This paper aims to explore the ways to solve the dilemma of balancing between efficiency and flexibility in project-oriented organizations (POOs). It investigates the characteristic of the relationship between efficiency and flexibility in the context of POOs. Based on the framework of organizational design, this study tries to open the “black box” of how POOs make a balance between efficiency and flexibility, and examines the influence of organizational design in this process.
This study is a comparative multiple case study based on four project-oriented enterprises, whose relationships between efficiency and flexibility are diverse from one another. It follows the process of building theory from case study, applying within-case and cross-case analysis and replication logic in shaping hypotheses.
The results show that the relationship between efficiency and flexibility in POOs can be divided into four different situations. The contradictory factors are identified as functional structure and project structure, standardized process and temporary plan, as well as strategic-level centralization and project-level decentralization. It is found that the key to achieve a balance between efficiency and flexibility is to coordinate the relationship of contradictory factors through the effective integration of organizational level and project level.
This study introduces the framework of organizational design in solving the dilemma of balancing between efficiency and flexibility, responding to the call for developing the project management theory from a strategic perspective. It provides theoretical support for POOs to achieve balancing between efficiency and flexibility, and suggests an effective synergy of organizational design in both organizational and project level.
Sun, X., Zhu, F. and Sun, M. (2018), "How to solve the dilemma of balancing between efficiency and flexibility in project-oriented organizations", Nankai Business Review International, Vol. 9 No. 1, pp. 33-58. https://doi.org/10.1108/NBRI-04-2017-0016Download as .RIS
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Nowadays, buyer’s market has become the basic marketing environment whereby customers are putting forward higher demands for personalized and differentiated business solutions. According to the latest statistics published by Project Management Institute, more than 55 per cent of global business is delivered in the form of project. Project-oriented organization (POO), as a new organization form has been globally accepted.
Existing literature shows that POOs are formed to solve complex tasks in dynamic and complex market environment (Modig, 2007). To cope with the uncertainty hidden in the market and the technology, POOs mainly depend on temporary and flexible project teams to achieve organizational flexibility (Cattani et al., 2011). Researchers in favor of organization flexibility believe that POO is a form of flexible organization that is able to achieve organization’s flexibility goals (Leybourne and Sainter, 2012). The key features of such organizations are “improvisation” and “ad-hoc response.” The organization is not limited by existing structures or practices; instead it is continuously in the process of re-design and creation (Klein et al., 2015). Based on the results from these literatures, the success of POOs no longer derives from efficiency advantages created by work breakdown, standardized procedures and consistency, but from flexibility advantages created by flexibility, autonomy and “improvisation.” To adapt to an increasingly complex and dynamic environment, some researchers even suggest that standardized operation and process will no longer exist, and the internal and external boundary of organizations will gradually dissipate (Devanna and Tichy, 2006). Similar views such as super flexibility are growing in the field of modern organization study.
However, scholars who advocate the organization system theory and the institutional theory question about the “flexibility comes first” opinion. They believe that the organization system is established on institutions and routines whereby internal complexity is reduced, and the idea of flexibility that advocates constant changes and “improvisation” ignores the nature of organizations (van Rekom, 2010). Turner and Lee-Kelley (2013) stated that excessive enthusiasm for organization flexibility and ignorance of organization efficiency are not acceptable. Even in a complex and dynamic environment, organization efficiency is equally important to the organization. Organization has to respond quickly to cope with unstable environment and dynamic changing customer demands while still maintaining enough efficiency to avoid mistakes and to stay on the right strategic direction (Eisenhardt et al., 2010). Schreyögg and Sydow (2010) studied the harm created by super flexibility from the perspective of the nature and function of organizations, and state that ideal flexibility will result in radical development in the wrong direction while pursuing organizational flexibility.
Based on above viewpoints, it is challenging for POOs to maintain balancing between efficiency and flexibility. POOs’ business has clear demand preferences and requests for timely response. However, most of these organizations involved from traditional operation-oriented organizations established on functions, rules and regulations. To adjust fluidly to the demands of the environment meanwhile maintaining stable and sustainable development, POOs have to carefully balance between efficiency and flexibility. Else, the organization will either fall into chaos while pursuing flexibility excessively or compromise coordination and timely responding while being bound by standards and functions (O’Reilly and Tushman, 2011).
