Organizing Beyond the Line-
Managing modern organizations are to a great extent a matter of managing projects – that is time-limited and goal-oriented micro-organizations. Projects are used purposefully to drive innovation, create more dynamic organizations, shake up traditional rigid structures, create improved preconditions for learning and knowledge integration, and better govern complex transactions across firms, to name a few of the diverse and many underlying reasons. As a result an increasing number of companies are adopting properties resembling the project-based organization. However, traditional management thinking has tended to treat the project-based organization simplistically – primarily as a way to improve coordination and communication across functional units. This has also led managers to not fully understand the potential of project-based organizing. This article shows how thinking about project-based organizing could be re-addressed and improved – to use projects as a way to drive strategy and innovation in the firm, and ensure that the managing and organizing of projects becomes a source for competitive advantage.
The classic pendulum
Prior research has primarily emphasized two variables in explaining the needs and variations of project-based organizations: sub-system interdependencies and rate of knowledge change. The first dimension – sub-system interdependencies – speaks in favor of an organization that privileges the project dimension, since there is a need to coordinate across functional or disciplinary boundaries. The greater the sub-system interdependencies, the greater the need for communication, and thus the greater the need for a project-based organizational structure.
The second dimension – the rate of knowledge change and specifically the rate of disciplinary knowledge change – is negatively associated with the need for a project-based organizational structure. The higher the rate of knowledge change, the more the need for disciplinary communication and dialogue, and thus the privileges functional departments with moderate emphasis on the project dimension. In between these two dimensions we find various sorts of ‘weak’ project-based organizations (or matrix organizations). Figure 1 summarizes the arguments.
This distinction has been, and still very much is, the story of project-based organizations, and it is even today the dominant line of reasoning when practitioners consider the underlying motives for adopting a project-based organization. This distinction – forming a particular kind of pendulum – also very much typifies how managers have thought about organizational structures as either focusing on the project dimension or focusing on the functional dimension. Indeed, it is an important challenge for managers to sort out and a delicate balance that over the years have attracted much management attention. However, it is only half the story and its prevalence does not accurately reflect recent findings and research about the project-based organization. It is time to look beyond this simplistic pendulum to see how these dimensions can be transcended – to create an organization in which projects drive strategy and innovation.
Organizing for success
Today’s competitive landscape requires organizations to both handle rapid integration, integration of disciplinary knowledge into a continuous process of complex problem solving. In that respect, organizations need to excel in the management of sub-system interdependencies. We know this has been a key feature for Scandinavian business success when looking at companies such as Scania, Ericsson, ABB, Wärtsilä, and Aker Solutions. Basically, these companies have all been extremely good historically at integrating diverse knowledge. They all have had ‘project competence’ as a core competence of the firm – applying their knowledge of project-based organizing in a wide range of markets and technology domains.
However, they also need to swiftly build specialized knowledge, of developing specialized expertise, for instance within certain technological domains, programming languages, engineering domains, and so on, to maintain long-term competitive advantage. In that respect, they would also need to be able to organize rapid knowledge change. As a consequence, they would simultaneously need to organize for knowledge integration and a high degree of knowledge specialization. This is definitely not an easy task and in the past it has been solved by placing emphasis on each of these dimensions at different times in the firm’s development. However, this logic has a number of short-comings. The question is therefore- how would they manage to transcend the classic pendulum?
Patterns of success I: beyond the line
In our research, we have observed that the firms that are at the edge of creating competitive advantage through their organizational structure are trying to escape the classic distinction earlier mentioned– of getting both sub-system interdependence and rapid knowledge development in place – of avoiding being caught in the conventional pendulum of either a line-focused organization or a project-focused organization. How are they able to escape this classic divide? How do these firms simultaneously handle tough requirements on knowledge integration and knowledge specialization without ending up with giving attention to only one of these dimensions? In our research we have seen a number of organizational innovations that together bring us closer to the answer of transcending the pendulum. There are a few important patterns that we have found in our research:
• First, successful organizations typically innovative with regards to their line organization. They have embarked on new definitions of what constitutes a line organization. They have generally focused more on networks and communities to assume important knowledge management roles in the organization. They have dared to challenge the classic functional organization.
• They have also put a greater responsibility among employees to build their own networks. To stay current is an individual responsibility. This has implied individuals taking more responsibilities for knowledge development that was previously taken care of by managers and line departments. They have dared to delegate responsibility to the individual employees in ensuring that they remain competent and qualified.
• They have created new and different area of responsibility for the line managers. Line managers are often replaced by competence coaches. As an effect, line managers responsibility is to a greater extent a matter of driving competence strategies and HR issues. Successful organizations have dared to challenge the conventional role of the line manager – focusing more on competence and knowledge issues.
Patterns of success II: beyond the firm
Interestingly, we have discerned another pattern. This relates to the view of where the resources and competence are located. We have noted that several organizations have a much broader view and understanding of where their knowledge is located – beyond the boundaries of the focal firm. This has led several organizations to include various types of partners and consultancies as resources that are just as important as the resources that are organized internally. The following patterns were identified:
• Successful companies have developed a broader view on the boundaries of the firm. Traditional line units are not within but outside the boundaries of the firm. An increasing use of external communities, and external partners, including technical consultancies. This is a major change in mindset for many of these companies.
• A stronger network of technical consultancies. Line units are not always found within the boundaries of the firm. This requires organizations to become open organizations to allow external partners to tap into their knowledge base and innovation process.
• Partnerships with technical consultancies to broaden the technology strategy seems important. These partnerships are shaped through a complementarity with the internal resources. We observe that leading Scandinavian technical consultancies have played a critical role for their clients over the last decade assuming greater responsibilities for sourcing knowledge to the traditional Scandinavian technology giants.
The organization of the future
This points out that the organization of the future needs to be developed along two critical dimensions. We return to our initial model pointing out a need of a strong focus on sub-system interdependence and a strong organization to cope with challenges of rapid knowledge development. We delineate two key managerial implications. One that centers on ‘moving beyond the line’ and one that centers on ‘moving beyond firm boundaries’:
Managerial implication I: To handle the strong sub-system interdependencies a focus on project management, project-based organization, systems engineering, technology and knowledge integration is definitely needed. This calls for various kinds of systems integration capabilities and project capabilities – this calls for competent project managers, agile organizational approaches, and teamwork capabilities. This also calls for a line organization that is focused on the organization of projects – of supplying resources and new ways of looking at the responsibilities of the conventional line organization. Our message is thus: Dare to challenge the line.
Managerial implication II: To handle the strong requirements on rapid knowledge development more responsibilities need to be transferred to the individual worker supported by a knowledge-focused line manager. At the same time, the organization needs to maintain a strong partnership with external skill containers to ensure that they both have the speed to respond to changing technology requirements, yet at the same time, ensure knowledge depth. Our message is thus: Dare to challenge the boundary. Look at technical consultancies as key partners in the development of knowledge specialization.
Summing up these two dimensions and where the organization of the future is locating along them gives us an organization that transcends the pendulum – of excelling both in terms of handling sub-systems interdependencies – and at the same time – knowledge specialization and the handling of rapid knowledge development.
PhD, Professor at BI Norwegian Business School and part-time professor at Linköping University.
Söderlund is one of the pioneers in research on project-based organization. His current research centers on the management and organization of megaprojects and the nature and dynamics of project-based work. The article presented here draws on work he is currently doing on technical consultancies and new line organizations.