Management Studies: August 2011

Social Environment of Project

Social Environment is refers to all the social surroundings that influence project. It consists of factors related to human relationships.

Projects operate within the society. They satisfy societal needs. Social factors influence the practices and activities of projects.

Important factors in the social environment consist of demographics, social institutions, pressure groups and social change.

Factors in Social Environment of Project

Factors in Social Environment of Project
i) Demographics: Demography is concerned with human population and its distribution. Demographic forces that affect labor availability in projects are:

Size, distribution and growth of population in project area.
Age mix of population
Migration of population
Foreign employment policies.

ii) Social Institutions: They consist of reference groups and social class:

Reference Groups: They consist of groups that have a direct or indirect influence on the attitudes and behavior of ties or professionally successful people.
Social Class: It is the rank within a society determined by its members. It can be classified into upper, middle and lower. Members of a class share similar values, interests and behavior. Project activities are influenced by classes in the society. Projects need to tailor their activities to meet the needs of specific social classes.

iii) Pressure Groups: They are special interest groups. They use the political process to advance their position on an issues of social concern. They pressurize and lobby government and projects to protect their interests through change in laws, policies and practices.

Pressure groups can be related to consumerism, environment protection, human rights, women rights, good governance etc.

iv) Social Change: Change is making things different. Social change implies modification in relationships and behavior patterns in a society. Life style and social values promote social change.

Life style is a person's pattern of living reflected in his activities, interests and opinions. It affects product choice.

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Economic Environment (Economic Conditions)

Economic conditions indicate the health of the economy in which the projects operate. The factors of economic conditions are:

Income: The level and distribution of income affect expenditure, saving and investment. They together influence the economic conditions of projects. Nepal has a per capita income of US $ 280. The GDP growth rate is very low.
Business Cycles: The stages of business cycle can be prosperity, recession and recovery. They affect the health of projects.
Inflation: It is rise in price level. It influences costs, price and profits of projects.
Regional Economic Groups: They promote cooperation among member countries for projects. They provide opportunities to member countries and threats to non-member countries.

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Economic Environment (Economic Policies)

Policies are guidelines for action. Economic policies of the government significantly influence and guide projects.

Key economic policies influencing projects are:

Monetary Policy: It is concerned with money supply, price stability, interest rates and credit availability. Cheap money reduces project cost costs, dear money increases project costs.
Fiscal Policy: It is concerned with the use of taxation and government expenditure to regulate economic activity. Taxation on income, expenditure and capital exerts an important influence on project decisions. Government purchases, subsidies and other transfers also influence the activities of projects.
Industrial Policy: It is concerned with industrial licensing, location, incentives, facilities, foreign investment, technology transfer and nationalization. It greatly influences the investment climate for projects.

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Economic Environment (Economic System)

Economic environment refers to all the economic surroundings that influence project activities. It consists of economic parameters.

Important components of economic environment are :

Economic System

Economic system determines the scope of private sector participation and market forces. The models of economic system are:

Free Market Economy: This system is based on private sector ownership of the factors of production. Profit serves as the driver of economic engine. The comparative market mechanism guides project decisions. There is freedom of choice. Individual initiative is encouraged.
Centrally Planned Economy: This system is based on public ownership of the factors of production. The economy is centrally planned, controlled and regulated by the government. There is no consumer sovereignty. Public enterprises play a dominant role in projects.
Mixed Economy: This system is a mix of free market and centrally planned economies. Both public and private sectors coexist. The public sector has ownership and control of basic industries including utilities. The private sector owns agriculture and other industries but is regulated by the state.

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Legal Environment

Legal environment refers to all the legal surroundings that affect project activities. It consists of an array of acts, rules, regulations. It defines what projects can and cannot do.

Legal environment is concerned with

Protecting the rights and interests of clients, contractors, employees and the society.
Providing grounds on which project activities can be carried out. It encourages or restrains activities by providing facilities to law abiders and giving punishment to law breakers.
Regulating activities through legal provisions relating to wages, labor relations, foreign investment, foreign exchange, environment protection, habitat protection, project location, imports, exports and taxation etc.

Projects must ensure that their activities conform to the laws of the land. They must comply with legal provisions in force.

The important legal factors that influence projects are given:

Factors in Legal Environment of Project

Law: It consists of an array of laws enacted by the Parliament. It also protects the rights and interest of project participants.
Courts of Law: Courts are institutions established by law to solve disputes. Nepal has a three-tier court system. The Supreme Court is at the national level and is the highest level of judiciary. The courts of Appeal are at the middle level. The 75 district courts are at district level.
Law Administrators: Various law enforcement agencies ensure implementation of laws and the judgements of the courts of law. Government agencies, lawyers, police and jails play an important role in law administration.

