Center for Management of Emerging Companies

Project Management in Small High Technology Firms

Project management is important for companies and this certainly applies to small- and mid-sized firms challenging larger enterprises in a dynamic environment characterized by intense competition, globalization and customer demands for quality and timeliness.  A good deal of research has been done on project management in larger organizations; however, relatively little has been written about project management techniques in smaller companies with much more limited resources.  One exception is a paper written by Murphy and Ledwith that reported the results of a survey of more than 100 owner/managers of small high technology businesses in Ireland regarding various issues and techniques associated with their attempts to implement project management systems and techniques.

Key findings of the survey, as well as a review of related empirical studies by the authors of the paper, included the following: the critical criteria for assessing whether a project was “successful” included time, cost, quality and client satisfaction; the critical factors that contributed to the “success” of a project included top management support, clear goals and objectives, planning and control, resource allocation, risk management and client consultation; respondents strongly agreed that a well defined project management process was necessary for projects to be successfully implemented and that previous experience was a key factor in implementing an effective project management system; and respondents acknowledged that large organizations approach projects in a different manner than smaller firms and that organizational structure affects project management.

Owner/managers of small firms realize that larger organizations arguably have certain advantages over smaller firms with respect to project management—greater capital and resources and greater specialization; however, they did not accept the notion that project management was too complex and costly to be used by smaller firms.  When asked for specific ideas about how project performance could be improved they suggested making sure that project tasks took priority over other work, more control of project teams, clearer goals and communications channels and more emphasis on fact finding and client input at the conception stage.  The most popular project management tools and techniques among the respondents included formal project planning software, Gantt charts, project teams and change control processes.

Tips for Maximizing Team Performance

Teams are crucial elements for success and organizations that grow and prosper generally have learned how to manage their teams effectively.  In this report I lay out a few ideas for maximizing team performance including ways to create the necessary foundations for collaboration and trust among team members. Also important are the technical and management skills of the team leader.

Guidelines for Successfully Managing and Completing Projects

Project management is both an art and a science and successful project managers understand the technical tools that are available to assist them in planning and implementing projects as well as the needed to be flexible and innovative in order to deal with the unforeseen events that will inevitably occur regardless of how well a project has been charted and planned in advance.  This week's report  includes some general guidelines for increasing the chances of success for projects.

Guidelines for Effective Lateral Processes

Lateral processes are an important element of organizational design and the impact of lateral relations strategies increases significantly as the business activities of the organization growth and additional business units are created.  As such, senior managers and other involved in the organizational design process need to be mindful of the conditions that must be satisfied in order for formal organizational groups to openly share information, debate alternatives and arrive at decisions that are appropriate for the organization and perceived as fair and legitimate by members of each of the groups that are relevant to the particular activity, issue or problem.  In this post I provide a summary of some basic rules to follow in order to establish effective lateral processes in your organization. 

Challenges of Project Management for Small Companies

Smaller organizations, such as emerging companies in their early stages of development, typically lack the resources to fund a full-time project manager position for the entire length of a particular project.  In most cases, the project manager has multiple responsibilities and also must discharge line management responsibilities at the same time he or she is coordinating a project.  Obviously this creates a substantial risk of conflicts with respect to the time that the manager devotes to the project and how resources under the manager’s control are allocated between a project and the day-to-day activities that the manager normally oversees.  If possible, the responsibilities of the project manager should be limited to horizontal coordination of the activities necessary for completion of the project and  line managers would remain focused on their vertical (i.e., functional) duties and lending the requisite support necessary for completion of the project.

Due to the lack of resources, project managers in small companies are forced to juggle several projects at once and may encounter difficulties in planning and scheduling when there are significant differences in priorities among the projects.  Resource limitations are also an issue with respect to what the project manager can expect to obtain from the functional managers in a smaller organization.  Unlike a larger company where the project manager can negotiate with functional managers during the course of a project to obtain more resources, smaller companies generally do not have any resources in reserve that can be redeployed to a project once it has been launched.  Another resource-related issue is the lack of administrative support for project managers in smaller companies.  Smaller companies generally do not have a separate project office while larger companies, particularly in industries where projects are commonplace (e.g., aerospace or construction), may have a separate project support office or department with several full-time project managers and full-time administrative personnel to collect and organize information about the activities and procedures of the company that can be used in the project management process.  Without this type of support the project manager in a small company must invest additional personal time in collecting information on top of the activities necessary to simply manage the project.

