Will project-based organisations be the new normal?
The number and importance of projects are increasing steadily. Projects are being used to deliver innovative products and services, to perform change and transformation and – in general – get things done in organisations. That has a severe impact on the organisational structure, processes and culture. Most of the organisations are still organised based on the principle of dividing the work in functional activities and thus organising in specialized functional departments. Furthermore, the power is distributed from the top to the bottom of the organisation, resulting in a hierarchical pyramid based on command and control. Organisations and their activities are managed to perform tasks in the most efficient way. Projects are performed in such an organisational set-up, however the effectiveness of project work is impaired. Projects are stress, to the people engaged in projects, to the line functions being disturbed by the project and the leaders being distracted by disharmony a project may cause.
The more projects a traditionally set up organisation performs, the more stress it needs to cope with and first ideas of optimising, e.g. a more project-oriented organisation come into play. This may be temporary parts of the organisation, dealing with projects, or the first matrix organisation, where projects are performed cross-functional, means across the functional departments with resources assigned from those departments to the project. There is a lot to discuss about the matrix project organisation, but in essence it does not really excel in performing projects. The main point is the uneven distribution or struggle of power between a project manager and the heads of the functional departments. There are mechanisms for balancing the power better (e.g. overarching steering boards, a RASIC matrix), but it remains dysfunctional, especially when the share of project work is increasing, which we experience in many organisations. The result is many conflicts and inefficiencies, frustration and fluctuation etc.
A project based organisation (PBO) is according to Davies and Hobday one in which the project is the primary unit for performing certain tasks. Especially service firms, for example engineering providers, film studios, consultancies, legal firms, marketing and advertising, are rather organised around projects. Support functions such as sales, HR or R&D are in support of the project, but do not exercise power. They deploy resources and know-how as requested by the projects and agreed upon by a multi-project steering or management. The projects have the money / budget for acquiring or recruiting resources necessary, from internal or external resource pools. Processes in a PBO are organised from the client to the client, a value stream of activities, orchestrated by a project manager, using agile or traditional methods, tools and techniques. The culture of a PBO is clearly project-friendly, client-centric and oriented towards “doing the right things right”, which means combining effectiveness and efficiency.
A PBO may comprise several firms, for example a project consortium or network organisation, and thus is temporarily organised, flexible and adaptable to the specific circumstances of the project, its context and partners. Projects and their managers will be empowered, they are like entrepreneurs, responsible for achieving a maximum of opportunities whilst minimizing risks. Project managers in a PBO require more than just the technical competences of PM processes, methods and tools. They need to be competent in the area of leadership, in business matters and the strategic direction setting, they are responsible for client relations, the sustainable outcomes of their project, and the collaboration between all partners involved. Furthermore, the aspect of directing change and transformation plays an increasingly role of projects in a PBO. In essence, planning and controlling projects is not the key focus of a PM, rather the leadership aspects of a project. Choosing the right person to fill such a position is success-critical.
The more we see a change from products to services, from mass production to individualisation, from single organisations performing projects to a co-creative network of partners, the more we´ll see PBO as a role model. So PBOs are a trend which will change the way of organising, and the transformation of many organisations prove that this process is already taking place. We need to see this from an economic perspective, identify the drivers for this change and the impact it may have for traditional organisations. This goes together with the desire of the young generation to work in a different organisation. Both trends go together and it will get exciting during the next couple of years…