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Political Environment of Project

Political environment of project is related to the management of public affairs. The important factors that influence projects are:

Factors in Political Environment of Project

i) Political System

It consists of ideological forces, political parties, election procedures and power centers. A stable, efficient and honest political system is essential for projects. Political instability resulting from civil war, emergencies and terrorist activities adversely effect the projects.

ii) Political Institutions

They consists of legislature, executive and judiciary.

The legislature (parliament) enacts laws that guide project activities.
The executive (Government) implements the decisions of the legislature and lays down policies, regulations and procedures that influence the activities of projects.
The judiciary (Courts of Law) servers as watchdog and their rulings influence project practices. It settles disputes.

iii) Political Philosophy

It can be democratic, totalitarian or a mix of both. Democracy vests power in the hands of people. Totalitarian vests power in the hands of the state. A mix of both is based on power sharing.

Political philosophies influence project activities. Democracy provides greater role to the private sector. Totalitarianism provides greater role to the state. Mixed philosophies provide roles to both private sector and state.

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Matrix Responsibility Chart/Linear Responsibility Chart

Linear Responsibility Chart is also known as linear chart (LC), Matrix Responsibility Chart (MRC), Responsibility Interface Matrix (RIM), Responsibility and Accountability Matrix (RAM). It is the chart of responsibility which identifies the project participants and shows authority and responsibility relationship among the project participants due to their overlapping involvements in project management. The participants may be general manager, manager of projects, project manager and functional managers. It clearly specify the authority and responsibility relationships of project participants to avoid confusion and conflicts. Specially, it is used in matrix organization structure in order to minimize the confusion and conflicts between project manager and functional managers. It explains what and who of project work. It links the project activities or task to the responsible person which ensures effective implementation of project to achieve defined objectives within constraints.

A project achieves specific objective within constraints of time, cost and quality. In project, there are several participants which are as follows:

General Manager: Executive chief of the organization
Manager of Projects: Chief of project department
Functional Managers: Chiefs of functional departments
Project Manager: Chief of a specific project

The authority and responsibility of the various project participants in the activities and decisions of the project can be:

a) Actual responsibility for getting the job done.
b) General supervision responsibility.
c) Must be consulted.
d) May be consulted.
e) Must be notified.
f) Must approve.

There should the clear authority-responsibility relationships among the project participants so as to remove confusion and conflicts in project. The main mechanism for such purpose is Matrix Responsibility Chart (MRC).

LRC is prepared to find out responsibility center of all key activities in the project and for those purpose, LRC is divided into rows and columns and numbers. The rows of LRC indicate activities, responsibility and authorities. The columns identify the position of the project participants and numbers indicate the degree of authority and responsibility existed between rows and columns of LRC, the numbers can be symbol.

The Matrix Responsibility chart is divided into:
a) Rows: They indicate activities, responsibilities, authority.
b) Columns: They identify position of project participants.
c) Numbers: They indicate the degree of authority-responsibility existing between the rows and columns. They can be symbols.

Linear Responsibility Chart

Symbols/ Codes:
1 = Actual responsibility
2 = General responsibility/ General Supervision
3 = Most be consulted
4 = May be consulted
5 = Must be notifies
6 = Must approve

The advantages of Matrix Responsibility Chart or Linear Responsibility Chart are as follows:

It describes the role of project participants in project matters. Authority, responsibility and accountability for project activities are delineated among various project participants. Problem-solving becomes easier.
Communication is facilitated. It cuts red tape.
It is a useful tool for supervising of authority and responsibilities.
There is delegation of authority.
It postures coordination because it clarifies rules and responsibility, authority and responsibility relationships for project activities among the participates. It reduces confusion and conflict between project manager and functional managers. It helps to monitor responsibility of project participants. It combines organizational structure with work breakdown structure which makes easy to fix responsibility to project participants.

The disadvantages of Matrix Responsibility Chart or Linear Responsibility Chart are as follows:

It does not describe about people interactions in the project. It is a mechanical aid.
All relationships may be difficult to delineate.
Customer-imposed requirements may limit its usefulness.
It acts as mechanical tools for fixing responsibility only but not defines the relationship between project participants. It tries to express authority-responsibility relationship in specific terms. But situation and degree of all relationship may be difficult to express. Project is customer oriented and always impose requirement. The requirement may limit the usefulness of LRC.

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Pages

Social Environment of Project

Economic Environment (Economic Conditions)

Economic Environment (Economic Policies)

Economic Environment (Economic System)

Legal Environment

Political Environment of Project

Matrix Responsibility Chart/Linear Responsibility Chart