The management of operations in the project-based organisation

Abstract

Project-based organisations require a different approach to their management from the functional hierarchical line-management approaches adopted for most of the 20th century. The latter works well where products are stable. During the latter half of the century, however, the nature of work has changed so that now, for many organisations, almost every product or service is supplied against a bespoke design, and markets and technologies change continuously. The classical management theories developed to manage mass production no longer apply; the new organisation needs new theories for its management. At Erasmus University, we are investigating the management of project-based organisations, to identify practices adopted by firms internationally. In this paper, we report our findings about operations management practices adopted. We suggest a six-step process model for operations management, and show that different approaches are used in the implementation of this model, depending on the size of projects undertaken and the number of customers. We describe different approaches in each of the four cases: large projects-few customers; large projects-many customers; many projects-few customers; and many projects-many customers.

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Journal of Change Management
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The management of operations in the project-based
organisation
J. Rodney Turner
a
b
c
d
e
& Anne Keegan
f
a
Project Management at Erasmus University Rotterdam
b
Operations Director for the European Construction Institute Benelux Region
c
Associate faculty at Henley Management College
d
Visiting fellow at the University of Technology Sydney
e
Director of EuroProjex, the European centre for Project Excellence
f
Department of Business and Organisation in the Faculty of Economics of Erasmus
University, Rotterdam
Published online: 18 Jun 2010.
To cite this article: J. Rodney Turner & Anne Keegan (2000) The management of operations in the project-based
organisation, Journal of Change Management, 1:2, 131-148, DOI: 10.1080/714042464
To link to this article: http://dx.doi.org/10.1080/714042464
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project-based organisation (PBO) (Peters,
1992; Hastings, 1993; Turner and
Keegan, 1999). This evolution has been
caused by the changing nature of work
from mass production, with essentially
stable customer requirements and slowly
changing technology, to the current
INTRODUCTION
During the second half of the 20th
century, there has been an evolution in
the nature of organisations, their work
and its management, from the functional
structure almost universally adopted in
the first half of the century to the
䉷 Henry Stewart Publications 1469-7071 (2000) Vol. 1, 2, 131–148 Journal of Change Management 131
The management of operations in the
project-based organisation
Received (in revised form): 18th May, 2000
J. Rodney Turner
is Professor of Project Management at Erasmus University Rotterdam, and Operations
Director for the European Construction Institute Benelux Region. He is also a member of
associate faculty at Henley Management College, and a visiting fellow at the University
of Technology Sydney. He is a director of EuroProjex, the European Centre for Project
Excellence.
Anne Keegan
is a lecturer in the Department of Business and Organisation in the Faculty of
Economics of Erasmus University, Rotterdam. She was previously a Post-Doctoral
Researcher of RIBES (the Rotterdam Institute of Business Economic Studies), attached
to the department. She lectures and undertakes research in the fields of Human
Resource Management and Organisation Theory.
KEYWORDS: project-based management, classical management, project organisation,
project processes, customer focus, size of project, size of customer
ABSTRACT Project-based organisations require a different approach to their management
from the functional hierarchical line-management approaches adopted for most of the 20th
century. The latter works well where products are stable. During the latter half of the
century, however, the nature of work has changed so that now, for many organisations,
almost every product or service is supplied against a bespoke design, and markets and
technologies change continuously. The classical management theories developed to manage
mass production no longer apply; the new organisation needs new theories for its
management. At Erasmus University, we are investigating the management of project-based
organisations, to identify practices adopted by firms internationally. In this paper, we report
our findings about operations management practices adopted. We suggest a six-step process
model for operations management, and show that different approaches are used in the
implementation of this model, depending on the size of projects undertaken and the number
of customers. We describe different approaches in each of the four cases: large projects–few
customers; large projects–many customers; many projects–few customers; and many
projects–many customers.
J. Rodney Turner
Wildwood, Manor Close,
East Horsley, Surrey KT24
6SA, UK
Tel : ( ⫹44) (0)1483 282 344;
Fax: (⫹44) (0)1483 284 884;
e-mail: jrttgl@cs.com
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the many customers, and acts internally as
a few customers for the few large projects.
In the third case, the organisations group
projects into a few large programmes for
their few customers. In the fourth case,
many different approaches are adopted to
manage the interface between the projects
and the customers. These include:
— the assignment of specific project roles
to coordinate the network
undertaking the projects
— thecreationofaninternalmarketto
manage the interface between projects
and customers
— the grouping of projects into
programmes, where each programme
has a few customers
— the use of matrix management.
THE PROJECT-BASED
ORGANISATION
We d efine a PBO as an organisation in
which the majority of products made or
services offered are against bespoke
designs for external or internal customers.
