Guru Gobind Singh Foundation’s

Introduction to project management

 Syllabus:
• Unit-I
• Introduction to project management (8 hours)
• Importance, Objectives & Functions of Management ,
Principles of Management, Categories of Project, Project
Failure, Project- Life Cycle Concept and Cost Components,
Project Management Book of Knowledge {PMBOK} –
Different Domain Areas, Project management Institute and
Certified Project Management Professionals (PMP).
Importance of organizational Structure in Management-
Authority / Responsibility Relation, Management by
objectives (MBO)

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Importance of Subject
• The primary purpose of this study is to understand the critical success
factors in construction projects.
• The major objective is to analyze project efficiently to handle the knowledge
area of management and to examine the factors that ensure project success
for a development project.
• Various project management techniques are in use to bridge the gap
between failure and success in the implementation of projects. Despite this
increasing awareness of project management by organizations, projects still
fail.
• Many projects around the world keep failing, resulting in the loss of millions
of dollars for organizations.
• The purpose of studying this subject to learn systematically and understand
the causes that ensure the project success by applying the project
knowledge areas, e.g. project integration management, project scope
management, project time management, project cost management, project
quality management, project human resource management, project
communication management and project stakeholder management.

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Importance of Management
• Achieving organizational goals is an important role to be played by the
management of an organization. The successor failure of an organization
depend upon the way it is managed.
• Managing the organization is the most difficult job due to the increasing
competition in the internal as well as the external business environment.
• Management brings together all Six Ms i.e. Men and Women, Money,
Machines, Materials, Methods and Markets.
• Good management enhances the profit and reputation to the organization
while poor management can just throw out the company out of the
competition.
• An effective management is one which actually guides the employee onto a
path of efficient and productive work, while leading towards goal.
• Proper management helps to build efficient organizational structure, set
targets that are testing yet achievable and optimize resource utilization. Such
a scenario increases profits by maximizing productivity and reducing costs.
Happy and de-stressed workers work with more zeal and enthusiasm. This
increases quality and quantity of output, which aids in the growth of the
company, beating competition and emerging out victorious
• Reduction In Wastage, Simplifies The Organizational Structure, Increases
market Stability, Provides The “Feel Good Factor” (to keep the workers
happy) and Profits Galore

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Objectives & Functions of Management
• Project completion requires human efforts, state of art
technology and financial investment.
• The operations and logistics are needed to be well managed in
all projects.
• Resource utilization, working under constraints, deadlines,
deliverables, outputs, risk, man management etc. forms the
crux of all work during any project.
• Management of all resources and bringing them together
within a time frame for a desired result is called project
management.
• The organization has to face fierce competition, capture the
max. market share, sustain growth, increase profit; they needs
to monitor the project, minutely work out cost and time
overrun of project.
• Three fundamental criteria of the project that must meet are:
1. The project must be completed on time.
2. The project must be accomplished within the budgeted
cost.
3. The project must meet the prescribed quality
requirements.

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Three usual Project Objectives are:
1. Function or Performance:
2. Containment of Expenditure within Budget:
3. Time Scale
• (1) Function or Performance: The final result must satisfy the
requirements of the end user. In a project for developing racing car, the
objectives must be to produce a vehicle that satisfies specified
standards for performance, Reliability and safety.
• (2) Containment of Expenditure within Budget: While developing
racing car it is needed if the development costs will exceed those
planned, then their recovery from car sales could result in the selling
price having to be increased too far above prices charged by
competitors for their rival products. Projects must, therefore, be
completed within their budgeted costs.
• (3) Time Scale In the motor car example, the car should be fully
developed and proven in time for launch at the motor show.
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 Having project objectives is important but having the right project objectives is
the true key to success. Project objectives shall be SMART.
• S = Specific M = Measurable A = Achievable (or attainable, actionable, appropriate)
• R = Realistic T = Time-bound (or timely, traceable)
1. Specific: Make sure your objective is clearly defined. Narrow your scope of the
objective so that is has a very tangible and specific outcome. This helps you to focus
your intent. While writing this part of the objective, think of the Who, What,
Where, When and Why of it all.
2. Measurable: Make sure you can actually quantify the objective. If it’s not
measurable, you won’t know when the project objective has been met. You want to
make sure the objective is trackable to keep you and the team accountable.
3. Achievable: Make sure you can accomplish the objective. Identify the clear steps
that need to happen to make sure the objective is completed. When writing this
portion of the objective as yourself how you will accomplish it? What steps need to
be taken in order to accomplish the specific objective you’ve defined?
4. Realistic: This one is really important. Don’t set objectives that can’t be achieved
within the constraints of the project. Make sure your objective is practical. Do you
have the budget to do this? Is there enough time? Does your team have the right
knowledge or do you have time to invest in learning?
5. Time-Bound: When will this be done by? Having a clear end date defined helps
everybody involved. It lets you know when you need to focus on that objective. It
also helps you set a relationship between multiple objectives on a project as well. If
you can’t do objective C until A is done and A is getting done in Q1, then you should
have C completed in Q2.
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Specific Measurable Achievable Realistic Time-bound

I’ll allocate 100 hours

Our Jr. Developer and Jr.
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a website Jr. Developer at
have 5 pages week available to work on the By December 2019
for $3,000 blended rate of
and 1 form. project and have done similar
dollars. $30/hour to stay
projects for $3,000.
within budget.