In fact, the paradox of efficiency and flexibility arouse interests from scholars. Thompson (2003) described it as the core paradox of organization management. Scholars generally believe that realization of efficiency depends on high-level standardization, formalization and specialization, while such bureaucratic behaviors restrain the mutual adjustment of the dynamic process and further affect organizational flexibility (Adler et al., 1999). In the research of how to overcome the paradox, scholars generally take the ambidexterity point of view, and one of the most influential perspectives is the organizational ambidexterity including structural ambidexterity and contextual ambidexterity (Farjoun, 2010). Although both views are considered potential solutions to solve the paradox of efficiency and flexibility, these mainly transfer the contradictions from organization level down to the subunits or organization member level while the paradox is yet resolved (Gibson and Birkinshaw, 2004). Latest research works improve both viewpoints: Eisenhardt et al. (2010) suggested it necessitates starting from the micro-foundation and exploring the use of ambidexterity in organizational design. Schreyögg and Sydow (2010) stated that the managers should neither separate efficiency and flexibility nor depend too much on the individual, but to develop an organizational framework incorporates the tensions between efficiency and flexibility from the very beginning. From these research works, it is not hard to find that to solve the dilemma of balancing between efficiency and flexibility, the organization needs to design and develop an organizational framework incorporating countervailing forces and further systematically design the organizational structures and behaviors.
However, these studies are limited to traditional organization under general context without taking into consideration the special conflicting demands faced by POOs. Regarding the balance of efficiency and flexibility in POO, not much research results were found in the literatures. In this paper, in accordance of Eisenhardt, Schreyögg and Sydow’s studies, we explore the ways to solve the dilemma of balancing between efficiency and flexibility from the organizational design point of view. Considering the existing researches yet provide clear definitions of efficiency and flexibility in POO context, this study first clarifies the relationship between efficiency and flexibility, and then further explores how efficiency and flexibility reach balancing. Following the advice of Yin, this study applies a case study that has an advantage on offering insights into complex social processes and relationships in unexplored research area (Yin, 2013). Therefore, this paper carries out a case study to compare four different POOs in different efficiency and flexibility relationships, tries to open the “black box” of how POOs solve the dilemma of balancing between efficiency and flexibility and reveals what role and function organizational design plays in this process.
2. Literature review and theoretical framework
The exploratory case study also needs theoretical framework to provide guidance for data collection and analysis (Eisenhardt and Graebner, 2007). Therefore, we first review exiting literature to focus on the specific topic, develop and propose the research framework, which provides the theoretical foundations for the case study.
2.1 The paradox of efficiency and flexibility
For a long time, the paradox of efficiency and flexibility has been an important topic in the field of organization study. In the era of industry, represented by Taylor’s scientific management school, scholars seek for the opportunities to improve the efficiency through research on the replication of action and operation. Strategic management school strengthens the organization efficiency from centralized decision-making and internal consistency perspectives. Scholars from organization research field study the efficiency through organization structure design (Scott, 2004). Scholars agree that organization efficiency means standardization of work procedures, specialization through work division and establishment of centralization and hierarchy, to ensure the accuracy and reliability of the organization operations (Cohen, 2007).
Along with the acceleration of technological changes and globalization, the organizational competitive advantages are becoming more and more difficult to be maintained. Organizations need to adjust accordingly on the basis of the change of environment (Li et al., 2009). Some scholars begin to question the effort to pursue efficiency, and they argue that:
First, the standardization of procedures limits the solutions to solve problems. In fast-changing environment, the rigid framework has changed from strategic assets to strategic burdens, which becomes an obstacle to the organization to adapt environmental changes.
Second, because of the boundary created by specialization, it impairs the system thinking of divisions within the organization and hinders the flexible configuration of organization resources.
Third, as decision-making information could diminish through multilevel transfer, centralized decision-making system is not able to cope with the challenges created by uncertainty and information explosion in complex environment (Turner and Lee-Kelley, 2013).
Targeting at the dysfunction exiting in the functional organization, scholars propose the flexible perspective, which emphasizes on the dynamic ability (Teece, 2007). These viewpoints advocate that organization structures shall develop from functional structure to network structure and organization coordination mechanism shall develop from formal procedures to spontaneous interaction mode. They also recommend removing the specialized departments or units, which is to be replaced by temporary procedures and project teams. Vertical command system is to be replaced by free communication across the entire organization (Helfat and Peteraf, 2009). While organization efficiency emphasizes on replicability and stability, organization flexibility emphasizes on diversification and improvisation.
