and decision-making processes.

Def: It is also defined as a system of shared beliefs and values that develops within an organization and guides the behavior of its members.

Proactive management of projects and contracts has come to realize that project structures need to be dynamic and not static.

Organizational structures should have ability, capacity and capability of embracing rapid restructuring when environmental conditions dictate otherwise.

There are no organizational structures which are bad or good but such structures can only be appropriate or inappropriate.

 

FACTORS THAT INFLUNCE THE PROJECT ORGANISATION STRUCTURE

  • Technological changes. Technological revolution may lead to complexity, varieties of new products, development of new processes, new data, new labour competences, new tools, new ideas etc and all these factors must be harmonized to ensure conformity, compatibility and compliance with the ever-changing technologies in the market.
  • Simplicity or complexity of the project. Resources required to implement a project depend very much depend on how simple or complex a project is. A project organizational structure therefore must be developed in such a way that the unique needs of the client are addressed adequately, effectively and cost effectively.
  • Nature of the product to be rolled out by the project. A project rolling out tangible goods or services or works requires different and appropriate organizational structures if good and satisfactory results are be achieved. Expected profitability or value for money plays very crucial role in structuring the organization.
  • Market competition. The organization has to be structured in a way that will give it a competitive edge over the competitors in the market as only fittest can survive in such a market.
  • Value of the project. The total project cost or value of money invested in the project gives a proper guide on the most appropriate structure the project should adopt.
  • Staff technical competences. Develop an organizational structure that the available staff in the organization can conveniently, efficiently and effectively manage.
  • Whether the organization is mechanistic or organic. The need for centralization or decentralization of authority, making rules and procedures or fewer tasks, formalized communication or internal communication etc. will to a great extent influence the most appropriate structure to be adapted by an entity.
  • Differentiation-integration dimension. The need for specialized technical competences and division of labour plays a big role in deciding the appropriate structure an organization may adopt.
  • The size of the organization. The size of labour force on full time basis determines the right structure an entity may adopt. Larger organizations tend to more formal, have more rules, more regulations, increased job specialization, complex decisions to be made etc. while smaller organizations tend to be more informal, have fewer rules and less need for specialized technical competences. All these variables play very important role in determining an organizational structure that will fit best a particular entity.
  • The lifecycle stage of an organization. The stage at which an organization is very much influences the right organizational structure. An organization at birth, youth, midlife and maturity stages will have different organizational structures at each different stage of lifecycle as the organization evolves from one stage to another.

 

SIGNS FOR NEED TO RESTRUCTURE THE PROJECT ORGANIZATION.

It is important to regularly and consistently identify and interpret red flags or early warning signs that indicate the need for a new and better project organizational structure so as to ensure that the project delivers maximum results.

Such signs may include but not limited to:

  • The project management team is satisfied with its existing members in respect of knowledge, experience, efficiency and integrity but the project is not meeting lead time, cost and related deliverables.

There is high commitment of getting the project work done competently but performance not satisfying.

  • The key technical staff involved in the project management feel overworked, exploited and misused.
  • Particular technical groups or individual project team members have tendency of blaming each other for failure to meet specifications, lead time and costs.
  • Project obligations are completed on time, to the specifications and at the right cost but technical groups or individual team members are not satisfied with the gains

 

TYPES OF PROJECT ORGANIZATIONAL STRUCTURES.

Basically, below are the commonest types or forms of project organization structures:

 

Simple project organizational structure.

It is a type of organizational structure where only a few product lines or very limited activities are carried out and decisions are made by one person in authority without any consultations.

In this structure the owner of the business and a few employees with the arrangement of tasks, responsibilities and communication are highly informal and accomplished through direct supervision.

In other words, the organization is run by the personal control of an individual.

 

ADVANTAGES.

