Introducing projects in a functional organization
Developed by Valentin Ange Fort
Case study write-up: the French health care system. This analysis has been conducted after multiple discussions with one of the directors of the local site of Perpignan.
The French health care system is run by a private company established by the state. This company has historically a functional organization. In 2011, the mother company decided to define key performance indicators (KPI) in order to rank the regional sites. The better your KPIs are, the more resources you get the following year. In order to achieve a good performance, the site of Perpignan created projects to fulfill these set goals. The directors want to distribute the same amount of project to each manager. Unfortunately, some departments have less projects than the average. In this case, the manager is assigned projects concerning other departments which will force them to learn how to deal with new employees. This leads to difficulties in leading the project. A lot of knowledge sharing and authority transfers are required. The purpose of the following article is to think about good practices and studies in order to assign the project in the best way. For example, a network mapping of the company would enable the directors to be aware of informal links between employees from different departments. This analysis can be a good starting point to involve these employees in a cross functional project concerning these departments. Such relations can also speed up the knowledge sharing process and enhance the communication during the project. Another issue for this company is that the employees do not have notions of project management. In order to deal with that, the board of directors has to design project management best practices for the company.
France has one of the strongest health care systems in the world. The system insures low prices for health services to all the citizens. This implies a lot of refunds and the management of a huge amount of money. The administration of all the money needed for the reimbursement of the expenses is run by a private company called “Social security”. This company employs more than 100.000 people in all the French territories. It is divided in local sites. There are 100 departments in France and they all have a site. All of these local sites are controlled by the national headquarter who defines the strategy of the company and the new policies. It is also important to emphasize that the Social security is highly monitored by the government. The last years, there was an important deficit and the government, who finances the company, put a lot of pressure to make the company profitable.
In this context, in 2011, the national headquarter decided to design key performance indicators (KPIs) in order to measure the efficiency of all local sites on the same basis and try to decrease the shortfall. Today, there are 100 KPIs allocated to the different functions of the organization. At the end of the fiscal year, all the indicators of all the sites are gathered and analyzed by the headquarter. Then, a grade is given to all the sites and a ranking of the 100 local sites is done based on the completion of the objectives. A good rank enables a site to ask for more resources, like new employees or new equipment, for the following year. Even if there is no competition between the sites, the completion of the objectives is important for their development and they give it a high priority.
In order to fulfill their objectives and get good KPIs, a solution for the local sites is to treat the completion of the latter as a project. This means that the site will have 100 projects a year which will be to have the best score in all the KPIs. This is the solution retained by the site of Perpignan, a city in the South of France, in which the study has been conducted. In Perpignan, as in every site, the organization is historically functional. Indeed, the work provided by the company was mainly based on routine and no cross functional relations were needed. Henceforth, most of the KPIs projects need a multidisciplinary team in order to be completed. Today, the site of Perpignan tries to learn how to run projects, which is new for them, and try to define the best way to create strong and coherent project teams. However, all the attempts have been disastrous until now and the employees could not deal with the overload of work created by the addition of the projects to the daily operations. Another failure was the fact that the employees have to work with people from other departments who have developed different practices. The problematic faced by the site of Perpignan is:
How to create the best multidisciplinary project teams in order to fulfill the objectives of the company, dealing with the need of a functional organization?
The local site of Perpignan has 350 employees working in functional departments such as IT, HR, accounting, fraud prevention. Historically working in a daily routine, these departments are very independent and few are the connections and relations between them. However, this changed in 2011 with the introduction of the projects aiming to complete the KPI requirements. The company moved from a purely functional organization to a light matrix weight organization.
The number of KPIs has been decreed at 100 by the national headquarter. The board of directors of the Perpignan decided to allot the projects between all the functional managers. In order to overload the managers in the same way, the directors aim to give the same amount of projects to each of them. Nevertheless, the number of projects per department is different from one to another. This leads the project managers, who are also functional manager, to deal with new employees from other departments. Today, the board of directors decides which manager will be in charge of which KPI and the manager is free to choose his team. However, most of the functional managers have no skills in project management and the teams they create are most of the time not working as well as expected.
The raised issue in this article is highly connected to the human behavior. People are the heart of this project structure. In order to understand who are these people and how they are related to the problem, a short stakeholder analysis has been conducted.
The Board of Directors
The board of directors is under the pressure of the national headquarter. In order to fulfill their objectives, the directors define the projects and allot them to the managers. It is important for them to have resources for next year in order to be at least as much efficient.
The functional managers become part-time project manager in the new structure. Unfortunately most of them have no skills and experience in project management. Besides, they have to deal with employees of other departments with who they are not used to work.
The employees can be lost in the new organization. They have to accept the change in both the people and the practices.
This analysis can be also visualized using the Mendelow's Power-interest grid.
The three groups of stakeholders involved in the projects have different objectives. The board of directors wants good results in order to have more resources for the following year; the managers have to deal with their departments and need good results to have also more internal resources allocated; finally, the employees have to deal with their routine and the projects can be seen as a waste of time. Besides, inside the groups, it is also possible to have different incentives. The employees of two different departments can have goals that are not aligned.
The site of Perpignan knew a lot of changes in its organization the last years because of the new national policy of the company. The star model  gives a quick overview of the actual organization.
The Star Model
- Strategy: For a long time, the strategy of the company has been based only on the effectiveness. The goal was to reimburse everyone as fast as possible without taking care of the resources consumption during the process and without controlling the veracity of the inquiries. Today, with the creation of KPIs, the company orients its strategy to a more efficiency way of thinking.