I will set clear I will achieve this by

I will participate in professional
objectives and staying focused,
I will get a development courses and For my next annual
measure my working hard and
raise at volunteer for project review, in one year’s
progress against proving and
work. opportunities that will allow for time.
them through documenting my
growth throughout the year.
the year. value.
8
Functions of Management
• Henri Fayol stated five functions of management that encompass
these necessary skills: planning, organizing, leading, and controlling.
• Planning: 1. creating a plan to meet company goals and objectives. 2.
allocating employee resources and delegating responsibilities, as well
as setting realistic timelines and standards for completion.
3. Planning requires continuously check on team progress to make
small adjustments when necessary, while still maintaining a clear
picture of a company's larger aims and goals.
• Organizing: 1. It help to ensure a company or departmental unit runs
smoothly by establishing internal processes and structures of
employees or teams to be suited for specific tasks. 2. It keeps
everyone and everything organized throughout daily operations. 3. It
also include adjusting the timeline of project or alter a team's
internal structure and roles in response to company growth.

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Functions of Management
• Leading: 1. This involves projecting a strong sense of direction and
leadership when setting goals and communicating new processes,
products and services, or internal policy. 2. Leadership include
recognizing when employees need an extra boost of reinforcement
and praise to handling conflicts between team members fairly and
decisively.3. There should be comfortable and confident commanding
between team members’ daily tasks as well as during periods of
significant change or challenge.
• Controlling: 1.It ensure all of the above functions are working toward
the success of a company by consistently monitoring employee
performance, quality of work, and the efficiency and reliability of
completed projects.2. It ensures the ultimate goals of the business
are being adequately met

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Principles of Management
• Fayol's 14 principles of management are listed below:
1. Division of Work – The work is divided among employees as per
specialization. Output can increases with increasingly skilled and efficient
work.
2. Authority – Managers must have the authority to give orders, but they
must also keep in mind that with authority comes responsibility.
3. Discipline – Discipline must be upheld in organizations, but methods for
doing so can vary.
4. Unity of Command – Employees should have only one direct supervisor.
5. Unity of Direction – Teams with the same objective should be working
under the direction of one manager, using one plan. This will ensure that
action is properly coordinated.
6. Subordination of Individual Interests to the General Interest – The
interests of one employee should not be allowed to become more
important than those of the group. This includes managers.

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7. Remuneration – Employee satisfaction depends on fair remuneration for
everyone. This includes financial and non-financial compensation.
8. Centralization – This principle refers to how close employees are to the
decision-making process. It is important to aim for an appropriate
balance.
9. Scalar Chain – Employees should be aware of where they stand in the
organization's hierarchy, or chain of command.
10. Order – The workplace facilities must be clean, tidy and safe for
employees. Everything should have its place.
11. Equity – Managers should be fair to staff at all times, both maintaining
discipline as necessary and acting with kindness where appropriate.
12. Stability of Tenure of Personnel – Managers should strive to minimize
employee turnover. Personnel planning should be a priority.
13. Initiative – Employees should be given the necessary level of freedom to
create and carry out plans.
14. Esprit de Corps – Organizations should strive to promote team spirit and
unity.

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Categories of Project
• Types of Projects:
• (1) Manufacturing Projects: Where the final result is a vehicle, ship,
aircraft, a piece of machinery etc.
• (2) Construction Projects: Resulting in the erection of buildings,
bridges, roads, tunnels etc. Mining and petro-chemical projects can
be included in this group.
• (3) Management Projects: Which include the organization or
reorganization of work without necessarily producing a tangible
result. Examples would be the design and testing of a new computer
software package, relocation of a company’s headquarters or the
production of a stage show.
• (4) Research Projects: In which the objectives may be difficult to
establish, and where the results are unpredictable.

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Project success or failure
• the study of project success or failure and critical success factors is a means
of understanding and improving the project management process.
• Success really does not have a specific definition, but in case of a project’s
success can be defined as completing a project on time, within budget with a
good level of quality.
• Project success = project management success + project product success
• Project Management Success – This concentrates upon the project process
and especially the successful achievement of cost, time, and quality. Also the
way in which the project management process was performed will be
considered.
• Product Success – This deals with the effects of the project’s final product. A
clear difference should be made between product success and project
management success, in order to properly identify and evaluate project
management success and product success, as they are differ from each
other.

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 Project Failure-Attributes and measure
Reasons for Failure Reasons for success
Insufficient use of progress report Frequent feedback from parent organization
Inadequate project manager Frequent feedback from the client
Lack of administrative and co-ordination skill Judicious use of networking techniques
Insufficient tech. and leadership skills of Prod. Manager Organization structure suited to the project
Lack of rapport with client Adequate Control
Excessive structuring within the project team Projecting participation
Lack of project team participation Parent Commitment
Job insecurity within the project team Parent enthusiasm
Poor relations within the parent organization Project manager’s commitment to established
schedules, budgets and goals
New type of project Clients commitment to established schedules,
budgets and goals
More complicated project Enthusiastic public support
Initial Under Funding Lack of excessive Govt. red tape and legal and
other bureaucratic problems
Unrealistic project schedule
Unfavorable public opinion
Lack of Govt. Support
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Project manager
• Having a project manager is not going to guarantee the success of a
project. He must have a number of skills to use during the project to
guide the rest of the team to successfully complete all the objectives.
• Business, communication, responsiveness, process, results,
operational, realism and technological skills are mentioned as some
of the most important skills a project manager should have to deliver
success.
• If the project is successful, senior management will probably claim
that all external factors were favorable. On the contrary, if it turns to
be a failure, project manager easily becomes the scapegoat.
• All members of the project team must be committed to the success
of the project and the overall mission of the company. Apart from
their skills and commitment, project team members should have
clear communication channels to access “both the functional
manager and the project manager within a matrix organization.