However, many scholars challenge this viewpoint, as it abandons the formal standards and procedures to achieve flexibility. How to correctly handle this paradox has become one of the hotspots in organization research field (Volberda et al., 2012). Obviously, pursuing efficiency from mechanical viewpoint and constantly changing and adjusting the organization from flexibility viewpoint, both are simple and straightforward solutions, which could drive the organization to the extreme (Jansen et al., 2012, Mattes, 2014). March (1991) stated that it is advisable to avoid completely shifting toward the ideal flexibility but to make full use of the efficiency advantages of replication. Ambidextrous thinking provides the foundation to solve the paradox (Raisch et al., 2009). From an ambidexterity perspective, one of the solutions is to design different conventional and innovative subunits to differentiate ability and specialization in structure, subsequently to realize both efficiency and flexibility simultaneously (Duncan, 1976). This kind of ambidextrous structure achieves organization function separation, meanwhile causing issues associated with system integration and increase of coordination cost (Jansen et al., 2009). Another approach is situational ambidexterity, which transfers the solution to the paradox of efficiency and flexibility to a more specific individual behavior level. Members are requested to switch their behaviors according to the different situations faced by the organization, to cope with the countervailing demands (Davis et al., 2009). However, many scholars question about the controllability of the employees’ organizational behavior, as well as the possibility of establishing such organizational situation. They believe that situational ambidexterity is an overly optimistic idea (Raisch et al., 2009). In addition, there are scholars who put forward the combination of structural and situational ambidexterity, to synchronize and complement each other in the organization level, and thus solve the paradox of efficiency and flexibility (Durisin and Todorova, 2012).
In general, the focus of the existing research is mainly on the causes of the paradox, and how to balance efficiency and flexibility. However, most of the conclusions are mainly derived from the theoretical deduction in general organization management, and also how to embed the research results into more specific organization situations (for instance POOs) to dig for the root causes, which remains to be further studied and discussed.
2.2 The characteristics of efficiency and flexibility in POOs
Project-oriented organizations are also named as project-based organizations (PBOs). Hobday (2000) discussed the differences between POOs and PBOs, and stated that in POOs, though the enterprise decision-making and strategic management highly depend on projects, functional coordination still exists in the process of implementation. On the other hand, in PBOs, project is the main mechanism for coordination and integration of all the important business functions. Formal functional coordination is not included in the process of implementation. Thiry and Deguire (2007) defined POOs as “organizations that manage production functions within a temporary project organization setting, but some coordination across project lines occurs.” They pointed out that the POO is within the scope of PBO concept because the pure PBO is a relatively specialized form of organization, not necessarily all organizations operated by projects have to transform into PBOs. This paper considers the practices that most of the Chinese enterprises tend to keep the functional coordination and most of the time, projects are the driving force and development direction. In this case, the research object is defined as “project-oriented organization” in this study.
Flexibility is the inherent characteristic of POOs, which is to adapt to the dynamic and complex external environment, by emphasizing on the customization and differentiation of the business (Lindkvist, 2008). On the contrary, efficiency targets have been challenged in POOs. Temporality and uniqueness could easily make the company ignore the long-term development targets. Too much attention paid on a special demand could be hard for the organization to promote coordination and scale merits. As a result, from a long-term perspective, system efficiency in POOs could be inhibited (Engwall, 2003).
To be specific, the special relationship between efficiency and flexibility in POOs is closely related to its nature. First, the project team is an important unit of POOs and is the basic carrier for unique and innovative tasks. On the other hand, permanent departments act as supporting units in POOs (Turner and Müller, 2003; Gareis, 2010). This temporary organization structure overcomes the rigidity in the traditional organization structure and improves the organizational flexibility to cope with challenges of different demands. With reference to this, another key feature of POOs is the horizontal and longitudinal mixture of two-dimensional coordinating channel (Mueller, 2015). One of the dimensions is the unique horizontal coordination channel, which aims at goal sharing and resource allocation around clients’ special demands. The other dimension is the functional management level, to allocate tasks and communicate vertically through hierarchy in the functional field (Klimkeit, 2013). Finally, the dual goals of POOs also affect the relationship between efficiency and flexibility. Because most of the project tasks are temporary and short-term, organizations are directly facing short-term goals. Meanwhile, the organization still needs to consider the long-term strategic targets, to ensure the realization of the sustainable development (Turner, 2009).
