CASE STUDY #1. PROJECT MANAGEMENT AND OPERATIONS MANAGEMENT.
(Start date: 4/1/16. Due date: 4/4/16 by 12:00 PM EDT)
LEARNING OBJECTIVES
1. Identify the effect of organization type on time horizons.
2. Compare project management and operations management.
3. Describe the organizational options for managing projects.
The project is affected by the type of organization in which the project is conducted and
how the organization is organized to manage projects.
Organizational Priorities
Organizations fulfill a societal role to meet economic, religious, and governance functions.
Local factories, churches, and hospitals are all organizations that provide some social or
community need. Factories create wealth and jobs, churches provide spiritual and common
social needs for communities, and government organizations provide regulations and services
that allow for an orderly society. These organizations have different views of time and each
organization develops an operational approach to accomplishing the purpose of the
organization over that time horizon. For example, a religious group might begin construction of a
cathedral that would take several lifetimes to complete, government performance is reviewed at
election time, and a publicly owned company must justify its use of money each year in the
annual report.
Organizations operate to effectively and efficiently produce the product or service that
achieves the organization’s purpose and goals as defined by the key stakeholders (those who
have a share or interest). An organization seeks to develop stable and predictable work
processes and then improve those work processes over time through increased quality, reduced
costs, and shorter delivery times. Total quality management, lean manufacturing, and several
other management philosophies and methodologies have focused on providing the tools and
processes for increasing the effectiveness and efficiency of the organization. Historically, these
methodologies focused on creating incremental and continuous improvement in work
processes. More recently, organizations are increasingly focused on step changes that take
advantage of new technologies to create a significant improvement in the effectiveness or
efficiency of the organization (Significant rather than incremental improvements in effectiveness
or efficiency that take advantage of new technologies).
Often, these initiatives to increase organizational effectiveness or efficiency are identified as
projects. Economic organizations will initiate a project to produce a new product, to introduce or
revamp work processes to significantly reduce product costs, or to merge with other
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organizations to reduce competition or lower costs and generate additional profits. A social
organization, such as a hospital, may build a new wing, introduce a new service, or design new
work processes to reduce costs. A government organization may introduce a new software
program that handles public records more efficiently, build a new road to reduce congestion, or
combine departments to reduce costs.
Each of the initiatives meets our definition of a project. Each is a temporary endeavor and
produces a unique product or service. Managing these projects effectively entails applying
project management knowledge, skills, and tools.
Operations Management versus Project Management
One way to improve understanding of project management is to contrast project management
with operations management. Whether in an economic, socioreligious, or government
organization, managers are charged with effectively and efficiently achieving the purpose of the
organization. Typically, a manager of an economic organization focuses on maximizing profits
and stockholder value. Leaders with socioreligious organizations focus on effective and efficient
delivery of a service to a community or constituency, and governmental managers are focused
on meeting goals established by governmental leaders.
Operations managers focus on the work processes of the operation. More effective work
processes will produce a better product or service, and a more efficient work process will reduce
costs. Operations managers analyze work processes and explore opportunities to make
improvements. Total quality management, continuous process improvement, lean
manufacturing, and other aspects of the quality movement provide tools and techniques for
examining organizational culture and work processes to create a more effective and efficient
organization. Operations managers are process focused, oriented toward capturing and
standardizing improvement to work processes and creating an organizational culture focused on
the long-term goals of the organization.
Project managers focus on the goals of the project. Project success is connected to achieving
the project goals within the project timeline. Project managers are goal directed and time
sensitive. Project managers apply project management tools and techniques to clearly define
the project goals, develop an execution plan to meet those goals, and meet the milestones and
end date of the project.
An operations manager may invest $10,000 to improve a work process that saves $3,000 a
year. Over a five-year period, the operations manager improved the profitability of the
operations by $5,000 and will continue to save $3,000 every year. The project manager of a
one-year project could not generate the savings to justify this kind of process improvement and
would not invest resources to explore this type of savings.
An operations manager creates a culture to focus on the long-term health of the organization.
Operations managers build teams over time that focus on standardizing and improving work
processes, that search for and nurture team members who will “fit in,” and that contribute to
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both the effectiveness of the team and the team culture. Project managers create a team that is
goal focused and energized around the success of the project. Project team members know that
the project assignment is temporary because the project, by definition, is temporary. Project
team members are often members of organizational teams that have a larger potential to affect
long-term advancement potential. Project managers create clear goals and clear expectations
for team members and tie project success to the overall success of the organization. Operations
managers are long-term focused and process oriented. Project managers are goal directed and
milestone oriented.
