In many industries, project-based firms — companies organized around completing customized projects for clients — are common. New research offers insights into the leadership — and politics — that typify these organizations.
In industrial sectors such as consulting, advertising, filmmaking, software, architecture, engineering and construction – where activities tend to be organized through the delivery of projects aimed at meeting the highly differentiated and customized needs of clients – most individual businesses, by definition, are “project-based firms.” They depend on executing discrete task-oriented packages for clients, often through temporary coalitions with other project-based organizations, and on routinely combining knowledge and skills in new ways.
The authors propose the concept of “baronies” to describe the organizational units that direct the projects within project-based firms. This metaphor is appropriate because it describes entities that often are led by powerful individuals (“barons”) who exhibit competitive, protective and entrepreneurial behaviors. Drawing on over 200 interviews with project managers and company leaders conducted in 40 project-based firms in eight countries, this article highlights the roles that barons play in three basic types of project-based firms: dominions, tight federations and loose federations.
In dominions, all baronies must respond to strict procedures established by the center; while the management of projects is decentralized, the power of project managers is limited. In tight federations, by contrast, barons have considerable autonomy with respect to project creation and execution, even though well-developed central departments place some limits on barons’ decision-making power. Loose federations are characterized by strong barons, weak central control and low levels of central services; barons independently bid for and manage their own projects and resources.
The authors examine the management implications of baronies in these three basic types of governance, highlighting the trade-offs made by firms in three areas of management behavior: synthesizing (transferring knowledge and experience across projects); spawning (the creation of new entrepreneurial endeavors); and squirreling (a baron’s diversion of resources, frequently concealed, for discretionary use).