Projects are the part of the enterprise where it is adapting to changing requirements from market, laws, society etc. Corporate changes and advancements always happen in projects. Without these changes there would be no progress but stagnation in the company, soon followed by “death”. So projects are a must in all companies, and they are inevitable for their growth and future.
This fact alone already implies that the project management organization of each enterprise needs to have a maturity sufficient to conduct the organization’s projects in a reasonable way. If on top the business model is project-driven with many customer projects or frequent adaptations, this implies increased requirements on how projects are done in these companies.
Established Structures often are Road Blocks to Success
At many companies with project-driven business model their established functional or matrix structures are obstacles for an optimal set-up and conduct, and economical success of their projects – and the root causes for repeating distressed projects.
There is usually a functional line structure established as governance organization structure in industry and manufacturing due to the dominant division of work, where tasks can be progressively elaborated and delegated according to product components. In many cases this goes along with central functional departments like finance, procurement, HR, QA, and sales, where the latter is often grouped by regions or customer clusters.
On the opposite projects do have completely different characteristics: Each project is unique, i.e. a new product, service or capability never seen before is developed for the company. So the projects’ progress is harder to predict and always in an uncertainty situation. Product R&D projects in manufacturing are a good example for this.
Analogously a primarily project-driven business or even a pure project business with customer projects has the same frame conditions. Work and value add are done with humans, are dependent on their availability and skills. Therefore the importance of coordination and efficiency of resource allocation and processes are primary for optimal throughput and results, and it takes special controlling and governance mechanisms suitable for these environments. The need for communication and information exchange is much more dominant than usual in functional structures.
Not only that established organizational structures and cultures are not made for such kind of working, they mostly are in direct conflict. Common and frequently repeating symptoms are
- insufficient clarification of scope and quality with the customer,
- unrealistic promises by sales,
- resource conflicts at projects vs. functional departments,
- project manager’s lacking authority and management support,
- local instead of cross-department (= corporate) optimization of processes, resource planning, budgets, margins, risk, and responsibilities,
- multiple, redundant, uneconomic performance of work in many projects
- unreliable controlling of suppliers and own project staff
- and over and over again projects in distress, delayed, with cost overruns, maybe penalties, or even cancelled at all.
With the increasing competition from a more and more global market environment the customer’s position in the market gets stronger, and a profitable course of projects becomes an imperative of thriftiness for the entire company.
Now imagine for a moment your company’s organization supporting this business model even optimally…
Examples for project-driven Enterprises
Typical companies with a project-driven business model are e.g. IT development, implementation, and integration, consulting companies, plant engineering and engineering bureaus, aircraft and space, as well as defense companies, civil construction, R&D, event business, and so on. But also enterprises with a strong influence of projects on their business like all regulations-sensitive industries (e.g. banking, energy sector etc.), high technology industry (engineering, capital goods, automotive, electronics etc.), as well as many public authorities and services.
In all these cases I find the above described patterns of burning money again and again. In all these cases a strategic transformation of the organization, structure and culture with corporate form following its function would unfold immense potential for profitability and fitness for future for the company.
If the money is earned in projects their margin is superior to the simple revenue of the single departments and plants. But it needs a re-built of existing hierarchies, responsibilities, incentives, mind sets and priorities etc. to transform even a project supporting organization into one well aligned to a project business.
Advantages of a strategic Transformation
In a project-oriented organization structure resources are reasonably assigned where they serve the business best, independent from their assignment to the lines. Skills respective staff can be optimized provided or hired or trained according to the business (= project) requirements. The activities in a project-oriented organization is easier to be focused on the business objectives, project selection follows the optimum of business benefits. A reliable delivery of projects and investments is a must; a profound know how and proven success record here is becoming a strategic market advantage.
Project-oriented Organizations are flexible: resource assignments for projects can be done efficiently from a pool, i.e. skills are utilized at the right time in the right project. If priorities or business requirements change reactions in changing resource assignments are flexible and fast.
There are lots of experiences with project-driven organizations. All have in common that profitable projects mean profitable companies. These experiences I’m currently recording in my book “Success and Growth in project-driven Enterprises – Motivation, Challenges, Transformation”, which is supposed to be released soon. Who doesn’t want to wait until its publication may shouldn’t hesitate to seek a conversation with me.