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Critical Success Factor(CSF)
• Critical success factors are normally identified in such areas as
production processes, employee and organization skills, functions,
techniques, and technologies.
• Critical success factor is an element of organizational activity which is
central to its future success. Critical success factors may change over
time, and may include items such as product quality, employee
attitudes, manufacturing flexibility, and brand awareness.
• There are four basic types of CSF’s as follow:
1. Industry CSF’s: resulting from specific industry characteristics;
2. Strategy CSF’s: resulting from the chosen competitive strategy of
the business;
3. Environmental CSF’s: resulting from economic or technological
changes; and
4. Temporal CSF’s: resulting from internal organizational needs and
changes.

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Project Life Cycle Concept and Cost Components
• Every project is unique in nature. The following stages are common to every
project:
1. The defining stage- Commencement with specifications of all activities
2. The Planning Stage- Critical discussions with What, why, when, where, whom
and how –related to each activity
3. The Execution Stage- Actual Job execution with physical and conceptual
initiatives, Monitoring of activities, scheduling of time, Labor, money,
Machinery.
4. The Delivering Stage-Ready output to deliver to the customer, assigning new
program to the task force.
• The Project Life Cycle refers to the four-step process (initiation, planning,
implementation, and closure) that is followed by nearly all project managers
when moving through stages of project completion.
• The Project Life Cycle provides a framework for managing any type of project
within a business.
• Life cycle cost (LCC) is an approach that assesses the total cost of an asset
over its life cycle including initial capital costs, maintenance costs, operating
costs and the asset's residual value at the end of its life.
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Project Life Cycle Concept and Cost Components

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Project Life Cycle Concept
• The initiation phase
• The initiation phase is the first phase of the entire project
management life cycle. The goal of this phase is to define the project,
develop a business case for it, and get it approved. During this time,
the project manager may do any of the following:
a. Perform a feasibility study
b. Create a project charter
c. Identify key stakeholders
d. Select project management tools
• By the end of this phase, the project manager should have a high-
level understanding of the project purpose, goals, requirements, and
risks.

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Project Life Cycle Concept
• The planning phase:- The planning phase is critical to creating a project roadmap the entire
team can follow. This is where all of the details are outlined and goals are defined in order
to meet the requirements laid out by the organization.
• During this phase, project managers will typically: 1) Create a project plan 2) Develop a
resource plan 3) Define goals and performance measures 4) Communicate roles and
responsibilities to team members 5) Build out workflows 6) Anticipate risks and create
contingency plans
• Execution Phase typically begins with a project meeting where the project manager
outlines the project objectives to all stakeholders involved. Before that meeting happens, it
is crucial for the project manager to do the following:
• Establish vision and deliverables: Set a common goal for everyone. Lay out what needs to get done
and by when.
• Identify team and set roles: Who does what? Create a list detailing this and include contact info for
easy communication.
• Develop initial project plan: Have a plan in place but finalize details with your team at the kickoff.
• Define metrics for success: How will the project be measured? What will make it successful? Set
expectations early.
• Identify potential risks and bottlenecks: Prep the team for potential roadblocks and have a process
in place so that these possible problems can be taken out quickly.
• Establish logistics for team communication: How will you update each other? Establish a
consistent process (daily, weekly meetings) and determine the technology for it.
• Choose work process or project management methodology: Establish the best practices your team
will follow.
• Decide which tools you’ll use: Ensure everyone has the proper tools and knows how to use them.
• Schedule the kickoff meeting: Entire team and stakeholders must be there, even if via video
conference or phone.
• Set the agenda and prepare the slides for the meeting: Send the agenda ahead of the meeting, so
everyone can prepare accordingly, and provide the slides after the meeting for reference.

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Project Life Cycle Concept
• The execution phase: This stage is where the meat of the project happens.
Deliverables are built to make sure the project is meeting requirements. This
is where most of the time, money, and people are pulled into the project.
• As previously mentioned, a kickoff meeting is held to mark the official start
of the execution phase. A kickoff meeting agenda might look something like
this:
• Introductions: Who’s who?
• Project background: Why are you doing this project? What are the goals?
• Project scope: What exactly will you be doing? What kind of work is involved?
• Project plan: How are we going to do this? What does the roadmap look like?
• Roles: Who will be responsible for which elements of the project?
• Communication: What kind of communication channels will be used? What kind
of meetings or status reports should your team expect?
• Tools: What tools will be used to complete the project, and how will they be
used?
• Next steps: What are the immediate action items that need to be completed?
• Q&A: Open the floor for any questions