The PBO may stand alone, servicing
external customers, or be a subsidiary of
alargerfirm, servicing internal or
external customers. It may even be a
consortium of firms which collaborate to
service third parties (Katzy and Schuh,
1998). We previously described why
classical management theory, developed
as the basis for the management of the
functional, hierarchical, line-management
organisation, is inappropriate for the
PBO (Turner and Keegan, 1999).
Classical management (Mintzberg, 1979;
Huczynski, 1996; Morgan, 1997) is based
on the work of:
— Smith (1776), who proposed that
economic improvement comes from a
constant drive for greater efficiency.
This striving for greater efficiency still
pervades management thinking. We
situation, where every product supplied
may be against a bespoke design, and
technology and markets change
continuously and rapidly. Whereas the
design of the functional organisation is
underpinned by a strong theoretical base,
classical management theory developed in
the 19th and early-20th centuries
(Mintzberg, 1979; Huczynski, 1996;
Morgan, 1997), the design of the PBO
has no such theoretical base. The latter
requires new theories for its
management. With the eventual aim of
developing such a theoretical base, we at
Erasmus University Rotterdam are
conducting an international research
project to determine how PBOs are and
should be managed (Turner and Keegan,
1999). In this paper, we present our
findings on the management of
operations within the PBO.
We s ta rt by d efining the PBO, and
argue that it requires different approaches
to its management from those used
successfully in the functional, hierarchical,
line-management organisation. We then
introduce a model for the management
of the PBO, and show how the size and
nature of customers and the projects
undertaken for those customers lead to
four different approaches to the
structuring and management of
operations. We describe, with examples,
these different structures in each of the
four scenarios identified of:
1. large projects–few customers
2. large projects–many customers
3. small projects–few customers
4. small projects–many customers.
In order to create customer-focused
processes, PBOs strive to maintain a
one-to-one relationship between project
teams and customers. This situation exists
perforce in the first case. In the second
case, an internal sales or marketing
department manages the interface with
132 Journal of Change Management Vol. 1, 2, 131–148 䉷 Henry Stewart Publications 1469-7071 (2000)
Turner and Keegan
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doing them, stable bureaucratic
command and control structures can be
put in place, and the whole structure can
work to make itself more and more
efficient through habitual incremental
improvement (Turner, 1999). Stable
functions can be defined because both
the work of the functions, and the
intermediate products which pass
between them are well defined and
unchanging, leading to the functional
approach to work. Such organisations
work like machines (Burns and Stalker,
1961; Mintzberg, 1979; Morgan, 1997).
The ideas of Smith, Fayol and Taylor
are at best inappropriate for the PBO,
and sometimes positively damaging:
1. Because every customer’s requirement
is different, a unique, novel and
transient project must be undertaken
to deliver every order (Turner, 1999).
This means the work undertaken by
each function changes for every order,
as does the intermediate products
passing between them. This in turn
means different, customer-focused
processes must be adopted for the
completion of every project (Figure 1)
(Turner and Peymai, 1995; Central
Computer and Telecommunications
and Agency (CCTA), 1997; Turner,
1999). Figure 2 shows a version of
customer-focused processes
recommended by PRINCE 2 (CCTA,
1997). It is therefore not possible to
define a single model for the
organisation to cover all
circumstances. A different model must
be developed for governance, for the
control of different operations, and for
the development of the knowledge
and people. Thus the Organisation
Structure Orthodoxy does not apply
to the PBO.
2. Because work is always changing, it is
not possible to define job roles
precisely, nor independently of the
have previously called it the
Economic Orthodoxy (Turner and
Keegan, 1999).
— Taylor (1913), who developed
concepts of job design. Based on his
scientific management thinking, jobs
are precisely defined, the
competencies required to do the job
described, and people found to fill the
roles. This approach of assigning the
person to the previously defined job,
and not vice versa, we call the
Human Resourcing Orthodoxy.
— Fayol (1949), and his followers
(Urwick, 1943), who designed
organisations with administrative
routines and command structures
through which work could be
planned, organised and controlled.
From this comes the concept of the
organisation structure, a single model
of the organisation and its functions,
which is used for multiple purposes,
including its governance, operational
control, and knowledge and people
management. This assumption that
there is but one structure for the
organisation, one model for its
management, we call the Organisation
Structure Orthodoxy.
— Weber (1947), who said this led to
the creation of dehumanising
bureaucracies. The subsequent
developments of human relations and
neo-human relations (Huczynski,
1996) just put a humanistic gloss on
the dehumanising nature of the
bureaucratic organisation.