For smaller companies projects are generally much more mission critical for the success and growth of the business simply because smaller companies typically have fewer projects and each of them represents a significant percentage of the company’s business.  Therefore, the consequences of failure on a project are much greater for smaller companies than for larger organizations that are able to spread their risk over a larger number of projects and customers.  While success with a large project can vault the business of a smaller company forward much more rapidly, senior management must be rightly concerned about whether it will need to invest in additional resources or jettison smaller customers in order to take a chance on the large project.  For these reasons, plus the fact that smaller companies are often slow to engage in wholesale delegation of authority, project managers in smaller companies can expect a higher degree of interference in the management of the project from senior management than is normally the case in larger companies.

How Project Management Works

The requirements for any project should be developed by the project manager with consultation from senior executives, user groups and, if applicable, customers.  In general, the requirements can be broken out into three basic categories – a statement of the scope of work and specifications for the end result of the project, milestone schedule, and a schematic that shows the logical structuring of the tasks and activities necessary to complete the project. 

The statement of the scope of work should identify the goals and objectives of the project, briefly describe in narrative form the work required to complete the project and identify the material funding limits and other constraints.  The length of the statement of work will vary depending on the size and importance of the project and for small projects may be no longer than a couple of sentences.  It is important, however, for the project manager to prepare a statement for all projects regardless of size. 

As the name implies, a “milestone schedule” is timeline, with target dates, of the major milestones that need to be achieved in order for the project to be completed.  The actual milestones will depend on the particular project and, for example, a project focusing on new product development might include the following milestones: design review meetings, completion of initial product testing, availability of prototype, completion of procurement and receipt of required licenses for sale of the product.  Delivery and presentation of major written and oral reports to senior executives may also be included on the milestone schedule.

The description of the work structure necessary for completion of the project will depend on the specific project; however, the goal of the project manager in developing the description is to break the project down into manageable sub-projects stages that can be priced, monitored and controlled.  For example, if the project is the introduction of a new product the project manager might segregate tasks and activities the sub-projects might be identified as sales promotion/advertising, pricing, market test, manufacturing and training.  In addition, the project manager should list the important tasks or activities for each sub-project.  With respect to training for new product introduction the list of tasks or activities might include selection of salespersons, selection of distributors, training of salespersons, training of distributors, printing of literature, dissemination of literature to salespersons, and dissemination of literature to distributors.  Note, of course, that activities such as dissemination of literature to salespersons and distributors cannot be done until the sales promotion/advertising sub-project is completed since that is the time when the relevant team members develop and finalize the literature.

Project Managers

The success or failure of a particular project often hinges on selecting the project manager.  There is always a temptation to recruit the project manager from outside the company in order to avoid actual or perceived problems of conflict of interest or loyalties to a particular function or department within the company.  However, bringing in someone new may not be the best idea since the person would not be familiar with the way that the company operates and others within the company may resent the newcomer and make it more difficult to complete the project successfully. 

Line managers normally do not make good project managers given that they have built-in conflicts of interest and will also be distracted by their normal duties and responsibilities.  In particular, if a line manager controls resources necessary for a project and also serves as the project manager she must often make difficult decisions regarding allocation of those resources between the project and the day-to-day functional activities that she is responsible for as the line manager. 

If at all possible, senior management should identify one or two persons from within the company who have the requisite skills and independence and assign them to full-time, dedicated positions as project managers.  Assuming that these persons do not have conflicts of interest, this is the best method for ensuring that projects can be executed effectively and efficiently since the project managers can focus all of their attention on the projects and build and nurture the skills necessary for effective project management.  This method works best when there is a steady steam of projects sufficient to justify allocation of resources to full-time project managers and it should be expected that project managers will handle several projects simultaneously. 