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Project Life Cycle Concept
• The controlling and monitoring phase:
• This phase happens at last with execution phase. As the project
moves forward, the project manager must make sure all moving parts
are headed in the right direction at all times and in a coordinated
manner. If adjustments to the project plan need to be made due to
unforeseen circumstances or a change in direction, they may happen
here.
• During the controlling and monitoring phase, project managers may
have to do any of the following:
a. Manage resources
b. Monitor project performance
c. Risk management
d. Perform status meetings and reports
e. Update project schedule
f. Modify project plans
• At the end of this phase, all of the agreed project deliverables should
be completed and accepted by the customer.
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25
Project Life Cycle Concept
• Project closure: The closing phase is a critical step in the project
management life cycle. It signals the official end of the project and provides
a period for reflection, wrap-up, and organization of materials.
• Project managers can:
a. Take inventory of all deliverables
b. Tie up any loose ends
c. Hand the project off to the client or the team that will be managing the
project’s day-to-day operations
d. Perform a postmortem to discuss and document any learnings from the project
e. Organize all project documents in a centralized location
f. Communicate the success of the project to stakeholders and executives
g. Celebrate project completion and acknowledge team members
• Thus you understand each stage in the project life cycle, choosing the right
project management tool for you and your team is critical to project success.
Read on for best practices when choosing a tool that fits your needs, and a
guide to the features you should consider when assessing a project
management software.

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Cost Components

1 Construction cost
2 Base cost = Construction cost + Land acquisition cost + Engineering services
cost (15 % of construction cost)
3 Project cost = Base cost + Physical contingency (10 % of base cost),
excluding price contingency

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 Project Management Book of Knowledge [PMBOK] - Different
Domain Areas
• PMBOK stands for Project Management Body of Knowledge. It is the entire
collection of processes, best practices, terminologies, and guidelines that are
accepted as standards within the project management industry. The body of
knowledge is constantly growing. As practitioners discover new methods or best
practices, it must be updated and disseminated.
• This is an effort that is overseen by the Project Management Institute (PMI), the
global not-for-profit member association of PM professionals which captures and
publishes the PMBOK within the book, A Guide to the Project Management Body
of Knowledge (PMBOK Guide).
• The first edition of the PMBOK Guide was published in 1996. It is now on its fifth
edition, which was published in 2013. Read a more in-depth discussion on
PMBOK.
• The PMBOK® Guide – Sixth Edition: It includes information on how to implement
its approaches in agile environments — a first for PMI.
• Other additions include 1.Trends and emerging practices, 2. Tailoring
considerations, 3. A greater emphasis on Strategic and Business Knowledge, 4. A
new section on the role of the project manager
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These are the 10 Project Management knowledge areas:

Project Integration Management

Project Scope Management
Project Schedule Management
Project Cost Management
Project Quality Management
Project Resource Management
Project Communications Management
Project Risk Management
Project Procurement Management
Project Stakeholder Management

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PMBOK Knowledge Area
• Integration PMBOK Knowledge Area: This is the only project management
knowledge area that has processes in each five process groups. These
processes are developing the project charter, developing the project
management plan, directing and managing the project work, monitoring and
controlling the project work, performing integrated change control and
closing the project or phase. The main purpose of the integration
management PMBOK knowledge area processes is the execution and
delivery of the project work end-to-end successfully.
• Scope Management PMBOK Knowledge Area: This project management
knowledge area has six processes. Four of them belong to planning. These
are planning the scope management, collecting requirements, defining the
scope and creating WBS. Two processes belong to the monitoring and
controlling process group. These are validating the scope and controlling the
scope. Scope management PMP Knowledge area processes aim to control
scope in a project and protects scope creep. This project management
knowledge area has seven processes, six of them are in the planning phase
and only one process belongs to the monitoring and controlling process
group. These are: planning the schedule management, defining activities,
sequencing activities, estimating activity resources, estimating activity
durations, developing the schedule and controlling the schedule. The main
objective of the schedule management processes is completing a project on
time without variance.

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PMBOK Knowledge Area
• Schedule Management PMBOK Knowledge Area: This project management
knowledge area has seven processes, six of them are in the planning phase
and only one process belongs to the monitoring and controlling process
group. These are: planning the schedule management, defining activities,
sequencing activities, estimating activity resources, estimating activity
durations, developing the schedule and controlling the schedule. The main
objective of the schedule management processes is completing a project on
time without variance.
• Cost Management PMP Knowledge Area: This PMP knowledge area has
four processes. These are planning cost management, estimating costs,
determining the budget and controlling costs. Cost management processes
aim to complete the project under a planned budget.
• Quality Management PMBOK Knowledge Area: This PMBOK knowledge
area has three processes. Planning the quality management process belongs
to the planning step, performing the quality assurance process belongs to
the executing and controlling the quality process belongs to the monitoring
and controlling. Quality management processes ensure to meet the projects’
quality objectives.
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PMBOK Knowledge Area
• Resource Management Knowledge Area: This project management
knowledge area has four processes. Planning the resource management
process belongs to planning phase and three other processes belong to the
executing process group. These are: acquiring the project team, developing
the project team and managing the project team. Project activities are
performed by project team members. Resource management processes
mainly aim to people management of project resources.
• Communications Management Knowledge Area: This PMBOK knowledge
area has three processes. These are planning the communications
management which belongs to planning phase, managing communications
which belong to executing phase and controlling communications which
belong to the monitoring and controlling. A certain amount of
communication will take place in a project internally and externally.
Management of information dissemination is done with the help of
communication management processes.
• Risk Management Knowledge Area: Since risks are evaluated mainly in the
planning phase, five out of six processes belong to the planning phase. These
are planning the risk management, identifying risks, performing qualitative
risk analysis, performing quantitative risk analysis and planning risk
responses. And one process that belongs to monitoring phase is controlling
risks. Risk management processes mainly aim to reduce the impacts of risks
to the project once they occur.