Classical management theory works well,
and is highly appropriate, where the
work of the organisation is stable
(Mintzberg, 1979; Huczynski, 1996;
Morgan, 1997). This will be the case if
the customers’ requirements and the
technology of the organisation are slow
to change. The job roles can then be
identified independently of the people
䉷 Henry Stewart Publications 1469-7071 (2000) Vol. 1, 2, 131–148 Journal of Change Management 133
The management of operations in the PBO
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organisations from countries around the
world (Table 1) (Turner and Keegan,
1999). We have identified that in the
functional, hierarchical, line-management
organisation, the functions fulfil five roles
which also must be fulfilled in the PBO:
1. governance
2. operational control
3. management of human resources
(people and competence)
4. management of knowledge, learning
and innovation
5. management of customers.
In this paper, we report our findings
about the management of operations
within the PBO. We identify that
different operational models are adopted
for different project types, and that this is
influenced by the nature of the
customers and projects undertaken for
them. Figure 3 represents the
management of operations as a six-step
process:
1. winning the customer’sorder
2. designing the product and process of
its delivery
3. producing the components of the
product
4. configuring the components of the
product
5. commissioning the product and
delivering to the customer
6. maintaining customer support after
delivery
— Winning the customer’sorder:Inorder
to win the order the firm must
identify potential customers, define
their requirements, and demonstrate a
superior ability to deliver them.
— Designing the product and process of its
delivery: The individual product and
production process required to deliver
the customer’s requirement must be
designed. This includes the
person fulfilling them. People with a
different type of competence must be
found; those who are familiar with
the technology and knowledge of the
firm,butareabletoworkin
unfamiliar, unstructured situations
(Keegan et al., 1999). The individuals
determine what job roles are required
by the task, and adapt their work
accordingly. This requires different
approaches to people development,
and means the Human Resourcing
Orthodoxy is inappropriate for the
PBO.
3. It is therefore not possible to aim for
efficiency. Indeed, efficiency works
against effective project management.
It reduces the ability to respond
flexibly to risk and the uncertain,
changing nature of projects (Turner
and Keegan, 1999; Turner, 1999). The
Economic Orthodoxy can be
damaging for the PBO.
4. In some PBOs, the nature of the
projects and customers are such that
new command and control structures
need to be created for every project,
andsometimeevenateachstageofa
project. Some PBOs can have stable
command and control structures, but
others, particularly those undertaking
large projects for a few customers
cannot. This requires organisations to
adopt several models for their
governance and control, several
organisation structures.
Thus, we need to find new theories for
the management of the PBO to replace
those of Smith, Taylor and Fayol.
A MODEL FOR THE PROJECT-BASED
ORGANISATION
In order to identify approaches adopted
to the management of PBOs, we have
undertaken an international research
project in which we have interviewed
134 Journal of Change Management Vol. 1, 2, 131–148 䉷 Henry Stewart Publications 1469-7071 (2000)
Turner and Keegan
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functionality, it must work to meet
the customer’s requirement. The
commissioning may be done by the
customer, or the PBO, or both
working together. The firm may also
need to provide ongoing support to
the customer, and continue to manage
the relationship to win future work.
— Maintaining customer support after
delivery: After delivery of the product,
the customer may require ongoing
maintenance or other support. This
will also be an essential part of
maintaining links with the customer
to obtain leads for potential future
work.
THE INFLUENCE OF CUSTOMERS
AND THEIR PROJECTS OR
PRODUCTS
Our research has shown that different
organisations adopt different approaches
functionality of the eventual product,
its components and how they are
configured to deliver the functionality,
and the production process by which
they will be produced. (Sometimes
the product required by the customer
is a design and there are no further
steps in the process.)
— Producing the components of the product:
Components of the product may be
sourced from a number of different
places, internal or external to the
organisation. The chain or network of
supply needs to be designed and
managed.
— Configuring the components of the
product: The individual components
must then be configured into the
eventual product to deliver the
required functionality.
