Part 5: Relationship Between Project Management, Operations Management, and Organizational Strategy

As mentioned earlier, every organization has a strategy.  An organization makes decisions to further its strategy.  The organization achieves results through Projects and through “day-to-day” operations.

Remember that an organization does things that are not projects.  Projects are temporary. 

For example, Vortex’s day-to-day operations include running their oven factory, ordering supplies, hiring employees, training, sales, customer service, & logistics.  All of these are handled by Operations Management.

Operations Management runs the entire business

  • Operations is day-to-day; responsible for achieving the strategic goals of the organization
  • Operations are Permanent, Projects are Temporary
  • But a project can be used to permanently improve operations or systems
  • Operations and Projects interact
    • At closeout of the project
    • During development of new products/expanding capacity
    • By improving operations
    • At the end of the product life cycle
  • Operations transfers resources to the Project at start up
  • Projects transfer deliverables/knowledge to the Operations at closing

  • Operations Management
    • Ensures that the business runs efficiently
    • Is responsible for optimum use of resources while meeting market demand
  • Operations Management is not in the scope of Project Management, so we won’t discuss it in detail

  • But, it’s important to consider the Operations Stakeholders when planning a Project, because they will benefit from the results
    • Identify the Operations Stakeholders, and determine their needs & influence
    • For example, at Vortex, Operations Stakeholders could include
      • Operators
      • Manufacturing Supervisors
      • Help Desk/Telephone Sales/Customer Service
      • Maintenance Workers
      • Salespersons
      • Retail Workers
    • All of these people (the people who manufacture the appliances, the people who sell them, the people who support them) will be affected by the design of new appliances, and their opinion matters.

  • Each Organization has a Strategic Direction (a strategy) and Performance Parameters
    • The strategy provides purpose, expectations, goals, and actions
    • Each goal or strategy must be measurable.  If we can’t measure it, we won’t know if we achieved the goal or if we are failing.
    • Performance Parameters are what the organization measures to determine if the strategy is working
    • For example, if the strategy is to improve sales, then “increasing revenue by $1 billion by the end of this year” might be a Performance Parameter.  If the strategy is to increase customer satisfaction, “improving customer satisfaction to 98%”, might be a Performance Parameter.
    • A project is more likely to be successful when it is aligned with the Strategic Direction
    • If the project is not delivering satisfactory results, the organization might cancel it.

  • Project-Based Organization (PBO)
    • Some organizations are known as Project-Based Organizations (PBO’s)
    • A PBO’s work is mainly projects, rather than functions/operations
    • A PBO can be a single firm, multiple firms working together, or a group within a firm
    • A PBO has less hierarchy/bureaucracy
    • Success is measured by end results
    • Examples of Project-Based Organizations include Construction, Engineering, and Architectural companies.  These companies don’t typically produce a repeatable product.  They mainly work on projects (new buildings or product designs) for their clients).  For example, an engineering company won’t design the same office building twice.  A construction company won’t build the same building twice.

      Of course, Construction, Engineering, and Architectural companies have “operations” such as marketing, legal, accounting, and human resources, but most of their resources are directed towards projects.
    • Examples of Organizations that are not Project-Based include banks, retail stores, and manufacturers.  These companies provide a product or service.  They provide the same product or service every day.

      Of course, retail stores, banks, and manufacturers still have projects to upgrade their capabilities.  For example, the bank might set up a project to design a new online banking app.
    • You are reading this book because you want to become a project manager.  But this is not to say that one type of organization is better than the other.  Each organization has its own objectives.  There are many successful “operations” type organizations.  “Operations” is a complicated field, just as complicated as “Project Management”.

  • Organizational Governance
    • Each Organization has Governance
    • To put it simply, governance is the way that an organization does things.  That includes policies and management.
    • For example, governance could mean that the organization will only hire tradespeople that are members of a union.  Or governance could mean that the organization requires an accountant to approve purchases over $20,000.
    • Governance creates constraints on a project.  Why?  Because a Project Manager can’t just do whatever he wants, even though his project is approved.  An action a Project Manager takes must also be subject to his organization’s governance.
    • For example, if the Project Manager wants to hire an electrician for his project, he must follow the company’s hiring policy, and hire a unionized electrician.  This unionized electrician may be more expensive (and this affects the project’s budget).
    • If the Project Manager wants to purchase a large quantity of lumber for his project, he must seek approval from the accountant.  If the accountant is busy, the Project Manager may have to wait some time to obtain approval.  This could delay the project.
    • A Project is judged by its compliance with the Governance; a Project Manager needs to understand corporate governance/policies to be successful

  • Organizational Strategy
    • Again, every organization has a strategy
    • The strategy should provide guidance & direction to a Project Manager
    • If there is a conflict between Organizational Strategy and the Project Objectives, they should be identified/documented early on
    • The Organizational Strategy is more important than the Project’s Objectives
    • A Project might be used to create a new Organizational Strategy