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PMBOK Knowledge Area
• Procurement Management Knowledge Area: This PMP knowledge
area has four processes. Planning procurement management belongs
to planning, conducting procurements belong to executing phase,
controlling procurements belong to monitoring and controlling phase
and closing procurements belong to project closure. The main
purpose of procurement processes is management and coordination
of purchasing activities in a project.
• Stakeholder Management Knowledge Area: This PMBOK knowledge
area has four processes. These are: identifying stakeholders, planning
stakeholder management, managing stakeholder management and
controlling stakeholder management. Stakeholder management
processes help to manage expectations of project stakeholders
during the project.
As you see all project management knowledge areas has one or more
process belonging to the 5 project management process groups. When
the project managers are well aware of all the project management
knowledge areas, they can conduct a project more efficiently.

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Project management Institute
• Project Management Institute(PMI) is the world's leading not-for-profit professional
membership association for the project, program and portfolio management profession.
• Founded in 1969, PMI delivers value for more than 2.9 million professionals working in
nearly every country in the world through global advocacy, collaboration, education and
research.
• PMI advances careers, improves organizational success and further matures the profession
of project management through its globally recognized standards, certifications, resources,
tools academic research, publications, professional development courses, and networking
opportunities
• PMI India office was established with the sole goal of advancing project management
profession and inculcating a project management culture within the establishments across
government, academia, and industry.
• PMI has eight chapters across the country in Mumbai, New Delhi, Bengaluru, Hyderabad,
Chennai, Pune, Thiruvananthapuram, and Kolkata. These chapters provide a platform for
knowledge transfer and networking for its members and also support PMI India’s advocacy
activities.
PMI India has undertaken many initiatives to promote the project management profession,
including the establishment of the PMI India Awards Program (since 2009). It is the highest
recognition for the project management community in the country. This award recognizes
and honors a project team that has delivered superior results through exemplary
application of project management principles. The awards are given away at the annual
PMI India Project Management National Conference. Awards have also been established
for recognizing the contribution made to this domain by academia.

34
Certified Project Management Professionals
(PMP).
• Project Management Professional (PMP) certification is an industry
recognized credential for project managers. PMP demonstrates the
experience, education, skill and competency required to lead and
direct projects. PMP is the most sought after certification
administered by the Project Management Institute (PMI), USA.
• Project Management Professional Certification, also known as PMP
certification, is a designation given by the Project Management
Institute (PMI) to professionals who meet certain education and
experience criteria.
• PMP® Certification Requirements: Register to become a member of
the Project Management Institute (PMI)®.1)Take PMP certification
training course to satisfy the required 35 hours (PDUs) education
requirement.2)Submit PMP exam application online.3) Schedule
exam with Pearson VUE.4)Take and Pass the PMP Exam.

35
Importance of organizational Structure in
Management
• An organizational structure is defined as the pattern or network of
relationships that exist among various positions. It involves the structure of
relationships among positions and jobs with the object of accomplishment of
enterprise objectives.
• Organizational structure provides guidance to all employees by laying out
the official reporting relationships that govern the workflow of the company.
• A formal outline of a company's structure makes it easier to add new
positions in the company, as well, providing a flexible and ready means for
growth.
• In this regard the following factors to be considered in designing an
effective organizational structure:
• (i) Environment.
• (ii) Technology
• (iii) Size of the organization, and
• (iv) Strategy.

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The following are the importance of
organizational structure:
• 1. Clear definition of authority, responsibility relationship facilities better
understanding of the objectives and the policies of the enterprise.
• 2. Organizational structure lays down both channels and the patterns of
communication. It facilitates proper administration.
• 3. It helps to coordinate activities of the component parts in order to
facilitate the realization of the goals of the organization.
• 4. It helps in growth and diversification of the activities of an organization.
• 5. Workers, participation in organization increases their cooperation and
improves their will to work. It stimulates initiation and creative thinking.
• 6. Implementation of policies and the achievement of the goals become
easier.
• 7. It prevents duplication of functions and makes it possible to achieve
maximum production with minimum efforts.
Thus to achieve these benefits an organizational structure should be designed
well with care.

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organizational structures

• Formal organizational structures are categorized as:

• (i) Line organizational structure.
• (ii) Staff or functional authority organizational structure.
• (iii) Line and staff organizational structure.
• (iv) Committee organizational structure.
• (v) Divisional organizational structure.
• (vi) Project organizational structure.
• (vii) Matrix organizational structure and
• (viii) Hybrid organizational structure.

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Staff or Functional Authority Organizational
Structure
• The jobs or positions in an organization can be categorized as:
• (i) Line position: a position in the direct chain of command that is
responsible for the achievement of an organization's goals and
• (ii) Staff position: A position intended to provide expertise, advice
and support for the line positions.
• The line officers or managers have the direct authority (known as line
authority) to be exercised by them to achieve the organizational
goals. The staff officers or managers have staff authority (i.e.,
authority to advice the line) over the line. This is also known as
functional authority.
• An organization where staff departments have authority over line
personnel in narrow areas of specialization is known as functional
authority organization. Exhibit 10.4 illustrates a staff or functional
authority organizational structure.