In summary, organization flexibility has become a leading development strategy for POOs. The conditions of pursuing ideal flexibility but ignoring efficiency are emerging in POOs. If this relationship is not effectively balanced, it will become hinders for the sustainable development of the organization (Pellegrinelli et al., 2015). However, the relationship between efficiency and flexibility has not attained enough attentions from scholars. How to recognize and cope with this paradox in POOs requires further research.
2.3 Research framework
Although POOs are different from general organizations, many researchers believe that it is necessary to introduce the traditional organization theory to the project organization research to further expand the theoretical depth of the research (Leybourne and Sainter, 2012). In the latest study of efficiency and flexibility paradox, Eisenhardt, Schreyögg and Sydow stated that contradictory analysis between efficiency and flexibility should not be separated from the theoretical framework of organizational design, and they began to focus on the micro level. This approach provides constructive direction for the balancing of efficiency and flexibility.
It is well known that organization is a system consisting of interacting elements, and effective element design and the matching of relationship among elements are supporting the operation of the organization. Currently, one of the widely used organizational design analysis framework is developed by Robbins and Coulter (2014), who integrated the research results of Hall and Daft, and suggested three basic elements of organizational design: complexity, formalization and centralization. Complexity describes the complexity of specialization and hierarchy. Formalization measures how the work is being delivered in a standard form in the organization. Centralization describes the power allocation status in the organization and is normally measured by the degree of centralization.
Based on this analysis framework, it is found in the existing research works that the scholars already shift the focus of paradox of efficiency and flexibility toward the three organization factors: complexity, formalization and centralization. First, some researchers argue about the success of high-efficiency functional organization. Nickerson and Zenger (2002) proposed that the strict specialization and hierarchy are very rigid in uncertain environment, which affects the adaptability and realization of high performance. Second, Gilbert (2006) found that organizational efficiency is more likely to be achieved in an organization with clear process and system, which impede organizational flexibility on the contrary. Third, Shih and Yong (2001) pointed out that the organization centralization guarantees the unity and high efficiency, meanwhile destroying the creativity of the organization. Decentralization is advantageous to realize organizational flexibility and adapt to innovation and revolution.
Thus, complexity, formalization and centralization are the key to understand the paradox of efficiency and flexibility. The analysis framework of organizational design could be used for the realization of balancing between efficiency and flexibility. Therefore, we adopt this framework (Figure 1), and analyze below questions from three dimensions: complexity, formalization and centralization:
How is the dilemma of efficiency and flexibility created?
How does organizational design affect efficiency and flexibility?
How to solve the dilemma of efficiency and flexibility through organizational design based on the logic of cause and effect?
3.1 Research design
The case study method adopted in this research is based on the type of research topic and existing research foundation. On one hand, the key to balance efficiency and flexibility in POOs is to find the root of the dilemma, which leads to the tension between efficiency and flexibility. This requires analysis of connections between and functions of relevant events under specific circumstances, which is more suitable for the use of case study (Siggelkow, 2007). On the other hand, there is no mature theory to answer this research question, thus the internal mechanisms could be induced from the data of case studies.
The research design consists of four sections:
First, through a pilot study, we induce and refine efficiency and flexible behaviors of POOs. Specific characteristics of the relationship of efficiency and flexibility in POOs are depicted to form the conceptual foundations of case analysis and phenomenon interpretation.
Second, through within-case analysis on the relationship between efficiency and flexibility in case firms, differences of the relationship between the two factors are summarized, to demonstrate the nature of the problem focused in this research.
Third, following the logic of cause and effect, through cross-case comparison and analysis, we trace the cause leading to the unbalance of efficiency and flexibility, and analyze the effect of organization element design.
Finally, based on the summarized difficulties of balancing and organization causes, we discuss how to solve the paradox between efficiency and flexibility through organization element design, to provide guidelines for the balance between efficiency and flexibility.
The research design is shown in Figure 2.
