These days a great deal is written about how to effectively manage the stakeholders of a construction project. We are reminded repeatedly how critical it is to manage the various project parties correctly, and also how difficult it is to do so. So much so that now a whole industry has sprung up in the construction project management software space dedicated to this. There are now many new technologies promising to help stakeholders collaborate more easily and more economically.

But why is managing stakeholders such a challenge? Was it always a challenge or has something changed with the onset of mega projects and their increasing complexity? I would say it’s a bit of both; there was always an inherent challenge in project stakeholder management, and it has been greatly compounded in recent years by the modern business landscape. Let’s understand why this is so.

The first step is to understand how the company is structured ie. its organizational structure, because this impacts not only how a company operates as a company ie internally, but in how it deals with external parties like consultants and clients and vendors. So, understanding the organizational structure will help us understand how the project stakeholders are likely work with each other and play off of each other, and also give us a sense of the delicate equilibrium that exists as a result of this complex intertwining of roles and responsibilities.

Organizational structures can be broadly classified into;

• Functional organization
• Matrix organization
  • Strong matrix
  • Weak matrix
  • Balanced matrix
• Projectized organization
• Composite organization

Functional organization

Most of the manufacturing / service organizations are divided functionally. Each function will have a head, who in turn reports to the CEO. For example, an automobile manufacturer will have functions like;

• Manufacturing
• Sales & Marketing
• Research and development
• Procurement
• Finance
• Human resources etc.

Each of these functions are headed by a senior manager (functional managers), who in turn report to the CEO.

Matrix Organization 

In matrix organizations, the team members report to more than one boss. Team members may report to the project manager for the project related activities, and to the functional manager for specific function related activities. For example, a technical architect in a project may report to the project manager for project related activities and at the same time report to the Chief Technology officer (CTO) for technology related stuff. Most of the product companies, which calls for multi-disciplinary skills to develop the product of the project falls into this category.  Matrix organizations are further subdivided into;

• Strong matrix (Project managers have more authority than the functional managers)
• Weak matrix (Functional managers have more authority than the project managers)
• Balanced matrix (Both the functional manager and the project manager have the same authority levels.

Projectized organizations

In projectized organizations, whatever they do is a project. For example; I.T projects companies, Civil projects companies etc. They perform projects after projects. Project manager and the teams are the breadwinners of the organization. Project managers have maximum authority levels in projectized organizations. In projectized organizations, all other functions play the support role to the project.

Composite organizations 

Composite organizations have a combination of functional, matrix and projectized structure.

A thorough understanding of the stakeholder’s (customers, suppliers and your own organization) organizational structures will help in accurate mapping of the stakeholders into;

• High power – high interest
• High power – low interest
• Low power – high interest
• Low power – low interest

Examples

• Project managers in functional organizations have very low authority levels
• Functional managers have more authority than the project managers in functional organizations
• Project managers have maximum authority in projectized organizations
• In matrix organizations, the power of the project manager and the functional manager varies based on whether it is a;
  • Strong matrix
  • Weak matrix
  • Balanced matrix

This knowledge will help us to go beyond what is drafted in the contractual documents and manage key stakeholders very effectively.

Organisational structures are of course just one of the factors that affect stakeholder management. We will explore more such in coming weeks.

See you soon!