  • Easier to budget and control the project activities as only a fewer product lines and limited activities are carried out.
  • Specialists can be easily grouped together to share their competences and experiences.
  • Available technical staff can be easily used in other different projects or other activities where their inputs are critically required.
  • Provides broader manpower base to work with in any of the project obligations.
  • Provides continuity in the functional disciplines/areas such as policies, procedures, processes etc.
  • Provides proper control over personnel since each employee has only one immediate supervisor to report to.
  • There is effective flow of information for timely decision making since channels of communication are well established.
  • The project activities are easily prioritized when need arises.

DISADVANTAGES.

  • No individual staff is directly responsible for the total project activities as each expert only handles his or her area.
  • Does not provide the project oriented emphasis required to accomplish the project tasks.
  • Coordination of project tasks may become complex as no formal meetings are held to handle project issues.
  • Decisions are not arrived at through consensus as only influential individuals take the centre stage and steal the show.
  • Nobody can be held responsible for incompetent implementation of the project tasks.
  • Motivation and innovation are not given special attention.
  • Responsiveness to the needs of the project is very slow or even nil at times.

 

  • Functional project organizational structure.

For functionally organized projects, the projects should be assigned to the functional unit that has the biggest interest in ensuring its success or can be most helpful in implementing it.

It is a structure in which the tasks, people and technologies necessary to do the work of the business are divided into separate functional groups eg. Procurement, finance/accounting, marketing, operations, engineering etc. with increasingly formal procedures for coordinating and integrating their activities to provide the project products and services.

It should be noted further that only individuals with what it takes or relevant expertise in a particular project should be assigned responsibilities of managing it.

In other words, the organization is based on the primary activities that have to be undertaken by departments of functional units eg. Production, finance/accounts, marketing, engineering, supply chain etc.

 

ADVANTAGES.

The advantages of using functional elements of the parent organization as administrative home for a project include but not limited to:

  • There is maximum flexibility in the use of the available technical staff. Experts may be temporarily assigned to the project, make the required contributions and immediately be reassigned to their normal and routine work.
  • High efficiency due to specialization.
  • Day to day operations or activities are easily and effectively delegated.
  • Centralized control of strategic decisions is easily and effectively retained.
  • Tightly links structure to strategy by designing key activities as separate units.
  • Available technical staff may be utilized in many different projects. Individual experts may be switched back and forth between the different projects with relative ease.
  • Available functional specialists may be grouped to share knowledge and experience. Such expert individuals may provide potential source of creative and synergistic solutions to technical problems.
  • There is technological continuity when individual experts choose to leave the project and even the organization. This also ensures the procedural, administrative and overall policy continuity that results when the project is maintained by the parent organization.
  • Provides the normal path of advancement for individual technical staff whose expertise is in the functional area. The project may be a source of glory for those who participate in its successful completion.

 

DISADVANTAGES.

Just as there are advantages to housing the project in a functional area, there are also disadvantages namely:

  • The client is not the focus of the project activities and concern. The functional unit has its own routine work to do, which usually takes precedence over the work of the project and hence over the interests of the client.
  • There is orientation toward the particular activities of the project. It is not usually problem oriented in the sense that a project should be successful.
  • No particular individuals are given full responsibilities for the project hence exposing the project to risks. This failure to pinpoint responsibility usually means that the Project Manager is made accountable for some parts of the project, but another person is made accountable for one or more other parts. Little imagination is required to forecast the lack of coordination and chaos that result.
  • Response to client needs is slow and arduous. There are often several layers of management between the project and the client.
  • Risk of sub-optimizing the project. Project issues that are directly within the interest area of the functional home may be dealt with carefully, but those outside normal interest areas may be given attention if not totally ignored.
  • Risk of de-motivating technical staff assigned to the project. The project is not in the mainstream of activities and interest, and some project team members may view service on the project as a professional diversion.
  • Holistic approach to the project is not given sufficient attention. Complex and emergency project activities are not given special attention deserved unless they are designed as a totality. Sharing of new information is slow and difficult at best.
  • May promote narrow specialization and rivalry or conflicts if not effectively managed.
  • May create difficulties in functional coordination and inter-functional decision making if not effectively controlled.
  • May limit development of general managers.
  • May cost more to carry out a function than it does outside the organization unless outsourced.