- Structure: The structure of the site changed also during the last years, moving from a functional organization to a light weight matrix.
- Process: With the new project oriented part of the organization, project management is developed as well as cross departmental teams.
- Reward system: The results regarding the KPIs are directly linked to the resources provided to the local sites for the following year. This is a change in the reward system.
- People: Project management skills have to be developed by the managers in order to obtain good results regarding the KPIs. The employees have also to learn to work with employees from other departments.
In order to involve the employees and be sure that they will be committed to the projects, it is important to create teams with people sharing the same vision. This will ensure both the efficiency and the effectiveness of the project team. Despite the lack of project management skills of the managers, the biggest issue is to find the best teammates to achieve the projects.
The problem of project management in the case of the site of Perpignan can be split in two sub issues. Here are presented the favorite solution for each issue.
Because of the change in the organizational structure, the functional managers have to learn how to deal with projects. Indeed, the project management requires different skills than the operational one and call on different processes. The first issue is the lack of alignment between the definition of the project, what it is, and the processes known and used by the manager to achieve it, how it should be done. In order to align these two points, the board of director has to define best practices regarding the project management. A good starting point is to deeply look into the standard ISO 21500:2012, "Guidance on Project Management". This can also lead to the development of new tools and models. It is important that the whole company has the same template and that the project management is well structured because it will help employees from every department to understand each other by developing the same language.
The second issue in the actual project management is setting up the project teams. Indeed, many teams are inefficient because they do not constitute a coherent system. In order to have a better overview of how the teams should be created, a solution can be a strong network analysis. A network analysis is the study of the relations between people involved in a group such as an organization, regarding defined criteria. The analysis can be done on a formal level, in order to visualize the hierarchical links, but the most interesting analysis will be done on an informal level. Indeed, in every group an informal network is created and it is especially helpful to know it when cross departmental teams have to be created. If two employees from two departments are used to have lunch together every day and the two departments work on the same project, the information sharing will be faster if these two employees are involved in the project.
The implementation of the proposed solution can be done as follow.
Before defining the best practices, the board of directors should ask their managers to investigate the actual practices in their own department. The managers will be in charge of describing the processes they follow, as well as the templates of the documents they use for example. In parallel, the board should brainstorm about which structure they want the managers to follow. A basic example of such a structure for project management is the stage-gate model. Then, the managers and the board should meet and discuss about which practices are relevant for the project management and the ones that have to be added. Then, a pilot project should be launched in order to test the developed practices and verify the assumptions possibly done. During the whole project, it is important to gather enough relevant feedbacks to adapt the practices. Then, once the practices have been improved, they can be applied for all projects through the company.
The second solution is to analyze the formal and informal information sharing network. There are two main ways to achieve such an analysis. The first one is to create a questionnaire and send it to the whole organization. Once the questions are designed, it is quick to get a lot of information and if the questions are well written, the results are easy to analyze. The disadvantage of this solution is that people can misunderstand some questions and also be influenced in their answers. The second way is to go on site and observe how the organization is working. By doing this, the analyst access directly to the source of the information and he is sure there are not distorted by the human judgment. Then, many software existed to turn the results of the analysis into a visual map, like Gephi which is a freeware. The analysis can be done by external consultants. An alternative can be also to call on a student and propose this as a master thesis project.
The main benefit of a good definition of the internal best practices for project management will be to decrease the complexity for both managers and employees. The creation of models and templates will make sure that all the stakeholders have the same language and it will increase the quality of the knowledge sharing.
The network analysis will lead to a map of the links between the employees of the organization. These links will highlight some interdepartmental groups who will be potential basis for project teams. Indeed, the quality of formal relations is partially dependent on the quality of informal ones. This solution is good to help the project leader to manage the human behavior involved in a project. However, it exists a temporal limit to this solution. Indeed, the relation between people change and also sometimes, the people change. This means that such a study should be done on a regular basis and can be time consuming.
Most of administrative companies have a purely functional organization. This means that the different departments are mostly independent and few are the relations between them. In the case of the French social security, the structure had to move into a more matrix one. The whole culture of the company is affected by this change. This change leads the directors of local sites, as the one of Perpignan, to develop some project skills and processes. In order to guide the employees to go through this phase, the directors and managers have to take care of creating the right teams in order to have the most efficient ones. Besides, an alignment of the global vision of all the local stakeholders and a standardization of the processes and documents will ensure the effectiveness of the project teams.
- ↑ Kevan Hall, Making the Matrix Work: How Matrix Managers Engage People and Cut Through Complexity, Hardcover – March 1, 2013.
- ↑ Project Management Study Circle, Stakeholders in Project Management, http://pmstudycircle.com/2012/03/stakeholders-in-project-management-definition-and-types/.
- ↑ Aubrey L. Mendelow, Mendelow’s Power-interest grid, Kent State University, Ohio, 1991.
- ↑ Alexander Osterwalder & Yves Pigneur, Business Model Generation, (John Wiley & Sons, Inc., Hoboken, New Jersey, 2010), ISBN: 978-0470-87641-1, p.270.
- ↑ Pedro Parraguez Ruiz, Mapping industrial networks as an approach identify inter-organisational collaborative potential, Denmark Technical University (DTU), http://www.openinnovate.co.uk/workingpaper-mapping-industrial-networks/.
- ↑ Robert G. Cooper and Elko J. Kleinschmidt, Stage-Gate® Process for New Product Success Edited by Jens Arleth © Innovation Management 2001.
- ↑ Gephi website, http://gephi.github.io.