Human Resource Management in Project-Based Organisations: Challenges and Changes

Diploma

ABSTRACT

This thesis is about human resource management (HRM) in project-based organisations. Firms have over the last decades tended to rely increasingly on project-based structures. This process of projectification implies a changed work situation for individuals in modern organisations. Researchers from the project field of research as well as from the HRM field of research have pointed to possible implications that projectification might have for HRM. This thesis explores this area through a combination of multiple, comparative, and single case studies of project-based organisations. The studies aim at identifying and analysing the changes and challenges for HRM in this particular context. 

 

The studies are presented in four separate papers. The findings suggest a number of important and empirically nested challenges related to Competence, Trust, Change, and Individuals. Moreover, the changing roles of HR departments and line managers in the overall HR organisation are discussed and analysed. The thesis proposes alternative roles for line managers, depending on the organisational context, and it also proposes two ’ideal types’ of HR-departmental structures.


INTRODUCTION

One of the most important trends in modern organisations is that of temporary, project-based structures becoming the every-day work environment for an increasing amount of individuals. For example, Manuel Castells states that  “…the actual operating unit becomes the /…/ project, enacted by a network, rather than individual companies or

formal groupings of companies…” (Castells, 1996:165)

In other words, many firms are going through something that could be referred to as ‘projectification’; a  general development process in which firms to a greater extent focus their operations on projects, project management and various types of project-like structures (see Engwall, Steinthórsson, & Söderholm, 2003; Midler, 1995). This trend has several implications for traditional ways of thinking when it comes to for example management, organisation, employee relations and contracts. James March expresses some of his concerns in the following way:

“In such a throw-away world, organizations lose important elements of permanence /…/ Throw-away personnel policies, where emphasis is placed on selection and turnover rather than on training and learning, have become common in modern business, politics and marriage.” (March, 1995:434)

According to James March, the new organisational ideal causes organisations to lose “important elements of permanence”, which should imply significant challenges for project-based organisations compared to more traditional functional structures (Galbraith, 1973). In this thesis I will argue that one such important challenge has to do with the management of human resources (HRM), since projectification considerably changes the relation between the organisation and the people working in it.

Despite March’s concern over throw-away personnel policies, modern firms seem to rely more than ever on the competence and knowledge of their employees. A common motto among today’s companies is “Our employees are our most valuable asset!” Hence, studies which focus on the management of the relation between the organisation and these “valuable assets” in project-based organisations appear as highly relevant, both theoretically in order to contribute to the knowledge of management of project-based organisations, and practically for projectified companies that strive to manage their individualorganisation relationships efficiently. I will let the quotation from Engwall, et al. (2003:130) guide you into the core of my research:

“As organizations move into project-based structures, human resource management, hiring of staff, and competence development all seem to be affected. This is, however, a virtually unexplored area of empirical research. Furthermore, issues concerning working life must be readdressed in this new corporate context design. From the perspective of the individual employee, factors like motivation, commitment, empowerment, job satisfaction, time pressure, and medical stress seem to be reconceptualized in the projectified context. Working life issues also include accounts of project work as a new career path and as ways of linking project organizations to individual goals.”

In the following sections, I will further introduce the projectification trend and develop the argument for the need to focus on HRM in order to increase the understanding of project-based organisations. 


PROJECTIFICATION AND PROJECT-BASED ORGANISATIONS

The interest for the growing importance of flexible organisational structures is not new. Researchers paid attention to this development already in the 1970s and 1980s. This research did not study the nature of project-based structures per se, but rather identified the emergence of more flexible organisational forms in terms of, for instance, matrix structures (Galbraith & Nathanson, 1978) and ad hoc structures (Mintzberg, 1983). 

Many of the researchers who analyse the general organisational development in modern industry refer to a need to face the challenges of a higher degree of globalisation, uncertainty and complexity, and a fast technological advancement. The historical overview by Mary Jo Hatch (1997) of organisational change and of the literature that deals with this field of research points to these changes. It also indicates the organisational responses; increased organisational flexibility and increased employee commitment and responsibility. According to Hatch, this development leads to the creation of ‘postindustrial organisations’ where the organisational borders are indistinct, or have disappeared, and where employees to an increasing degree work in temporary teams where they represent a certain area of expertise.   

The development described by Hatch has also been documented by the sociologist and organisational theorist Wolf Heydebrand (1989). Heydebrand puts projects at the centre for the analysis of modern firms and societal structures and argues that project-based structures are a prominent feature of many modern organisational forms. He states that modern organisations “are staffed by specialists, professionals, and experts who work in an organic, decentralised structure of project teams, task forces, and relatively autonomous groups” (p. 337). 

Apparently, highly educated and competent employees are an important feature of the emerging project-based structures (see also Fombrun, 1984). The employees and their competencies become the main competitive advantage, which implies that also the work situation of single employees becomes a critical strategic competitive factor. Early studies also point to important challenges brought about by the development towards flexible, project-based structures. For example, Galbraith & Nathanson (1978) highlight the changes in performance measurement and career structures, and the need for a strong HR department to aid in such development processes.  

More recently, a number of broader empirical studies have illustrated the projectification trend. The survey by Whittington, et al. (1999) shows that a wider use of project-based structures was one of the most evident changes in large European firms during the 1990s. It is therefore not surprising that a significant number of researchers have focused on studies of projectification (although not always using this terminology to describe it), in order to expand the knowledge within the field.

This field of research can be divided in two streams; one analysing the projectification process on a macro-level and the other one on a microlevel (see Figure 1).  The stream that analyses projectification on a macrolevel deals with the general trend in modern industry to increasingly use various forms of project-based structures (e.g. Ekstedt, et al., 1999; Söderlund, 2005; Whittington, et al., 1999). This trend holds various dimensions, but focusing on the organisational structure of modern firms, the increased occurrence of project-based organisations should logically consist of two change patterns; (1) that new firms increasingly start off as project-based organisations and (2) that traditional, functional organisations change into relying more on project-based structures.

The stream of research that analyses projectification on a micro-level focuses on this second change pattern and deals with the projectification process in focal firms that are moving, or have moved, from functional to project-based structures (e.g. Lindkvist, 2004; Midler, 1995). The studies of the micro level of projectification provide valuable examples of specific projectification processes and they contribute to the general knowledge of the management of project-based organisations.  However, they typically do not pay particular attention to the dimension of management that focuses the relation between the employees and the organisation; HRM.

Midler’s (1995) study of the French car manufacturer Renault – one of the most famous examples of studies that focus on the micro-level of projectification – stresses the need for studies on “the relation between the development of temporary organizations (as project teams) and the permanent structures and processes within the firms” (p.373). HRM can be considered as part of the permanent structures and processes of the firm, maintaining some “elements of permanence” as earlier advertised for by March (1995). The problem with Midler’s study is that he includes the transformation of the permanent processes of the firm as a step in the very projectification process, which makes it impossible study the relation between the two processes. This relation is central for my research and I have therefore chosen to separate analytically the transformation of the permanent processes, such as HRM, from the projectification process. In order to fully understand the meaning of this separation, I need to clarify my view of what characterises project-based organisations.