— Commissioning the product and delivering
to the customer: Not only must the
product deliver the required
䉷 Henry Stewart Publications 1469-7071 (2000) Vol. 1, 2, 131–148 Journal of Change Management 135
Figure 1
Customer-focused
processes versus
internally focused
functions, after
Turner and
Peymai (1995)
The management of operations in the PBO
Cross discipline teams
deliver results
to customer requirements
guided by precedent
Process
management
(military
approach)
Project-based
management
Customer-focused
processes
Management
Focus
Internally-focused
Specialist functions
do work
to defined systems
following rules
Functional
hierarchical
l
i
ne
management
Conventional
project
management
Routine Novel
Nature of Product
discrete functions
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136 Journal of Change Management Vol. 1, 2, 131–148 䉷 Henry Stewart Publications 1469-7071 (2000)
Figure 2
Customer-focused
processes
recommended by
PRINCE 2 (CCTA,
1997)
Turner and Keegan
Controlling
a Stage
Starting-up
a Project
Initiating
a Project
Managing
Product Delivery
Project Planning
Corporate or Programme Management
Directing a Project
Project
Mandate
Project
Brief
Authori-
zation
PID
Advice
Reports End Stage
Reports
End Project
Reports
Lessons
Learned
Work Pack
Auth’n
Quality Checkpoint
Work Pack Closure
Closing
a Project
Managing
Stage
Transition
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for them. Most organisations undertake a
portfolio of projects for a range of
customers, but the operational processes
to the realisation of this process
dependent on the nature of their
customers and the projects undertaken
䉷 Henry Stewart Publications 1469-7071 (2000) Vol. 1, 2, 131–148 Journal of Change Management 137
The management of operations in the PBO
Table 1 Organisations interviewed
Company name Country Company type
Ericsson Malaysia Supplier of bespoke intelligent networks to
telephone operators, systems and networks to
organisations, and telephone handsets
Ericsson Netherlands Supplier of bespoke intelligent networks to the
telecommunications industry, design and installation
STS Netherlands Research company developing novel equipment for
the computer industry
Pink Elephant Netherlands Information systems consultants
ABN Amro IS Division Netherlands Internal department delivering information systems
solutions to a bank
Arcadis Bouw/Infra Netherlands Engineering procurement and construction
contractor in the building, railway and infrastructure
industries
Ballast Nedam Netherlands Civil engineering construction contractor dealing
mainly in concrete construction
Raytheon Engineers
and Constructors
Netherlands Engineering procurement and construction
contractor in the oil, gas and petrochemical industry
Fluor Daniel BV Netherlands Engineering procurement and construction
contractor in the oil, gas and petrochemical industry
ABB Lummus Global Netherlands Engineering procurement and construction
contractor in the oil, gas and petrochemical industry
ABB Austria Engineering procurement and construction
contractor in the power generation industry
(combined cycle power station)
Unisys Austria Supplier of computer equipment and bespoke
information systems solutions
Unisys UK Supplier of computer equipment and bespoke
information systems solutions
British Aerospace
Defence Systems
UK Supplier of bespoke electronic systems to the
defence and other industries
Reuters UK Supplier of business and financial data products
British Telecom UK Communications and data network operator
Posten State Data Centre Norway Supplier of bespoke information systems solutions to
the public sector
EDS Telecom New Zealand Supplier of bespoke information systems solutions to
the national telephone operator
Alwo AG Switzerland Manufacturer of bespoke precision engineering
machines and tools
University of St Galen Switzerland Established the virtual factory, comprising 30
companies from Germany, Austria and Switzerland
around Lake Constance
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138 Journal of Change Management Vol. 1, 2, 131–148 䉷 Henry Stewart Publications 1469-7071 (2000)
Figure 3
The operations
processes in the
PBO
Turner and Keegan
Controls
Customer
Requirement
Governance
Strategy
Governance
Leadership
Governance
Direction
Governance
Finance
Customer
Nature
Outputs
Future
Work
Inputs
Customer
Require’t
External
Resources
Procured
Material
Resources
Competence Knowledge
Win
Customer’s
Order
Design
Product &
Process
Produce
Components
of Product
Configure
Components
of Product
Commission
Product and
Handover
Maintain
Customer
Support
Figure 3
The operations processes in the project-base organization
Final
Product
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relevant firms accordingly. The firms
doing work for internal customers are all
shown at the bottom right, in italics.
Organisations tend not to retain the
expertise internally to undertake large
projects. Since the work tends to be rare,
large projects are almost universally let to
external suppliers. It might be said that
internal departments doing internal work
have just one, dominant customer. The
nature of the relationship with the other
parts of the business with which they
work, however, tends to be the same as
external suppliers with many customers.
Similarly, EDS Telecom in New Zealand
effectively acts as an internal IS
department to the national telephone
operator. Hence, it acts like the Back
Office in BT, and can said to have many
customers, that is many users within the
client company, not just one — the
client company.
THE OPERATIONAL MODELS IN
PRACTICE
We now describe how the different
operational processes are adopted by in
practice by organisations we have studied
from each of the four quadrants in Table
2. Table 3 gives examples of the names
used to describe managers responsible for
the steps in the process.
Large projects–few customers
Organisations undertaking large projects
for few customers tend to be from the
construction or heavy engineering
industries. Dedicated teams are created to
deliver the large projects, and these are
inevitably large, being small organisations
in their own right. The project
organisations created have what Frame
(1995) describes as an isomorphic
structure, the structure of the project
organisation reflects the current stage of
the process:
adopted are designed to minimise the
number of interfaces between project
teams and customers. Hence, we find
that the operational processes adopted
depend on whether the organisation
undertakes a few large projects or many
small projects, and whether they have a
few large customers or many small ones.