3.2 Pilot study
Respondents of pilot study are from two groups: researchers in the field of project organization and staff in POOs. The former group is familiar with knowledge of project management, POO-related books, literatures and cases, which helps provide effective information to determine POOs’ status of efficiency and flexibility. The latter group can specifically describe their understanding of efficiency and flexibility in POOs based on work experience, where common languages are established for the following interviews in case firms:
First, according to the research purpose and existing research results, we choose five research teams with total 20 researchers to gather information through group discussion. The group discussion is combined with brainstorming and mind map, which requires the participants to describe their understanding about efficiency and flexibility. Figure 3 shows the mind map developed by a participant during the discussion.
Second, we interview 15 middle, senior executives and project managers, and the average interview period is not less than 30 min.
Finally, 35 descriptive data are received. With the use of NVivo, descriptive data whose content are similar are merged, and text sources (number of respondents) and node reference (number of mentions) are calculated; text sources more than three are filtered, retained and induced. The induction process follows the analysis framework of complexity, formalization and centralization. After rounds of inductive refining, finally the 11 dimensions to describe the efficiency and flexibility behaviors of POOs are obtained, as shown in Table I.
3.3 Case selection
Case selection follows the principle of theoretical sampling:
First, POOs are filtered based on whether business is delivered through project and if project teams and functional departments coexist in the organization. Case firms are from various industries including IT, automobile, manufacturing, construction and consultancy and from different forms of ownership including state-owned enterprise, private enterprise and foreign-funded enterprise.
Second, it is found that in various industries and ownership forms, the case firms’ performance of efficiency is different, based on the study of cases’ status in efficiency and flexibility. Therefore, this paper mainly focuses on the organizational design and management’s effect on efficiency and flexibility, instead of the impact of industry and ownership form.
Third, on the basis of firms’ sensitivity to the paradox of efficiency and flexibility, we choose firms which are deeply perplexed by the problem or have practical experience of solving such problems.
Finally, on the basis of the preliminary assessment of “project management status” and “conditions of efficiency and flexibility” in the case firm completed by contact persons, four firms with different characteristics in management practices are chosen.
The basic information of the four cases is listed in Table II.
3.4 Data collection
From early 2014, we started the survey and conducted 34 interviews with the four case firms. Each interview is held 50-90 min with notes taken and radio recorded. Table III describes the data source of interviews in detail. Four groups of interviewees are chosen: project manager, project team members, functional managers and functional department members.
To avoid expected common variance because of single data source, this research adopts various data collection methods, which are as follows:
3.4.1 Archival data.
Before the survey, the research team gathers case firms’ relevant information from various sources including official website, news, literature and case database to obtain preliminary understanding about firms’ operational status and project management development history.
3.4.2 Semi-structured interview.
With the results obtained from the pilot analysis, targeting at four different categories of interviewees, interview outlines are developed separately. The interview outline mainly consists of three components: first, participants’ roles and responsibilities in the organization, work experience and his/her understanding of efficiency and flexibility in the context of POOs; second, organization’s behaviors of efficiency and flexibility and characteristics or events reflecting these behaviors; and third, give comments for the status of efficiency and flexibility in the organization, and analyze the existing problem, its impact and antecedents.
The respondents are free to express their views, and authors guide the interview with some leading questions relating to the dimensions of complexity, formalization and centralization.
To avoid potential subjective errors, we design a questionnaire for the interviewees before the interview closes out to further guarantee the validity of data collection. The questionnaire is consistent with the interview outline, and items are listed in Table IV. Thus for any data description, we have the respondents’ statement, questionnaires, and third-party judgment from the researchers, which together form a triangulation.
3.5 Data analysis
Data analysis follows typical multiple case study paradigm; a within-case analysis is established followed by a cross-case analysis, before the theoretical framework is established. The data analysis process is listed below:
All interview and observation records are classified according to case firms, interview number and question number, data showing the same problems are gathered together to establish the case study database.
With the aid of NVivo, we code, merge, summarize and eventually filter data source more than three as the basis for qualitative analysis. There are total 133 valid data, as shown in Table. At the same time, we perform statistical analysis on the 34 questionnaires, and verify the qualitative analysis results with the average of each item accordingly. The combination of qualitative and quantitative analysis has a better reliability and validity over single method of analysis (Xu et al., 2014).
Cross-case analysis is used in four cases, to investigate the causes of different status of balance. The average scores of corresponding questionnaire items are also the supplement to the qualitative analysis.
Finally, we compare the findings from cases with similar views in existing research, whereby similar ideas form validation, whereas different findings require root causes and explanations.
