Project-Based vs Business Operations
Many organizations today are project-based or project-oriented, and these organizations are strongly connected to corporate strategy. Indeed, the role of project-based operations is 1) to implement corporate strategy 2) to translate this strategy into programmes and projects and 3) to create a competitive advantage for the organizations. In that context, we ask two questions: 1) Do the business operations design parameters apply to project-based operations design? and 2) What changes are required to make design parameters work effectively at project-based operations?
Let us begin by clarifying the terms “business operations” and “project-based operations”. Everything that keeps a company running and generates value is referred to collectively as business operations. Maylor, Turner and Murray-Webster (2014) define project-based operations (PBO) as “…operations having low-medium volume and medium-high variety”. In other words, project-based operations create temporary structures for fast innovation, reengineering and/or improvement. The Variety-Volume model (see Figure 1) visually represents the project-based vs business operations phenomenon.
Figure 1
Project-based vs business operations organizational design
For the purpose of this article, we will use the Star Model (Galbraith, 2002) as a framework to explore the organizational design of project-based operations. We will consider five key design parameters: 1) strategy 2) people 3) reward systems 4) structure and 5) processes.
Strategy - different strategies drive different organizational designs.
Business strategies and priorities are starting points for organizational design. Project-based operations need to review strategies more frequently than business operations organizations. In fact, experts recommend that PBO organizations work continually toward their next advantage, amending strategy rather than sustaining the current one. Regular reviews of business strategy are important if plans are made for a longer time. But project-based operations without such reviews should have extremely short time horizons, with no dependencies among projects.
People – organizations need to be designed by and around people.
Employees in project-based operations always form around the task. As Lechler (1998) observes, “when it comes to projects, it is the people that count”. Project-based assignments normally require that individuals have different roles before, during and after being involved in a PBO. In other words, teams depend on organized processes that have been around for a long time. An important part of a PBO is bridging, whereby experiences gained during the lifetime of a project are transferred to other projects or business settings. By contrast, business operations teams may be formed from any group of people. This is because business operations are more interested in people who fit their culture -- it is easier to fix a job-skills gap than a person-culture mismatch.
Reward systems – not only the essence of economics but an essential parameter of organizational design.
Business operations organizations use a mixture of reward practices: compensation, promotion, recognition and job challenge. All are intended to provide long-term motivations for employees. Project-based operations, on the other hand, focus more on short-term performance than long-term motivation. Unlike business operations, PBO organizations link recognition systems to a project’s performance, in terms of time, cost and quality. The more complex a project-based operations organization becomes, the more the reward system is based on the performance of the PBO organization.
Structure – an important element helping organizations to be successful.
People in different organizations perform much more effectively when the structure supports their work. Each project-based operations organization requires a unique structure combining resources and management style. Understanding a PBO structure helps leaders accurately predict the distribution of resources and allows for better planning. PBO structures often assume a causal connection between the project task and the organizational outcomes.
Processes - in all organizations, the way that work gets done matters.
Business operations organizational designs focus on production rather than transition. But when transition or transformation becomes necessary, project-based organizations are often created. If a PBO organization is created for a specific situation that will not recur, organizational design should focus on operational processes. If and only if innovation or improvement is scalable --that is, devoted to a task that will be repeated – the design should be organized around business and management processes. Thus, the design of the processes should be similar to organizations typically associated with business operations (see Figure 1).
It is thus fair to conclude that the organizational design of project-based operations is linked to time-bound efforts and the uniqueness of the task. However, the finite life cycle of projects in a PBO does not distinguish project-based operations from business operations organization. When the task of project-based operations organization stretches over many years, the PBO and business operations organizations resemble each other in many ways. In other words, the organizational design of project-based operations and business operations should be conducted similarly: leaders should use identical design parameters.
References
Galbraith J.R. Designing Organizations: Strategy, Structure, and the Process at the Business Unit and Enterprise Levels (San Francisco, CA: Jossey Bass, 2002).
Lechler T. When it comes to project management, it’s the people that matter: an empirical analysis of project management in Germany (Calgary: University of Calgary Press, 1998).
Maylor, H., Turner, N. & Murray-Webster, R. (2015) ‘It worked for manufacturing… Operations strategy in project-based operations’, International Journal of Project Management, 33(1): pp.103-115.