39
• 1. Line Organizational
Structure:
• A line organization has only direct, vertical
relationships between different levels in the firm.
There are only line departments-departments
directly involved in accomplishing the primary
goal of the organization. For example, in a typical
firm, line departments include production and
marketing. In a line organization authority follows
the chain of command.
• Fig illustrates a single line organizational
structure.
Features:
• Has only direct vertical relationships between
different levels in the firm.
Advantages: • Some of the advantages of a pure line organization are:
• 1. Tends to simplify and clarify authority, • (i) A line structure tends to simplify and clarify responsibility,
responsibility and accountability relationships authority and accountability relationships. The levels of
responsibility and authority are likely to be precise and
• 2. Promotes fast decision making understandable.(ii) A line structure promotes fast decision
making and flexibility.(iii) Because line organizations are usually
• 3. Simple to understand. small, managements and employees have greater closeness.
Disadvantages: • some disadvantages also. They are: (i) As the firm grows larger,
line organization becomes more ineffective.(ii) Improved speed
• 1. Neglects specialists in planning and flexibility may not offset the lack of specialized
• 2. Overloads key persons. knowledge.(iii) Managers may have to become experts in too
many fields.(iv) There is a tendency to become overly
dependent on the few key people who an perform numerous
jobs.

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• 1. Line Organizational Structure:
• A line organization has only direct, vertical
relationships between different levels in the firm. There
are only line departments-departments directly
involved in accomplishing the primary goal of the
organization. For example, in a typical firm, line
departments include production and marketing. In a line
organization authority follows the chain of command.
• Exhibit 10.3 illustrates a single line organizational
structure.
Features:
• Has only direct vertical relationships between different
levels in the firm.
Advantages:
• 1. Tends to simplify and clarify authority, responsibility
and accountability relationships
• 2. Promotes fast decision making
• Some of the advantages of a pure line organization are:
• 3. Simple to understand.
• (i) A line structure tends to simplify and clarify responsibility,
Disadvantages: authority and accountability relationships. The levels of
responsibility and authority are likely to be precise and
• 1. Neglects specialists in planning understandable.(ii) A line structure promotes fast decision
• 2. Overloads key persons. making and flexibility.(iii) Because line organizations are
usually small, managements and employees have greater
closeness.
• some disadvantages also. They are: (i) As the firm grows
larger, line organization becomes more ineffective.(ii)
Improved speed and flexibility may not offset the lack of
specialized knowledge.(iii) Managers may have to become
experts in too many fields.(iv) There is a tendency to become
overly dependent on the few key people who an perform
numerous jobs.

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• 2. Staff or Functional Authority
Organizational Structure
• In the line organization, the line managers
cannot be experts in all the functions they
are required to perform. But in the functional
authority organization, staff personnel who
are specialists in some fields are given
functional authority (The right of staff
specialists to issue orders in their own names
in designated areas).
• The principle of unity of command is violated
when functional authority exists i.e., a
worker or a group of workers may have to
receive instructions or orders from the line
supervisor as well as the staff specialist which
may result in confusion and the conflicting
orders from multiple sources may lead to
increased ineffectiveness. Some staff
specialists may exert direct authority over the
line personnel, rather than exert advice
authority (for example, quality control
inspector may direct the worker as well as
advise in matters related to quality).
• While this type of organizational structure
overcomes the disadvantages of a pure line
organizational structure, it has some major
disadvantages:
• They are: (i) the potential conflicts resulting
from violation of principle of unity of
command and (ii) the tendency to keep
authority centralized at higher levels in the
organization.
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 3. Line and Staff Organizational Structure:
• Most large organizations belong to this type of
organizational structure. These organizations have direct,
vertical relationships between different levels and also
specialists responsible for advising and assisting line
managers. Such organizations have both line and staff
departments. Staff departments provide line people with
advice and assistance in specialized areas (for example,
quality control advising production department).
• The line functions are production and marketing
whereas the staff functions include personnel, quality
control, research and development, finance, accounting
etc. The staff authority of functional authority
organizational structure is replaced by staff responsibility
so that the principle of unity of command is not violated.
• Three types of specialized staffs can be identified:
• (i) Advising,
• (ii) Service and
• (iii) Control.
• Some staffs perform only one of these functions but
some may perform two or all the three functions. The
primary advantage is the use of expertise of staff
specialists by the line personnel. The span of control of
line managers can be increased because they are
relieved of many functions which the staff people
perform to assist the line.