4. Within-case analysis
On the basis of the result of the pilot study, organizational behaviors of efficiency and flexibility in POOs can be a reference to evaluate the performance of efficiency and flexibility. When performances of efficiency and flexibility are high, it means the organization is doing well in both factors and stays in a balance. When either of the two factors is in a weaker status, or both factors are not performing well, it means efficiency and flexibility are unbalanced. Thus, the relationship between efficiency and flexibility can be represented by a two-dimensional matrix. Figure 4 provides the classification logic to explore the balance status where the case firm stays.
Valid interview data (I) and observation data (II) are filtered as the qualitative analysis basis to evaluate the balance of efficiency and flexibility. Arithmetic mean values are calculated for efficiency and flexibility with the questionnaire results from each case. Top one-third interval (3.33 < Av ≦ 5) is defined as good performance, whereas the bottom two-third (0 < Av ≦ 3.33) is defined as low performance. Through analysis, it is found that big differences exist in the behaviors and relationship between efficiency and flexibility in each of the four cases.
Case B makes the full use of its professional advantages and strengthens its employees’ executions of standards and regulations through trainings and periodic assessment. Case D, as a foreign-funded enterprise, accumulates a complete set of project management process and workflow over years of development. Its employees are fully aware of their roles and responsibilities, authorities and interests. Questionnaire results show that Case D’s Av(E) is 4.67, which proves that Case D’s efficiency is relatively high. On contrast, Cases A and C have neither strict and effective project workflow nor measures to improve their employees’ professional skills, which shows that standardization and institutionalization are missing in both cases. Av(E) are 2.33 and 2.76, respectively, and both cases belong to the low-efficiency category. On the basis of the flexibility status of the organization, Cases A and D implement an organization structure combing pure project and strong matrix. Both use project management to integrate resources across functions and overall can adapt to the changes from clients and market. Av(F) are 3.82 and 4.18, respectively, which indicate high flexibility. On the other hand, flexibility evaluations of Cases B and C are not promising. From flexibility perspective, interviewees complain several times that the enterprise’s responses to customers’ new requests are very slow and a huge gap exists between different functional divisions. Statistics show the same result, and Av(F) are only 2.55 and 2.27. Table V lists down representative interview data entries and observation data entries of four cases from three dimensions (complexity, formalization and centralization). Table V also provides the statistical results of questionnaires, which provide qualitative and quantitative basis to identify the balance status of efficiency and flexibility in four firms.
Data analysis shows that Case A’s organization structure completely turns into temporary project team and abandons consistent standards and regulations, and decision-making is decentralized to project level. Case A belongs to an unbalanced situation where flexibility is overemphasized. Case B is efficiency-oriented and pays attentions to function division and standards. It emphasizes centralized command and consistent action, but it lacks systematic planning based on project. Case B belongs to an unbalanced situation where efficiency is overemphasized. Case C is not performing well in both efficiency and flexibility. It fails to establish functional standards and regulations and it lacks organizational adjustment and institutional improvement aiming at project management. Project objectives and client demands are not fulfilled effectively or timely. Therefore, Case C is in an unbalanced situation where both efficiency and flexibility are low. Case D not only establishes standardized project management process and authorization procedures but also implements flexible integration and team autonomy with project as the goal. It considers both efficiency and flexibility, and belongs to a scenario where efficiency and flexibility reach a balance (Table VI).
5. Cross-case analysis
This research aims to understand why there are big differences in the performance of efficiency and flexibility among the four cases and what drives POOs to achieve a balance of efficiency and flexibility. Authors analyze the organization characteristics that affect POOs’ efficiency and flexibility performance from three dimensions, namely, complexity, formalization and centralization, and summarize the mechanism to solve the paradox and eventually to reach a balance.
5.1 Coupling of functional structure and project structure
Complexity is a dimension to examine the organization from a perspective of organizational structure design. Project organization researchers generally believe that project execution is more suitable for organic structure. This study compares data of balanced and unbalanced scenarios, and finds a different but interesting viewpoint afterward. In POOs, flexibility is definitely critical for project executions; however, specialized functional departments or subunits that support project executions are equally important. And what is more important is to promote the two factors to coordinate and facilitate each other.