While there is a long list of desirable personal characteristics for a project manager, the two most important are communicative and interpersonal skills.  Assuming that the project manager will be required to interact with managers and employees from all parts of the company, many of which have high levels of technical expertise, it is essential for the project manager to be a good communicator, poised and an effective integrator of divergent opinions and personal styles.  In addition, the best project managers are able to balance technical solutions with the applicable constraints – time, cost and performance – and devote sufficient time and attention to planning and controlling the project.  Finally, the project manager must be able to identify and resolve problems and make decisions and explain them clearly and thoughtfully to all parties involved and impacted by the decision.

In order to be effective a project manager must understand quantitative tools and methods, organizational structures and organizational behavior.  Companies generally have a variety of quantitative tools and resources for planning, scheduling, controlling and monitoring work processes.  Knowledge of organizational structure of the company includes an understanding of how each line function or department operates so that potential conflicts between the responsibilities and goals of the project manager and each of the line managers can be identified and reconciled as soon as possible in order to allow the project to proceed smoothly and effectively.  Finally, organizational behavioral issues focus on the conflicts that will typically arise for functional employees when they are required to simultaneously report to their line manager and to the project manager of any project to which they are assigned.  In order to address problems from this dual-reporting structure senior management must ensure that managers and employees receive adequate training and guidance before imposing a project management overlay on to the day-to-day organizational structure.

Forms of Project Management

Several different forms of project management have been identified and each of them raises their own unique issues with respect project management techniques and cooperation and coordination between different departments and business units within the company.

The first form is referred to as “fragmented,” or “partial project,” management and will be used in cases where project management is required only for a small portion of the activities of the company.  A good example would be the use of project management techniques within a single department, such as new product development, which the remainder of the company continues to rely solely on traditional management tools.  This type of project is relatively simple to execute given that there is little need to reconcile actual or potential conflicts with other departments; however, it is still necessary to understand some of the tools that are available to improve how the project proceeds.  Moreover, the manager or employee within the department who is responsible for the project should be trained in basic communication, organization and project management techniques to be sure that the project is completed on a timely basis and that the end result conforms to the expectations of all interested parties within the department.

The second form is called “departmental project management” and requires that each department have its own project managers to oversee the department’s contribution to a larger project that must pass continuously through several departments.  New product development provides a good example of how this might work.  The process might begin with a project manager and project management structure in the research and development department.  Once the project team in that department has completed its work the torch is passed to another project manager and team in the engineering department.  This process continues through the manufacturing and marketing departments.  While the advantage is that each department uses a formal process to manage and complete its main responsibilities with respect to launching the new product, the obvious disadvantage is that there is no single project manager with a stake in making sure that the entire project successfully moves through all the stages from beginning to end.  The obvious response to the limitations of departmental project management is “task force project management” that includes designation of a task force leader who is to be “responsible” for making sure that the entire project is completed.

Finally, companies engaged in project-driven industries such as aerospace, construction and defense tend to gravitate toward “matrix” structures.  A matrix management structure for a project requires coordination between the project manager who is primarily responsible for the work flow and completion of the project and the managers of the various functional departments that have control over the resources that the project manager needs in order to complete the project.  Advantages of this type of structure include access to the specialized resources developed and enhanced by the functional departments; however, the main disadvantage is the possibility that the managers of the functional departments will withhold resources from the project and channel them toward other projects that have a more direct bearing on the performance and operations of the department.  Companies using a matrix management structure for projects may adopt different variations that are based, in large part, on how power is balanced between the project and departmental managers and senior management generally needs to be prepared to actively intervene to ensure that the project is completed on a timely basis without undue disruption to departmental activities.

