The “Silo” Effect in Large Project-Based Organizations

Delivering large and complex projects in accordance with contract requirements while meeting client expectations is difficult enough.  There is an added burden within large organizations that have not fully integrated project management into their fabric.  These organizations, particularly government agencies, are prone to the “Silo” Effect.  By this I mean that the core of the organization’s business (the delivery of large, complex and mission-critical projects) is either understood by too few people or there is an organization-wide disconnect between the project management and the finance & administration groups.  I have found this to also be common in large organizations in large private sector firms, but to a lesser extent than in the government sector.    Although these organizations focus on project delivery, they may not have managed to spread project management understanding throughout their functional groups.  This results in several significant and potentially costly problems:

  1.  Lack of alignment between administration and project management whereby financial staffers do not understand the drivers of successful projects.  They see project management as a mysterious “black-box” that they feed money into, but that they do not understand.  They lack the awareness needed to effectively question, challenge, monitor and comprehend the reports generated by the PM group.  They understand the business case and the financial expectations for the project, but do not know how to measure project status and cannot relate to the performance metrics (such as earned value and critical path scheduling) reported by the project managers.
  2. To make matters worse, their lack of understanding puts them at a disadvantage when interacting with the company PMO (project management office) and project teams.
  3. Failure to see the early warning signs of project problems and inability to react to these signs.
  4. Lack of context in reading project reports.   They lack the know-how and experience to question project leaders and adjust forecasts.  This can lead to indecision and poor decision-making related to the funding of scope changes, claims and subsequent phases.
  5. Risk assessments that do not properly account for the total extent of project risks.
  6. Inability to implement company-wide project portfolio management reporting, strategy and decision-making.

The resolution to the “Silo” Effect involves a commitment by senior management to aligning the culture of the organization.  This entails the prioritization of project management training across functional groups.  Within construction companies, employees with insufficient experience in project management should be exposed to the core business of construction management and contracts management.  They can then become more conversant with the concepts of project management.  In larger organizations, training can be supplemented by rotational training and cross-pollination so that financial and administrative professionals get acquainted with project management and with the levers that drive successful projects.

 

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