For the three companies staying in unbalanced situations, Case A, which emphasizes more on flexibility, fully dissolves functional departments into project teams. Communication and development among units based on discipline are limited and this eventually reduces the overall efficiency of the firm. On the contrast, Case B, which achieves efficiency, is facing problems of horizontal integration because of the lack of effective project organization development. Procurement department head from Case B mentions, “Projects are mixing together and everyone does things in his own way.” Thus in the dimension of complexity, vertical functional structure and horizontal project structure are the main factors leading to paradox between efficiency and flexibility.
It is found from the interview results of Case C that the reason that POOs are not able to fulfill clients’ demands or maintain efficiency is because of the gaps between functional structure and project structure. Case C keeps the traditional functional department design and establishes project manager’s responsibility system with the help from external consultancy. However, the utilization of functional departments by project teams is very difficult, whereas the cooperation between functional departments and project teams is insufficient, which eventually compromise both efficiency and flexibility. To explain this finding, we introduce a concept from physics – coupling as reference. The original meaning of coupling refers to a device used to connect two shafts together at their ends for transmitting power. Coupling strength depends on the degree of positive interaction between modules and it can be measured by the ability of alignment among modules (Wu, 2004). In this study, coupling is redefined as the cooperation and coordination between “two shafts,” functional structure and project structure, and can be measured by indicators including resource integration and cooperation between functional departments and project teams. For firms staying in unbalanced situations of efficiency and flexibility, insufficient structure is eventually expressed in the degree of coupling of functions and projects. Either functions are not able to form effective professional modules or projects are not able to integrate professional modules effectively, which further affects the positive interplay between functions and projects and impairs the balancing between efficiency and flexibility.
Case D, which stays in a balanced situation, provides sufficient evidence. Case D is built on strict and detailed work division whereby each employee has his/her own specialized area and clients, which ensures that its employees are the guru in that particular area continually. Meanwhile, they have a strong project manager group that depends on the responsibilities and missions assigned by the organization to “borrow” experts who can help to complete project objectives within the organization. Project managers plan from the overall perspective, whereas experts use their skills and experience to assist, to ensure that resources are fully used and developed. Table VII provides the qualitative and quantitative evaluations of coupling status of the four cases based on interview, observations and questionnaires. Quantitative analysis is conducted on the basis of the arithmetic mean values of three sets of data including functional structure, project structure and coupling of the two factors. The coupling of the two factors follows the definition introduced in this research and represented by two items “project resource integration” and “function division boundary”.
The reason why the degree of coupling of functional and project departments affects the balance of efficiency and flexibility is that the specialization level and standardization level of functional departments reduce the difficulties to integrate projects horizontally, while increasing the firm’s operation efficiency. Coupling of functions and projects means that POOs find an effective organizational design to effectively bridge functions and projects, which is the foundation to ensure the achievement of efficiency and flexibility. Thus, we make the proposition:
Functional structures and project structures form a pair of countervailing factors affecting the relationship between efficiency and flexibility in POOs. Coupling of functional structures and project structures promotes the balancing of efficiency and flexibility in POOs.
5.2 Complementation of standard processes and temporary plans
The traditional organizational theory believes that the standard process in the dimension of formalization is the foundation for high efficiency. Scholars who advocate business process reengineering correct this view. They point out that, with the acceleration of market environment and technology revolution, traditional process design could cause organizational rigidity. In the new environment, process has to be a horizontal process connected to many functions, instead of centering on functional work merely (Eisenhardt et al., 2010). However, in the field of project management, process management is almost marginalized, and is replaced by project plans, which leads to the paradox of efficiency and flexibility.
Data gathered from case studies show that low-efficiency performance in Cases A and C is largely because of the lack of standardization of business process. Case A has no subject of liability in business process design and improvement because of the missing functional departments. In Case C, each functional department’s work process is not clear and most of the regular work has not been standardized. On the other hand, Case B, which establishes clear operation standard and process for all departments, yet reaches a balance of efficiency and flexibility. The reason is there is no plan management targeting at projects, which causes insufficient flexibility when the organization is facing demand change. Therefore, in the dimension of formalization, the contradictions of efficiency and flexibility mainly come from the improper handling of business process and project planning. However, data from three firms staying in unbalanced situations indicate that process is incapable of providing standard business module for planning and planning is not able to integrate various functional businesses effectively. If process and planning cannot support and complement each other, it will cause uneven development of efficiency and flexibility.