 

Pure project organizational structure.

In this type of structure, the project is separated from the rest of the parent organization system. It becomes a self-contained unit with its own full time key technical staff, its own administration, its own resources, its own reports and its own detailed control procedures.

 

ADVANTAGES.

  • The Project Manager has full authority over the project and enjoys complete work force devoted to the project.
  • All project team members are directly responsible to the Project Manager. There are no functional specialists whose permission must be sought or whose advice must be heeded before making final technical decisions. The Project Manager is truly the project director.
  • Project Manager communicates directly with senior corporate management. The shortened communication lines result in faster information sharing with minimal failures.
  • Where there are several successive projects of a similar kind, the structure can maintain a more or less permanent cadre of experts who develop considerable skills in specific technologies. Indeed, the existence of suck skill pools can easily attract customers to the parent organization.
  • Project team members are more committed to the project. Motivation is high and acts to foster the task orientation.
  • Decisions are made much faster due centralized authority. The entire project organization can react more rapidly to the requirements of the client and needs of senior corporate management.
  • There is solid unity of command. There is little doubt that the quality of life of subordinates is enhanced when each subordinate has one, and only one, boss.
  • This structure is simple and flexible, which makes it relatively easy to understand and to implement.
  • The structure supports holistic approach to the project. The dangers of focusing on and optimizing the project’s subsystems rather than the total project are often a major cause of technical failure in projects.

 

DISADVANTAGES.

While the advantages of the pure organization structure make powerful arguments favouring this structure, its disadvantages are also serious:

  • Risk of overstaffing as such staff are not shared across other projects or parent organizational activities.
  • Equipment and technical assistance are stockpiled in order to be certain that they will be available when needed. Personnel with critical technical skills may be hired by the project when they are available rather than when they are needed. Such staff also tend be maintained on the project longer than needed, just in case.
  • Risk of technological changes rendering usefulness of some of the skills outlived. Though individuals engaged with the project activities develop considerable depth in the technology of the project, they tend to fall behind in other areas of their technical expertise in projects characterized as high technology.
  • Inconsistency in the way in which policies and procedures are carried out is fostered. There is tendency of not understanding problems due to easy excuse for ignoring dicta from the head office.
  • The project takes a life of its own. Team me

members tend to form strong attachments to the project and to each other. Friendly rivalry may become bitter competition and political infighting between projects is common.

  • Risk of worry about life after the project ends. Typically, there is considerable uncertainty about what will happen when the project is completed, whether project team members will be laid off or assigned to low-prestige work or break up altogether and this leads to the fear of unknown.

 

(D)Matrix  project organizational structure.

This is a combination of both functional and pure organization structures. It attempts to couple some of the advantages of pure organization structure with some of the desirable features of functional organization structure in order to avoid some of the disadvantages of each and explore maximum benefits of each.

This combination of structures may take the forms of product and geographical divisions or functional and divisional structures operating in tandem.

It is for long term projects.

ADVANTAGES.

  • The project is the point of emphasis. The Project Manager takes responsibility for managing the project, for bringing it on time, within cost and to specification.
  • The project has reasonable access to the entire reservoir of technology in all functional divisions. The talents of the functional divisions are available to all the projects, thus sharply reducing the duplication required by the pure project organization structure.
  • There is less anxiety about what happens when the project is completed than is typical of the pure project organization structure. Even though project team members tend to develop a strong attachment for the project, they also feel close to their functional home.
  • The response to client needs is rapid and flexible. A project nested within an operational organization must adapt to the needs of the parent organization if the project has to survive.
  • The project easily accesses representatives from the administrative units of the parent organization. As a result, consistency with policies, practices and procedures of the parent organization are preserved.
  • It allows a better organization-wide balance of resources to achieve the several different time/cost/performance targets of the individual projects, where several projects are simultaneously undertaken. This holistic approach to the total organization’s needs allows projects to be staffed and scheduled in order to optimize total system performance rather than to achieve the goals of one project at the expense of others.
  • It covers a wide range of project activities in between. Some functional units might provide human resources while others only supply capacity. This way, it easier and more effective to adapt to a wide variety of projects and subject to the needs, abilities and desires of the parent organization.