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 4. Committee organizational structure.
• Some advantages are: • Disadvantages:
• (i) Even through a line and staff structure allows higher flexibility and • (i) Conflict between line and staff may still arise.
specialization it may create conflict between line and staff personnel.
• (ii) Staff officers may resent their lack of authority.
• (ii) Line managers may not like staff personnel telling them what to do and
how to do it even though they recognize the specialists’ knowledge and • (iii) Co-ordination between line and staff may become
expertise.
difficult.
• (iii) Some staff people have difficulty adjusting to the role, especially when
• Committee Organizational Structure Features:
line managers are reluctant to accept advice. • (a) Formed for managing certain problems/situations
• (iv) Staff people may resent their lack of authority and this may cause line • (b) Are temporary decisions.
and staff conflict.
Advantages:
• Features:1. Line and staff have direct vertical relationship between
different levels.2. Staff specialists are responsible for advising and • 1. Committee decisions are better than individual
assisting line managers/officers in specialized areas.3. These types of decisions
specialized staff are (a) Advisory, (b) Service, (c) Control e.g., • 2. Better interaction between committee members leads
• (a) Advisory: Management information system, Operation Research and to better co-ordination of activities
Quantitative Techniques, Industrial Engineering, Planning etc. • 3. Committee members can be motivated to participate in
• (b) Service: Maintenance, Purchase, Stores, Finance, Marketing. group decision making.
• (c) Control: Quality control, Cost control, Auditing etc. • 4. Group discussion may lead to creative thinking.
• Advantages’
Disadvantages:
• (i) Use of expertise of staff specialists.
• 1. Committees may delay decisions, consume more time
and hence more expensive.
• (ii) Span of control can be increased • 2. Group action may lead to compromise and indecision.
• (iii) Relieves line authorities of routine and specialized decisions. • 3. ‘Buck passing’ may result.
• (iv) No need for all round executives.

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5. Divisional Organizational Structure:

• In this type of structure, the

organization can have different
basis on which departments are
formed. They are:
• (i) Function,
• (ii) Product,
• (iii) Geographic territory,
• (iv) Project and
• (iv) Combination approach.
• Exhibit 10.6 illustrates
organizational structures
formed based on the above
basis of depart mentation.

45
6. Project Organizational Structure:
• he line, line and staff and functional authority organizational structures
facilitate establishment and distribution of authority for vertical coordination
and control rather than horizontal relationships. In some projects (complex
activity consisting of a number of interdependent and independent
activities) work process may flow horizontally, diagonally, upwards and
downwards. The direction of work flow depends on the distribution of
talents and abilities in the organization and the need to apply them to the
problem that exists. The cope up with such situations, project organizations
and matrix organizations have emerged.
• A project organization is a temporary organization designed to achieve
specific results by using teams of specialists from different functional areas
in the organization. The project team focuses all its energies, resources and
results on the assigned project. Once the project has been completed, the
team members from various cross functional departments may go back to
their previous positions or may be assigned to a new project. Some of the
examples of projects are: research and development projects, product
development, construction of a new plant, housing complex, shopping
complex, bridge etc.

46
47
• Feature:
• Temporary organization designed to achieve specific results by using teams of specialists from different functional areas in
the organization.
• Importance of Project Organizational Structure:
• Project organizational structure is most valuable when:
• (i) Work is defined by a specific goal and target date for completion.
• (ii) Work is unique and unfamiliar to the organization.
• (iii) Work is complex having independent activities and specialized skills are necessary for accomplishment.
• (iv) Work is critical in terms of possible gains or losses.
• (v) Work is not repetitive in nature.
• Characteristics of project organization:
• 1. Personnel are assigned to a project from the existing permanent organization and are under the direction and control
of the project manager.
• 2. The project manager specifies what effort is needed and when work will be performed whereas the concerned
department manager executes the work using his resources.
• 3. The project manager gets the needed support from production, quality control, engineering etc. for completion of the
project.
• 4. The authority over the project team members is shared by project manager and the respective functional managers in
the permanent organization.
• 5. The services of the specialists (project team members) are temporarily loaned to the project manager till the
completion of the project.
• 6. There may be conflict between the project manager and the departmental manager on the issue of exercising authority
over team members.
• 7. Since authority relationships are overlapping with possibilities of conflicts, informal relationships between project
manager and departmental managers (functional managers) become more important than formal prescription of
authority.
• 8. Full and free communication is essential among those working on the project.

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 7. Matrix Organizational Structure:
• It is a permanent organization designed to achieve specific results by
using teams of specialists from different functional areas in the
organization. The matrix organization is illustrated in Exhibit 10.8.
• Feature:
• Superimposes a horizontal set of divisions and reporting relationships
onto a hierarchical functional structure

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 7. Matrix Organizational Structure:
• This type of organization is often used when the firm has to be highly
responsive to a rapidly changing external environment.
• In matrix structures, there are functional managers and product (or project
or business group) managers. Functional manager are in charge of
specialized resources such as production, quality control, inventories,
scheduling and marketing. Product or business group managers are in charge
of one or more products and are authorized to prepare product strategies or
business group strategies and call on the various functional managers for the
necessary resources.
• The problem with this structure is the negative effects of dual authority
similar to that of project organization. The functional managers may lose
some of their authority because product managers are given the budgets to
purchase internal resources. In a matrix organization, the product or
business group managers and functional managers have somewhat equal
power. There is possibility of conflict and frustration but the opportunity for
prompt and efficient accomplishment is quite high.

50
7. Matrix Organizational Structure:
• Advantages:
• 1. Decentralized decision making.
• 2. Strong product/project co-ordination.
• 3. Improved environmental monitoring.
• 4. Fast response to change.
• 5. Flexible use of resources.
• 6. Efficient use of support systems.
• Disadvantages:
• 1. High administration cost.
• 2. Potential confusion over authority and responsibility.
• 3. High prospects of conflict.
• 4. Overemphasis on group decision making.
• 5. Excessive focus on internal relations.