— Size of projects:Wedefine a large
project as one which is a significant
proportion of the firm’s turnover, and
a small one is a small proportion.
Simple arithmetic says that, if a firm
is undertaking large projects, it can
only do a few of them whereas, if it
is doing small projects, it must be
doingmanyofthemtomakeupthe
turnover. The emphasis is on the size
oftheprojectsasitisthatwhich
determines the operational
management approaches adopted.
— Number of customers:Some
organisations work for a few
dominant customers, whereas others
have a large number of customers.
Again, simple arithmetic says that if
there are a few customers, each must
provide the firm with a significant
proportion of its turnover (hence the
reason they tend to be dominant). On
the other hand, if there are many
customers, each will provide the firm
with a smaller proportion of its
business, and the firm will be less
reliant on any one customer. The
emphasis here is on the number of
customersasitisthatwhich
determines the operational
management approaches adopted.
Table 2 shows our sample by size of
project and number of customers. In
reality, many firms have a range of
project sizes and a range of customers. If
they have some large projects or some
large customers, however, those often
dominate, and we have placed the
䉷 Henry Stewart Publications 1469-7071 (2000) Vol. 1, 2, 131–148 Journal of Change Management 139
The management of operations in the PBO
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— Designing the product:Nowamatrix
approach is adopted (Frame, 1995).
Teams of engineers and designers
work in specialist functions, doing
design work for that discipline for all
areas of the plant. A lead engineer is
responsible for the input of a given
discipline. They work with project
engineers who are responsible for
coordinating the design of a given
area and configuring the components
of the product. This is matrix
working at the project team level; it
is not matrix management, since the
designers are working for one
manager, the lead engineer. The
project engineers must work through
them to obtain design input to their
area.
— Construct components of the product:
Construction is managed by the
project engineers and specialist
construction supervisors. The team
structure adopted is a task hierarchy
— Winning the order:Thisisthe
responsibility of a contracts or bid
management department. The bid
team is a task force, led by the bid or
contracts manager. The structure may
be one of two types described by
Frame (1995), a surgical team or an
egoless team. In the surgical team, the
preparation of the bid is managed by
the bid or contracts manager, who
draws on the expertise of others as
required. In the egoless team, the task
force works together as a team of
equal players, and the bid or contracts
manager facilitates the process,
perhaps even working as a junior
member of the team. Most of the
organisations in our study adopted the
surgical team. In one, ABB Lummus
Global, bid management is viewed as
a core competence, and attempts are
made to identify and spread best
practice in bid management
continuously.
140 Journal of Change Management Vol. 1, 2, 131–148 䉷 Henry Stewart Publications 1469-7071 (2000)
Turner and Keegan
Table 2 Our sample by size of project and number of customers
Size of project
Number of
customers Large–few Small–many
Few-large ABB Lummus Global
ABB CC Power Vienna
Fluor Daniel
Raytheon E&C
BAe Defence Systems
Ericsson
Arcadis Bouw/Infra
Many–small STS Unisys ISG Vienna & HQ
Pink Elephant
Posten SDS
EDS Telecom
Virtuell Fabrik
GEC Dunchurch
ABN Amro IS Division
Reuters FIPS
BT Back Office
Key: Firms in italics are departments servicing other departments of the same organisation
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䉷 Henry Stewart Publications 1469-7071 (2000) Vol. 1, 2, 131–148 Journal of Change Management 141
The management of operations in the PBO
Table 3 Managers responsible for the operations processes
Process
Big projects–
few customers
Big projects–
many customers
Small projects–
few customers
Small projects–
many customers
Small projects–
many customers
Small projects–
many customers
Small projects–
many customers
Example
Win customers
Design product
&process
Make
components
Configure
components
Deliver product
Maintain
customer
support
ABB Lummus
Global
Contract
management
Lead engineers
Construction
supervisors
Project
engineers
Project director
Contracts or
commercial
department
STS
Marketing
director
Research director
Suppliers
Marketing
director
Marketing
director
Marketing
director
Ericcson
Account manager
Solutions &
projects
managers
Project
managers
Solutions
manager
Account manager
Account manager
Virtuell Fabrik
(Katzy &
Schuh)
Broker
Network coach
Factory manager
Project manager
Project manager
Broker
BT Back Office
Account manager
Solutions
manager
Project manager
Project manager
Solutions
manager
Account manager
Internal change
programme
Champion
Programme
manager
Project manager
Project manager
Programme
manager
Champion
Consultancy
Director
Managing
consultant
Consultant
Consultant
Managing
consultant
Director
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stage is handed back to the functional
organisation, to be undertaken by
appropriate departments, usually a
commercial or contracts department.
