What is the importance of project organizational chart

An organizational chart, often called as organization chart or Org chart, is a diagram which shows the structure of an organization and the relationships and relative ranks of its parts and positions or jobs. It is a pictorial representation of a company’s structure which indicates clearly the relations between people within the organization. The order in which the authority and power in an organization is exercised and delegated is important for executing the related activities and achieving the goals and objectives successfully. So, the organizational chart graphically illustrates the concept known as chain of commands and shows the flow of authority, responsibility and communication.

While an organizational structure defines how the activities, such as, delegating tasks, coordination and supervision are directed towards the achievement of organizational goals and objectives, the organizational chart is a visual representation of that organizational structure. Being a graphic representation of an organization’s structure and hierarchy, the organizational chart depicts vividly the superior and subordinate relationship while it shows the lines of authority and lines of communication as well.

The importance of using organizational chart is felt due to the fact that a business organization needs to provide guidance and clarity on various organizational and human resource issues. It is through the organizational chart it is ensured that the responsibilities are being allocated, activities are being performed and management authority has been established in a way as needed. An organizational chart is of great support to create and define the organizational structure, so that the business objectives may be accomplished accordingly and yet successfully. It not only helps in dividing the functions of an organization in an appropriate manner, but it also aids greatly in developing the structure of reporting while guiding the employees properly, as the connecting lines on the chart show who is accountable to whom and who is in charge of what department.

Not just this, it also guides the employees as to whom they should report and contact in case of the issues that need to be resolved in a timely manner while making the employees aware of their rights and responsibilities. On the one hand it’s a great way of improving the performance of the employees; on the other hand, it enables to see whether or not the promotion channels open for the employees who deserve. Thus, it may be said that it’s not just a snapshot of an organization at a particular point of time or a blueprint of its functions, but it is cited as a valuable means of a detailed representation through which the complete organization may be visualized enabling management to understand how the work fits in all the related departments or units of an organization.

Though there are different types of organizational charts, such as, hierarchical, matrix or flat etc, which can be created by using MS Word, Excel or PowerPoint, but the objective behind creating the organizational chart is to illustrate the reporting relationship in an organization. Organization charts are the tools that enable us to understand how an organization works while it explains the structure of an organization as a whole. Thus, a good organizational chart or organogram is important to make planning easier and defining the organizational structure, culture and style while showing clearly the line of authority and of responsibility of each individual in the organization.

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Projects span a huge spectrum from big to small, innovative to routine, and technical to repetitive.

But there is, in fact, a standard project organization chart within which all projects fall. The project management model within the PMBOK, as well as other project management methodologies, define this standard structure.

The project management organization chart looks like this:

From the chart, this organization chart utilizes the following four major roles:

1. Project Sponsor
2. Project Manager
3. Project Team
4. Stakeholders

Project Sponsor

This is the person to whom the project’s deliverables are delivered.  They are one level above the project manager.  They are not directly involved with the project’s day to day execution, but they usually have some form of responsibility for the success and/or failure of the project.  They often have a say in major project decisions and have an ongoing awareness of the project’s status.

For example, a project to build a bridge is likely to have a project manager within the construction company, and a project sponsor within the owner organization (eg. government).  The project sponsor is not responsible for the day to day operations of the project, but is the funding liaison and central organizational contact for the project.

Often the project sponsor was in a “project champion” role before the project was initiated, making presentations and drumming up support for the project.

They can be internal or external to the organization carrying out the project.  A common organizational structure is to have the project sponsor as part of an “owner” organization, such as an oil company, and the project manager and project team within a “consultant” organization, like an engineering firm.

Project Manager

The project manager is the person that handles the day to day administration of the project and project team and is ultimately accountable for the project’s success.  Their job is to ensure the project deliverables are produced on time, on budget, on quality, and with all stakeholders satisfied.

They can be from the same organization or a different one, as is often the case with a vendor organization that was contracted to produce a set of deliverables.

The project manager produces the project plan and then ensures the project stays within the plan. This plan takes the form of a document called a Project Management Plan. The project sponsor approves the project management plan during the planning phase and it then becomes the official reference for the project. If changes need to be made, the project manager generally requests changes from the project sponsor, especially if there are changes to schedules or budgets involved.

Sometimes the project is managed by a team, particularly on large industrial or oilfield projects.  In this case there must a lead project manager, and the other project managers produce the project management documents such as schedules, estimates, quality criteria, risk analyses, and so forth.

Project Team

This group carries out the project work.  They produce the project’s deliverables and perform the tasks necessary to finish the project.  Although they are normally in a position to take responsibility for their work, it is project manager who ultimately must take responsibility for the success or failure of the project.

Project team members can come from other departments or they can be hired externally. If any members of the project team have ongoing commitments to their departments, it is even more imperative to manage their work to ensure the project does not suffer. This is done via a resource calendar.

Stakeholders

Every project, by definition, has someone who has an interest in its outcome.  As a minimum the project sponsor could be considered a stakeholder because they are expecting the deliverables at a certain time, budget, and quality level.  Only very small projects have no other stakeholders, for example, if you are pouring concrete on your private sidewalk you might not have anyone else to please but yourself. But much bigger than that and there will undoubtedly be other stakeholders who need to be kept informed and actively managed.

It is the project manager’s job to know all the stakeholders, no matter how insignificant they are, and ensure their approval is earned.  Some stakeholders are supporters, such as local business groups for a new stadium.  Some are opposed, like environmental groups (usually), and some simply wish to keep informed of the status, like city building permit officials.  Their position can, of course, change if their needs are not met by the project manager.

Stakeholders come in many forms:

1. Clients, customers, and end users.  These are the ultimate purchasers of the products or services which the project produces.  Often these don’t formally exist because the project sponsor can serve exclusively in this role.  If they do, however, they will indirectly dictate project criteria like quality standards, budgets, and grade (or specs and feature lists).  Often the project needs to incorporate market testing or other customer response surveys which make them a core part of the project.
2. Investors.  Often the project contains investors who have a financial stake in the success of the project, and the project manager must keep them informed of the status of the project.
3. Vendors.  Many projects outsource project work to other firms.  These firms require active management by the procuring organization to ensure the quality level, timeliness, and budgets are kept within expectations.
4. Organizational Groups.  Many projects affect other areas of the organization.  Functional managers lend project staff, safety coordinators have their hand in the day to day work, financial people want interim updates, and the list goes on.
5. Regulatory Agencies.  Most projects have government regulations that affect their work, and this can have a substantial impact to the project, either cost, time, or both.
6. Major Stakeholders.  Sometimes there is one stakeholder who has an enormous stake in the project outcome, and requires a tremendous amount of time and effort to keep satisfied. For example in a school building project, the plumbing contractor has the general contractor as a major stakeholder.

Project Organization Chart within the Project Management Plan

The Project Management Body of Knowledge (PMBOK) requires that the project sponsor, project manager, and stakeholders be identified within the project management plan.

This should take place near the beginning of the document and its format is very simple.  It should be a bulleted or tabled list of all the project members, including full contact information so that the project management plan can serve as the central project reference.  A graphical organization chart looks great but is not necessary.

Depending on the size and complexity of the project, stakeholders are then analyzed to determine their interest in, and power over, the project.  Lastly, a communication plan for the stakeholders is a part of the project management plan and ensures that the stakeholders are actively managed for project success.