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8. Hybrid Organizational Structure:

52
Hybrid Organizational Structure:
• Advantages:
• 1. Alignment of corporate and divisional goals.
• 2. Functional expertise and efficiency.
• 3. Adaptability and flexibility in divisions.
• Disadvantages:
• 1. Conflicts between corporate departments and units.
• 2. Excessive administration overhead.
• 3. Slow response to exceptional situations.
• Uses:
• Used in organizations that face considerable environmental uncertainty that can be met
through a divisional structure and that also required functional expertise or efficiency
• This type of structure is used by multinational companies operating in the global
environment, for example, International Business Machines USA. This kind of structure
depends on factors such as degree of international orientation and commitment.
Multinational corporations may have their corporate offices in the country of origin and
their international divisions established in various countries reporting to the CEO or
president at the headquarters. The international divisions or foreign subsidiaries may be
grouped into regions such as North America, Asia, Europe etc. and again each region may
be subdivided into countries within each region.
• While the focus is on international geographic structures, companies may also choose
functional or process or product depart-mentation in addition to geographic pattern while
at the head quarter’s the depart-mentation may be based on function.
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Authority -Responsibility Relation
• Relationship between Authority and Responsibility:
• Authority is the right of a superior to give orders and instructions to his
subordinates to get things done. Authority means a formal, institutional or legal
power in a particular job, function or position that empowers the holder of that
job, function or position to successfully perform his task.
• Responsibility means the duties assigned to a person at the time of delegation
of authority. Responsibility is the obligation of a subordinate to perform a duty,
which has been assigned to him by his superior. It may continue or cease with the
accomplishment of the desired objective.
• It involves:
• 1. Compliance
• 2. Obedience and
• 3. Dependability.
• Authority can be delegated, but responsibility cannot be delegated.
• Authority – Responsibility Relationship:
• Authority and responsibility of a manager should be co-equal i.e. authority
should be commensurate with responsibility. According to George R. Terry,
responsibility is inseparable, there is every danger that it may be misused by the
possessor. Similarly, if responsibility is greater than authority, the tendency of
the management becomes difficult and even ineffective. In order to ensure that
authority and responsibility are co-equal, a correlative action may be resorted to.
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Management by objectives (MBO)
• The process of setting objectives in the organization to give a sense
of direction to the employees is called as Management by
Objectives.
• Management by objectives (MBO) is a strategic management model
that aims to improve the performance of an organization by clearly
defining objectives that are agreed to by both management and
employees.
• Management by Objectives (MBO) is a personnel management
technique where managers and employees work together to set,
record and monitor goals for a specific period of time. Organizational
goals and planning flow top-down through the organization and are
translated into personal goals for organizational members.
• The principle of MBO is for employees to have a clear understanding
of their roles and the responsibilities expected of them, so they can
understand how their activities relate to the achievement of the
organization's goals. MBO also places importance on fulfilling the
personal goals of each employee.

55
Management by objectives (MBO)
• The process of setting objectives in the organization to give a sense
of direction to the employees is called as Management by
Objectives.
• Management by objectives (MBO) is a strategic management model
that aims to improve the performance of an organization by clearly
defining objectives that are agreed to by both management and
employees.
• Management by Objectives (MBO) is a personnel management
technique where managers and employees work together to set,
record and monitor goals for a specific period of time. Organizational
goals and planning flow top-down through the organization and are
translated into personal goals for organizational members.
• The principle of MBO is for employees to have a clear understanding
of their roles and the responsibilities expected of them, so they can
understand how their activities relate to the achievement of the
organization's goals. MBO also places importance on fulfilling the
personal goals of each employee.

56
Need for Management by Objectives (MBO)
1. The Management by Objectives process helps the employees to understand their duties
at the workplace.
2. The employees are clear as to what is expected out of them.
3. Management by Objectives process leads to satisfied employees. It avoids job mismatch
and unnecessary confusions later on.
4. Employees in their own way contribute to the achievement of the goals and objectives
of the organization. Every employee has his own role at the workplace. Each one feels
indispensable for the organization and eventually develops a feeling of loyalty towards
the organization. They tend to stick to the organization for a longer span of time and
contribute effectively. They enjoy at the workplace and do not treat work as a burden.
5. Management by Objectives ensures effective communication amongst the employees.
It leads to a positive ambience at the workplace.
6. Management by Objectives leads to well defined hierarchies at the workplace. It
ensures transparency at all levels. A supervisor of any organization would never directly
interact with the Managing Director in case of queries. He would first meet his
reporting boss who would then pass on the message to his senior and so on. Every one
is clear about his position in the organization.
7. The MBO Process leads to highly motivated and committed employees.
8. The MBO Process sets a benchmark for every employee. The superiors set targets for
each of the team members. Each employee is given a list of specific tasks.

57
Limitations of Management by objectives Process
1. It sometimes ignores the prevailing culture and working conditions
of the organization.
2. More emphasis is being laid on targets and objectives. It just
expects the employees to achieve their targets and meet the
objectives of the organization without bothering much about the
existing circumstances at the workplace. Employees are just
expected to perform and meet the deadlines. The MBO Process
sometimes do treat individuals as mere machines.
3. The MBO process increases comparisons between individuals at
the workplace. Employees tend to depend on nasty politics and
other unproductive tasks to outshine their fellow workers.
Employees do only what their superiors ask them to do. Their
work lacks innovation, creativity and sometimes also becomes
monotonous.

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59