Organisations adopting this approach
create a command and control structure
for each project. For projects of this size,
this is natural. Further, the nature of the
projects is such that they are often
undertaken remote from head office.
Until recently, communications were
such that the project manager had to be
empowered to take decisions without
reference back to head office, as it would
take too long to get an answer. Although
communications are now instantaneous,
project directors still expect to operate as
the head of their autonomous command
structure. We interviewed one project
director from a company that had been
taken over by a company from the
defence electronics industry, which does
many projects for a few customers (see
below). More permanent command
structures are adopted by this type of
firm, and our interviewee found it
difficult working for a master that would
not empower him to the extent he was
used to. (He left and is now a general
manager with a competitor.)
Large projects–many customers
Only one firm from our sample could be
said to be undertaking large projects for
many customers, a start-up company,
established to develop an idea of the
entrepreneurial managing director. It
really has only one project, the entire
business. Indeed, one of their customers
is viewed as the main potential user for
this product once developed. They are
funding much of the development work,
and obtaining patent rights. There are
many other potential users, however, for
whom variants of the product will be
made. As far as the internal project team
(Frame, 1995). Multidisciplinary
teams, responding through the
construction supervisors to the project
engineers, do all the work to
complete an area of the plant.
— Configure the components of the product:
The delivery of each area is managed
by a project engineer, who ensures
the plant is delivered in accordance
with the design. They are also
responsible for link up and
commissioning. During this stage, the
team type moves from the task
hierarchy adopted during construction,
back to the surgical type as the final
product is configured and
commissioned for the customer.
Multidisciplinary task forces work
under the lead of a specialist to
ensure work is completed quickly and
efficiently.
— Deliver the product to the customer:The
overall project is managed by a
project manager, or, if of sufficient
size and complexity, by a project
director. Reflecting its importance,
one firm we interviewed assigned this
role for a strategic project critical to
the firm’s future, to the Project’s
Director; he had gone from a
governance role on the board to an
operational role. The new role was of
such risk and significance to the
future of the firm and the client,
however, it was viewed as a
development for the individual
concerned. In all these companies,
project management is viewed as a
key source of value added both to the
firm and the client.
— Maintain customer support:After
commissioning, the project team is
disbanded. Ongoing customer support
may include maintenance or the
supply of spares, or the design of
plant upgrades. Maintenance of
customer support is essential for
winning new business. Work at this
142 Journal of Change Management Vol. 1, 2, 131–148 䉷 Henry Stewart Publications 1469-7071 (2000)
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long-term relationship with the client,
defining the evolution of the programme.
They identify a need for individual
project components of the programme,
and only then are project managers
assigned, from within the Operations
Division, to deliver them. This leads to
an overall structure of the programme,
which we describe as a fish-bone
approach (Figure 5). The back-bone
represents the ongoing development
programme, with project teams
consecutively contributing individual
components. The project teams tend to
adopt a specialist, or surgical, structure
(Frame, 1995). The operations process
therefore works as follows:
— Win the order: This is a continuous
(functional) process undertaken by
Accounts Managers within Sales and
Marketing. They win the order for
the programme, and work with the
client to maintain the relationship.
The Account Managers and Solutions
Managers constantly work with the
clients on the development of the
programmes, and the identification of
new projects.
— Design and deliver the product:Surgical
project teams are responsible for the
design and delivery of each project.
The project managers and their
specialist teams design the individual
components of the programme
delivered by each projects and deliver
the product.
— Configure the components: The Solutions
Managers work with the Project
Managers to configure the individual
project components into the overall
programme. Although each
component is unique and novel, this
tends to be an ongoing, repetitive,
development task.
— Deliver the product to the customer and
Maintain customer support:Thedelivery
of the final product to the customer
are concerned, there is only one external
customer, the Marketing Director.
Hence, the organisation has created an
artifice whereby the project team appear
to be undertaking a large project for a
single dominant customer. The
Marketing Director markets to all the
potential customers, reducing the number
of interfaces for the project teams.
Small projects–few customers
These firms group projects into
programmes, so they effectively
undertake a small number of large
programmes for a small number of
clients. The essential difference with the
large project is the large project leads to
a single deliverable, and when that is
delivered the project is over. The
programmes undertaken here can carry
on indefinitely, and indeed the eventual
outcome is always being updated. Each
individual small project is well defined,
but technology is continuously
developing. Although the clients know
the general scope of what they want, the
actual scope evolves as technology
develops. One organisation we
interviewed from this category was
Ericsson in the Netherlands. They are
developing telecommunications networks
for several of the operators in the
Netherlands. The networks evolve with
time, but there are clearly identifiable
projects to deliver individual components
of the network.
