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, most individual businesses are “project-based firms”1 — in other words, their activities tend to be organized through the delivery of projects aimed at meeting the highly differentiated and customized needs of clients.2 These firms depend on executing discrete task-oriented packages for clients, often through temporary coalitions with other project-based organizations,3 and on routinely combining knowledge and skills in new ways.
Of course, as with any business, project-based firms need to maintain internal coherence. But they also require flexibility to respond to opportunities, manage workloads and allocate resources to different projects. As a result, this type of organization, which is becoming increasingly common in developed economies, presents special management and leadership challenges. Research on this subject has been dominated by singular projects as the units of analysis.4 By contrast, this article focuses on the leadership, structure and governance of the firms that deliver those projects.5
The Leading Question
How do project-based firms resolve the tensions between flexibility and control?
- The level of centralized control in project-based firms varies widely.
- Executives who lead the organizational units that deliver projects can be thought of as “barons” — powerful individuals who often exhibit competitive, protective and entrepreneurial behavior.
- In more decentralized firms, project barons often “squirrel” away resources — such as money or knowledge — to keep them for their unit’s use rather than share them.
This article draws on more than 200 interviews with project managers and company leaders conducted in 40 project-based firms in eight countries. (See “About the Research.”) We propose the concept of “baronies” to describe the organizational units that execute the projects within project-based firms. The term arose when an interviewee claimed that “we are the barons running the business,” and it emerged in a number of subsequent interviews and workshops as well. This metaphor is appropriate because it describes entities that often are led by powerful individuals who exhibit the baronial characteristics associated with competitive, protective and entrepreneurial behavior. It also suggests the political nature of resource allocation within project-based firms.