Question

The chemical division employed 3,000 people in 1998. By 2003, there were only 600 employees. In 2004, the materials division was formed and located on the chemical division site with a landlord–tenant relationship. The materials division has grown from $50 million in 2000 to $120 million in 2004. Today, the materials division employs 350 people.

All projects originate in construction or engineering but usually are designed to support production. The engineering and construction departments have ­projects that span the entire organization directed by a project coordinator. The project coordinator is a line employee who is temporarily assigned to coordinate a project in his line organization in addition to performing his line responsibilities. Assignments are made by the division managers (who report to the plant manager) and are based on technical expertise. The coordinators have monitoring authority only and are not noted for being good planners or negotiators. The coordinators report to their respective line managers.

Basically, a project can start in either division with the project coordinators. The coordinators draw up a large scope of work and submit it to the project engineering group, which arranges for design contractors, depending on the size of the project. Project engineering places it on their design schedule according to priority and produces prints and specifications, and receives quotes. A construction cost estimate is then produced following 60 to 75 percent design completion. The estimate and project papers are prepared, and the project is circulated through the plant and in Chicago for approval and authorization. Following authorization, the design is completed, and materials are ordered. Following design, the project is transferred to either of two plant construction groups for construction. The project coordinators than arrange for the work to be accomplished in their areas with minimum interference from manufacturing forces. In all cases, the coordinators act as project managers and must take the usual constraints of time, money, and performance into account.

Falls Engineering has 300 projects listed for completion between 2006 and 2008. In the last two years, fewer than 10 percent of the projects were completed within time, cost, and performance constraints. Line managers find it increasingly difficult to make resource commitments because crises always seem to develop, including a number of fires.

Profits are made in manufacturing, and everyone knows it. Whenever a manufacturing crisis occurs, line managers pull resources off the projects, and, of course, the projects suffer. Project coordinators are trying, but with very little success, to put some slack onto the schedules to allow for contingencies.

The breakdown of the 300 plant projects is shown next.

Corporate realized the necessity for changing the organizational structure. A meeting was set up among the plant manager, plant executives, and corporate executives to resolve these problems once and for all. The plant manager decided to survey his employees concerning their feelings about the present organizational structure. Their comments are listed next.

• “The projects we have the most trouble with are the small ones under $200,000. Can we use informal project management for the small ones and formal project management on the large ones?”
• “Why do we persist in using computer programming to control our resources? These sophisticated packages are useless because they do not account for firefighting.”
• “Project coordinators need access to various levels of management, in both divisions.”
• “Our line managers do not realize the necessity for effective planning of resources. Resources are assigned based on emotions and not need.”
• “Sometimes a line manager gives a commitment, but the project coordinator cannot force him to keep it.”
• “Line managers always find fault with project coordinators who try to develop detailed schedules themselves.”
• “If we continuously have to crash project time, doesn’t that indicate poor planning?”
• “We need a career path in project coordination so that we can develop a body of good planners, communicators, and integrators.”
• “I’ve seen project coordinators who have no interest in the job, cannot work with diverse functional disciplines, and cannot communicate. Yet someone assigned them as a project coordinator.”
• “Any organizational system we come up with has to be better than the one we have now.”
• “Somebody has to have total accountability. Our people are working on projects and, at the same time, do not know the project status, the current cost, the risks, and the end date.”
• “One of these days I’m going to kill an executive while he’s meddling in my project.”
• “Recently management made changes requiring more paperwork for the project coordinators. How many hours a week do they expect me to work?”
• “I’ve yet to see any documentation detailing the job description of the project coordinator.”
• “I have absolutely no knowledge about who is assigned as the project coordinator until work has to be coordinated in my group. Somehow, I’m not sure that this is the way the system should work.”
• “I know that we line managers are supposed to be flexible, but changing the priorities every week isn’t exactly my idea of fun.”
• “If the projects start out with poor planning, then management does not have the right to expect the line managers always to come to the rescue.”
• “Why is it that line managers always get blamed for schedule delays, even if it’s the result of poor planning up front?”
• “If management doesn’t want to hire additional resources, then why should the line managers be made to suffer? Perhaps we should cut out some of these useless projects. Sometimes I think management dreams up some of these projects simply to spend the allocated funds.”
• “I have yet to see a project I felt had a realistic deadline.”

After preparing alternatives and recommendations as plant manager, try to do some role-playing by putting yourself in the shoes of the corporate executives. Would you, as a corporate executive, approve the recommendation? Where does profitability, sales, return on investment, and so on enter into your decision?

Answer 1

As a corporate Executive I will analyse the situation and will try to approve the suitable recommendations;

• First of all, it is important to change the organisation structure. As suggested by the plan manager only for large projects formal structure can be followed.
• Moreover, project coordinators should have an access to all levels of management for effective completion of the project.
• Apart from that communication is the essence of coordination, it is essential to have both formal and informal communication.
• Accountability should be created among the staff to report their responsiblity in a timely manner.

For effective selection of project the company can adopt any discounted or non discounted method of project evaluation;

Project evaluation techniques like

1. Net Present Value

2. Pay back period method

3. Internal Rate of Return etc

After selection of feasible projects line managers can use effective methods of planning like,   

Critical Path Method , where they can identify critical and non critical paths and can allocate time and resources accordingly.

Moreover it is important to ensure profitability, sales and return on investment

For that they can source Break Even Analysis

Where they can decide the point at which total cost and sales are equal or the point of break even or bread earning point.

If they go beyond that point they will incure only variable cost and no fixed cost, hence they can maximise their profitability.