Because these firms have a longer-
term relationship with their clients, they
adopt functional approaches to the
management of the early and later steps
of the process (Figure 4). A Sales and
Marketing Division, with Account
Managers, manages the relationship with
the clients and draws on the skills of an
Operations Division to undertake work.
Within the Operations Division are
Solutions Managers who also have a
䉷 Henry Stewart Publications 1469-7071 (2000) Vol. 1, 2, 131–148 Journal of Change Management 143
The management of operations in the PBO
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approach, Sales and Operations. The
team structure adopted for projects is a
surgical team, with a team of specialists
led by an expert, delivering a component
of the overall product.
Small projects–many customers
The main observation in this scenario is
how firms reduce the interfaces between
project teams and customers. The teams
need to focus on completing the
projects, managing the process and
product delivery, not the relationship
with a large number of customers. As in
the two previous scenarios, it is necessary
to create an internal customer so that the
project teams can deal with that one
customer. The internal customer manages
the relationship with the external
customer on behalf of the project teams.
There are several ways of achieving this.
The Virtual Factory
The Virtual Factory, created by the
University of St Galen, involves a
consortium of manufacturing companies
around Lake Constance (Katzy and
Schuh, 1998). Bespoke products are
and ongoing support is also a
repetitive development task,
undertaken by the Solutions Managers
and the Account Managers.
Stable command and control structures
linked to the overall structure of the
business are adopted. This is possible
because there is a longer-term
relationship with the customer based on
the development programmes. Individual
projects, though unique, novel and
transient, deliver only a small component
of the product. Although project
managers may be empowered within
their project, their scope for flexibility is
limited by the size of their project, and
constraints imposed by the programme.
This led to the tensions described above,
when an organisation used to this way of
working tried to apply their standard
control techniques to the director on a
$0.5bn project.
The team structure changes between
the interface with the customer and the
project delivery, the emphasis shifting
from customer focus to product focus.
The team approach adopted at the
customer interface is a functional
144 Journal of Change Management Vol. 1, 2, 131–148 䉷 Henry Stewart Publications 1469-7071 (2000)
Figure 4
The relationship
between Sales
and Operations in
aPBO
undertaking many
projects for few
customers
Turner and Keegan
Sales &
Marketing
Operations
Account
Management
Solutions
Management
Customers
Customers
Competence Management
Projects
Projects
Programmes
Programmes
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to deal with changes in the Front
Office, it would become chaotic. It
solves this by creating an internal
market between itself and the Front
Office. The internal market changes its
structure to reflect the changing
operating divisions. This works by the
internal market maintaining Account
Managers, corresponding to operating
divisions in the Front Office, passing
requirements to Solutions Managers,
who place orders for systems solutions
on the Back Office. The arrangement
is very similar to that illustrated in
Figure 4. The individual projects so
generated are of such a size and nature
that the steps 2–5 in the Operational
Process tend to be undertaken by
specialist surgical teams.
Programmes of development
A variation of this approach, used by
many organisations for their internal
development work, is to recognise the
projects can be grouped into
development programmes. A programme
manager is assigned to coordinate the
projects, while a promoter takes the
responsibility of dealing with the many
internal customers who will use the
development product and feeds their
requirement into the project teams
through the programme manager. The
programme takes on the nature of a large
project.
delivered to clients which are beyond
the capabilities of any one of the
companies. They do this by forming a
network in which individual companies
fulfil different roles in the operational
process. Effectively, an isomorphic
network is created project by project to
meet the individual customer
requirements, the product and process
required to deliver it. This is most like
the large projects–few customers scenario,
with isomorphic project team structures
created with bespoke command and
control structures.
Katzy and Schuh (1998) identify that
companies in the consortium must
undertake specialist roles on the project
team, corresponding to managerial roles
associated with the operational process in
Figure 3. These are listed in Table 3.
Particularly, the broker acts as the
customer interface, shielding the rest of
the project team from the need to deal
with several customers.
BT’sBackOffice
BT’sBackOffice suffers because the
Front Office is constantly changing.
Since 1990, the operating divisions
have gone from three (domestic,
business and international) to 16 and
rising, recognising growing telephone
usage, market segmentation and
demographic changes. If the Back
Office were to adjust itself constantly
䉷 Henry Stewart Publications 1469-7071 (2000) Vol. 1, 2, 131–148 Journal of Change Management 145
Figure 5
The fish-bone
approach to
programme
delivery in a PBO
undertaking many
projects for few
customers
The management of operations in the PBO
Client
Programme
Project Project
Project Project
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with an American parent from the
Defence Electronics Industry,
undertaking many projects for one
client. The American parent tried to
manage the subsidiary in the close
way required by their industry, rather
than the empowering way required
by the ECI, creating serious tensions.