Organizing to Manage Projects
Because project management is different from operations management, projects are handled
best by people who are trained in project management. This expertise can be obtained by hiring
an outside consulting firm that specializes in project management or by developing an in-house
group.
Some organizations are designed to execute projects. Often entities contract with engineering
and construction companies to design and build their facilities or hire software companies to
develop a software solution. The major work processes within these organizations are designed
to support the acquisition and execution of projects. Functional departments such as estimating,
scheduling, and procurement create and maintain core competencies designed to support
projects. The ability of these types of organizations to successfully manage projects becomes a
competitive advantage in the marketplace.
Organizations designed to produce products or services also use projects. Major activities
outside the normal work of the organization’s department or functional units or major activities
that cross functional boundaries become a project (a temporary task undertaken to create a
product or service that is unique). As economic pressures increase the speed in which
organizations must change and adapt to new environmental conditions, leaders are increasingly
chartering projects to enable the organization to more quickly adapt. The application of a project
management approach increases the likelihood of success as organizations charter a project to
facilitate organizational change, to increase the development and introduction of new products
or support the merger or divesture of organizational units.
Project management offices (PMOs) have emerged to facilitate development of organizational
knowledge, skills, and tools to internally charter and manage projects within the organization.
The PMO varies in structure and responsibility depending on the project management approach
of the parent organization. On one end of the spectrum, the PMO has complete responsibility for
projects within an organization from the criteria and selection of appropriate projects to
accountability for project performance. In organizations that make a large investment in the
PMO, a large number of new product or process improvement projects are submitted, and the
project office develops a portfolio of projects to manage over a given period that maximizes the
use of organizational resources and provides the greatest return to the organization.
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PMOs can provide various functions for an organization. Some possible functions include the
following:
• Project management. Some organizations maintain the project manager within the PMO,
assign project managers from other departments, procure contract project managers, or
practice a combination of all three.
• Center of excellence. The project office can maintain the organization’s project management
policies and procedures, maintain a historical database, maintain best practices, and provide
training and specialized expertise when needed. Group within an organization that manages the
organization’s projects.
• Portfolio management. The project office actually supervises the project managers and
monitors project performance. Portfolio management also includes prioritizing projects on the
basis of value to the organization and maintains an inventory of projects. Portfolio management
balances the number and type of projects to create the greatest return from the entire portfolio
of projects.
• Functional support. The project office maintains project management expertise to support
the project. Estimating, project scheduling, and project cost analysis are examples of functional
support.
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KEY TAKEAWAYS
• The purpose of an organization can affect its view of the time allowed for projects.
• In an organization, project management can be used to make step changes to take advantage
of new technologies or make significant improvements in effectiveness or efficiency.
• Operations managers are long-term focused and process oriented. Project managers are goal
directed and milestone oriented.
• Projects can be handled by outside contractors or by an internal group in a PMO.
EXERCISES
1. The type of organization can influence the time frame allowed for projects.
____
work processes
2. Operations managers are focused on __________, while project managers are focused
on the goals of the project.
3. If projects are routinely handled internally, the group that manages the projects might be
Project ______ _____
called the ______Management Office (three words).
4. A friend of yours has a forty-five-minute commute to work. She decides to spend some time
evaluating the different options she has for routes and possible carpooling to reduce the cost
or time it takes to get to work. Is this task an example of something that uses the skills of
an operations manager, or does it need the additional skills of a project manager? Explain
your answer and refer to the definitions provided.
5. Business managers focus on improving efficiency and effectiveness, but sometimes they
use a project management approach to make significant changes. What often prompts them
to use the project management approach? What would be an example?
6. The manager of a sales department must meet annual sales goals, manage personnel in
the department, and develop and deliver product training for clients. How is this type of
operations management different from project management? Address each of the following
issues in your answer:
• How is the relationship between the operations manager and the sales staff different from the
relationship between a project manager and the project team members?
• Which of the duties described above is most like project management and might be contracted
to an outside firm?
• What is the biggest difference between project management and and the sales manager’s job?
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