 

DISADVANTAGES.

  • The balance of power is more delicate. There is no specific office solely responsible for overall final decision making as power and authority are shared by different offices depending on specific project deliverables. When doubts exists about who is in-charge, the project deliverables suffer. If the project is successful and highly visible, doubt about who is in-charge can foster internal infighting for the credit and glory. If the project is a failure, internal infighting will be even more brutal to avoid blame.
  • Balancing time, cost and performance between several projects is very demanding. Monitoring set of projects to achieve good results is a tough job. Further, the movement of resources from project to project in order to satisfy the several schedules can easily leading internal conflicts or infighting among the several Project Managers handling different projects, all of who tend to be more keen on ensuring success for their individual projects than in helping the total system to optimize organization-wide goals.
  • Severe problems of shutting down projects. The projects, having individual identities, tend to resist close out even when necessary.
  • The division of authority and responsibility is very complex. Negotiating for resources, technical assistance, delivery dates etc. is so complex that specialized and complex negotiating skills are imperative.
  • This type or form of project organization structure violates the management principle of unity of command. Project team members have different bosses to report to. This reporting line causes discomfort and de-motivation among the low level project team members.

 

(E)   Mixed or team-based project organizational structure.

In many ways mixed project organization structure is not distinguishable from matrix project organization structure, but it is typically used for small, shortterm projects where the formation of a full-fledged matrix structure is not justified.

It is an attempt to combine both horizontal and vertical coordination through structuring people into cross-functional teams,

Mixed project organization structure is simply a lower version of matrix organization structure. If the number or size of the projects being staffed under mixed project organization structure grows, a shift to a formal matrix organization structure naturally and automatically evolves.

 

NB:The most important thing to note is that mixed project organization structure has the same, similar and identical advantages and disadvantages as matrix project organization structure as only project period and size differentiate the two with all other variables or finer details remaining the same.

 

CHOOSING A PROJECT ORGANIZATIONAL STRUCTURE.

The choice of a project organizational structure is typically addressed to the senior management of the parent organization or benefactors. Very rarely do Project Managers have a choice about the way the project interacts with the parent organization.

Basically, the type or form of project organization structure may be influenced by variables such as:

  • The nature of the potential project, whether researching, manufacturing, works etc.
  • The characteristics of the various organizational goals.
  • The total costs and total benefits of each structure.
  • The policies, priorities and preferences of the parent organization.
  • The extent of resources required to implement the project more competently.
  • Geographical and cultural disparities.
  • The levels of the technologies to be embraced.
  • The number of projects to be handled simultaneously.
  • The uniqueness of the project to be rolled out.
  • The level of efficiency and effectiveness expected.

 

Before the right project organizational structure is finally chosen or determined, the procedure below is typically followed:

  • Define the project with a statement of the objectives that identify the major outcomes desired
  • Determine the key tasks associated with each objective and locate the units in the parent organization that serve as functional homes for such of tasks.
  • Arrange the key tasks by sequence and decompose them into work packages.
  • Determine which organizational units are required to carry out the work packages which units will work particularly closely with others.
  • List any special characteristics or assumptions associated with the project e.g. level technology needed, probable length and size, possible potential problems, who may be assigned to the project etc.
  • In light of the above, and with full cognizance of the pros and cons associated with each structural form so as to choose the most appropriate organizational structure.

 

 

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