(The American parent, recognising
this tension, have just announced that
they are to sell the subsidiary to
another parent, but one from the
ECI.)
— This contrasts with ABB, a
European-based firm with high
project orientation. They recognise
that projects from the construction
industry require an isomorphic
structure to reflect the nature of the
task, and that the culture of the
different divisions needs to reflect the
culture of businesses they operate in,
and the customers they serve.
SUMMARY
PBOs undertaking unique, novel and
transient work to deliver bespoke
products to customers, require a different
approach to their management from the
functional, hierarchical, line-management
approach successfully adopted by
organisations with stable products and
technologies. The functional organisation
can adopt an internally focused, discrete
approach with:
— well-defined job roles, designed to
meet the internal needs of the
organisation
— stable command and control structures
— a focus on increasing efficiency.
The PBO needs to adopt versatile,
customer-focused processes to do the
work required to meet the customers’
bespoke requirements. We have observed
that, within these constraints, PBOs
Matrix approach
This approach is adopted by firms of
consultants working for external
customers. There are solutions managers
working with customers, and drawing on
central resource pools to create teams of
consultants to work for the clients. We
interviewed one consultancy in the
Netherlands, however, that had grown so
successfully that the application of this
approach was leading to a growing
feeling of isolation of the consultants
from their resource leaders and from
their clients. They solved this by
changing their organisation. They created
multidisciplinary teams doing work for
categories of clients. These strategic
business units may service:
— adominantclient
— a geographic region
— an industry
— a collection of similar clients.
Effectively, they have created several
subsidiaries, each a PBO. Some do large
projects for large clients, some small
projects for large clients, and some small
projects for small clients. An individual’s
career development and work assignment
is managed by a strategic business unit.
Their competence development is
managed by a functional group. The
functional groups also develop new
products for the strategic business units.
So they too are PBOs servicing internal
clients.
The need for different approaches
The need to have different approaches is
recognised by some organisations and not
by others:
— We interviewed one organisation in
the Netherlands from the Engineering
Construction Industry, undertaking
large projects for a few customers,
146 Journal of Change Management Vol. 1, 2, 131–148 䉷 Henry Stewart Publications 1469-7071 (2000)
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relationships to the internal market.
4. Organisations undertaking many
projects for many customers tend to
operate this internal market in many
ways, depending on whether the size
of project or number of customers
dominates:
— The Virtual Factory adopts the
isomorphic structures of the firms (in
a versatile network) undertaking a few
large projects for a few dominant
customers, but using the broker rather
than the project manager to manage
the interface with the client.
— Companies undertaking many related
internal development projects to be
used by many internal departments,
create large programmes working for
those many customers, with a
programme director managing the
programme and a promoter
(champion or sponsor) managing the
interface with the many users.
— One company undertaking many
less-related development projects,
created an internal market so that the
projects had just one customer to
work for. They deliver the product to
that customer, and the customer
passes it on to the Front Office.
— Matrix management tries to design a
solution specific to this scenario, but
when the operation becomes large,
the need to maintain customer focus
means that individual project teams
need to be limited to doing a few
projects for a few customers.
Finally, the one consistent message
coming from the firmswehavestudied
and the projects we have observed is that
organisations need to recognise the
differing approaches and when they are
appropriate. They should adopt different
approaches for different businesses within
a larger group, and not try to adopt a
one size fits all approach.
adopt different strategies for their
management approach, dependent upon
the size and number of projects
undertaken and the size and number of
clients they service. They also adopt
different tactical approaches, particularly
the type of team structures used, for
different stages in the project life-cycle:
1. Organisations undertaking a few large
projects tend to adopt traditional
project management approaches,
whereas organisations undertaking
many smaller projects tend to group
the projects into larger programmes of
work and adopt emergent programme
management techniques.
2. Because the large projects truly are
transient, bespoke command and
control structures are adopted project
by project. It is also appropriate to
adopt isomorphic team structures
appropriate to the stage of the project.
Organisations undertaking programmes
of small projects find the programmes
are more continuous in their
existence, and so they can adopt more
stable command and control
structures. They tend to use specialist,
surgical teams, to deliver the
individual projects.
3. Organisations with a few customers
tend to have a one-to-one
relationship between the projects or
programmes and their customers. This
becomes inappropriate where there
are many customers, because the
number of interfaces is the product of
the number of customers and number
of projects or programmes. To avoid
this, organisations create an ‘internal
market’, so the projects or
programmes supply the internal
market, and that supplies the
customers. We speculate that some
form of transactional analysis would
determine when it was appropriate to
make the switch from one-to-one
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