Introduction to Project Management

Project management is a tool for conducting and completing unique, one-of-a-kind projects or functions necessary for execution of the strategy of a company without disrupting what would otherwise be the normal workflow of the company.  In general, project management creates and imposes a temporary management system over the normal organizational design of the company in order to accomplish a specific task or activity.  Harold Kerzner, one of the leaders in research relating to project management, offers the following useful formal definition of project management that identifies key elements of the process: “Project management is the planning, organizing, directing, and controlling of company resources for a relatively short-term project that has been established to completed specific goals and objectives.  Furthermore, project management utilizes the systems approach to management by having functional personnel (the vertical hierarchy) assigned to a specific project (the horizontal hierarchy).”

Planning, organizing, directing and controlling are four of the five functions or activities that are normally associated with traditional management and each of these are reflected in the definition of project management set out above.  Missing from the array of activities delegated to a project manager is the responsibility for “staffing,” which is the fifth activity that is normally associated with traditional management.  The reason is that staffing remains a line responsibility and the project manager can only request resources while the final decision as to what, and how many, resources will be diverted to the project will normally be left to the line managers for each of the functions involved in the project.  There are exceptions to this rule, of course, for situations when senior management intercedes and overrides the discretion of line managers to ensure that sufficient resources are diverted to certain mission-critical projects that must take priority over day-to-day tasks and activities.

While project management pertains to “relatively short-term projects,” there is no hard and fast rule with respect to scope and duration.  For example, engineering or construction projects may be as short as six months and as long as five years.  Large projects, such as the designing, building and launching a nuclear power facility or a state-of-the-art manufacturing plan, may take as long as ten years.  For most small organizations, however, short-term projects generally must be completed within three to twelve months.

For internal projects, the relevant constraints include time, cost and performance.  When the project is done for a customer, an additional constraint – customer satisfaction – must be added.  Another thing to consider for customer-focused projects is that the customer is concerned only with results and has no real interest in how the company organizes the way in which the project is approached and completed.

Customers Don't Care How You Organize Your Business

When discussing pending negotiations with the Chinese government regarding a number of potential projects in Fast Company, Dan Henson, VP and Chief Marketing Officer at GE, noted: “Our number-one revelation is that customers don’t necessarily organize their buying behavior the way we structure our business.  They want to know everything you can do to deliver on a . . . contract.  That is a lesson we will use beyond China.”

Henson’s comments are a reminder that business organizations, including emerging companies, need to be mindful of the drawbacks associated with the traditional practice of using function-based alignments of people and other resources (e.g., sales and marketing, procurement, or manufacturing departments).  While using functions as the primary dimension when organizing a company’s business activities can be useful in achieving the benefits of task-based specialization and can result in substantial savings through economies of scale, it also can quickly become a hindrance in developing new products and services if a functional department continues to focus on its own goals and ignores the need to cooperate with other departments in order to deliver the new product or service to customers at the lowest price and highest level of quality. For example, the procurement department may decide to purchase the raw materials for a new product from a particular vendor because the vendor provided the lowest price and this fits the specific goals and budget of that department.  However, if the materials turn out to be defective that means that other departments, such as manufacturing and technical service, will be forced to “overspend” in relation to their budgets to make up for the decision made by the procurement department.  At the end of the day the entire project may be delayed and over budget even though the procurement department achieved its budget goals.

Remember, customers don’t care whether the procurement department meets it budget objectives nor do they care whether other departments had to work overtime in order to overcome problems created by bad decisions elsewhere in the organization.  Moreoever, they are not interested in paying for extra costs that arise because companies don't push their departments to cooperate with one another.  Companies need to bring all departments on to the “same page” in the development process.  One way to do this is to carefully evaluate and define the “flow” for the development and commercialization of a new product or service as it moves throughout the company.  The goal is to determine which departments will need to be involved and when decisions that will impact more than one department will need to be made.  Then, make sure that a cross-functional team is put in place to manage the process and make sure that decisions are made with an eye toward the greater good of the company rather than specific departments.  As part of this process, incentives should be created for each department to cooperate and collaborate with other departments as part of the entire process. 

And, by the way, don’t forget to bring customers into the process early in order to get their views on what the ultimate goal needs to be!