Here, we use complementation to represent the interplay between process and planning. One of the project managers from Case C says, “If the procedure is not standardized, how can the planning be detailed and accurate.” For Case D, which stays in the balanced scenario, project management is established on a complete set of standardized business process system. “Through project management process and rules of planning development, the impact due to human factors” in planning is minimized to the maximum extent. Case D’s operation manager describes:
Every department has their standards, and project team has template and requirements for planning. Planning development is based on procedures, as the project progresses, some general items will continue to deposit into process, whereby the best practices will be summarized by the Practice Department.
Thus, in terms of formalization, complementation between standardized business workflow and temporary planning is the key for Case D to achieve a good balance between efficiency and flexibility (Table VIII).
Kerzner (2010) believed that mature planning is built on the foundations of tools, technique and process. This reflects that on the one side, process guarantees the quality of planning and on the other side, planning promotes the continuous optimization of process. Analysis results show that only when individualized planning and solidified process complement and promote each other, balance of efficiency and flexibility can be achieved. Reasonable explanation of this finding lies in the fact that although project manager targets at one-time and unique method of flexibility management, scholars commonly believe that the highest level of project management is to use the standard and mature method to manage projects (Liu and Leitner, 2012). Reutilization and institutionalization of temporary mechanism are helpful to establish a dynamic and long acting capability cultivation mechanism (Li et al., 2013). Thus we make the proposition:
Standard process and temporary planning form a pair of countervailing factors affecting the relationship between efficiency and flexibility in POOs. Complementation of standard process and temporary planning facilitates the balancing of efficiency and flexibility in POOs.
5.3 Associativity of centralization in strategic level and decentralization in project level
One of the organizational flexibility viewpoints is that organizational decentralization is good for employees’ initiative and innovation, which further improve organizational flexibility (Martin and Eisenhardt, 2010). However, there are concerns when it is viewed from the strategic perspective. If the organization decentralizes too much, it is likely to lead to a syndrome of “lack of career prospects” and the firm will fall into an uncontrolled state (Hill and Birkinshaw, 2008). The choice of centralization and decentralization constitutes the contradictory basis for efficiency and flexibility. The performance of Cases A, B and C proves this viewpoint.
The main problem of Case A is that it does not have clear overall strategic targets and predetermined project priority. Internal conflicts are inevitable when projects are protecting their own interests. One of the project managers says, “Everyone thinks his own project is critical, so they run on each other and argue back and forth.” The prioritization of project is in fact a decision-making from the senior management, which depends on the firm’s centralization. The problem reflected in Case B is just the opposite, most of the time decision-making is done by top management. The firm does not have a project management team that can work independently, and this largely limits flexibility and reduces the capability to respond to market changes and customer demand changes. Case C’s problem is even more serious. It has the typical characteristics of state-owned enterprises – top to bottom hierarchy. The project team is assigned with certain degree of authority; however, it still changes the deep-rooted thinking of hierarchy. Majority of project-related decision-makings are still made by the top management and functional department heads, which affects the efficiency and flexibility of project decision-making. A project manager from technical department says, “Although the company gave me a lot of power, I still feel I am just a common technical staff.” Therefore, to reach the balance of efficiency and flexibility, centralization in strategic level and decentralization in project level need to be considered at the same time and to be carefully balanced. We define this as associativity, which is represented by allocation of authority and internal consistency.
Case D gives a satisfactory answer. Although the interviewed project managers consistently admit that they are fully authorized to manage the projects, but when they are asked, “if the company tends to decentralize,” they give negative answers simultaneously. One of them explains:
Actually in our company, power is centralized, more specifically it is centralized in the strategic level. Management’s intent is already melt into the internal control system […] However, when it comes to actual projects, it is decentralized which is also within the scope of internal control system.
It can be found from Case D’s organizational structure and functions that executives set up a large number of auxiliary strategy decision-making positions, such as department responsible for survey on global customer development and department integrating best practices. Through centralized decision-making, the firm controls its direction of overall development. For projects filtered and prioritized strategically by the firm, project managers can decide how to organize and implement projects, to realize flexible control and management. Thus, the key to balance efficiency and flexibility in terms of centralization can be summarized as centralization in strategic level and decentralization in project level. Based on Case D’s experience, effective associativity relies on the differentiation of project strategic objectives and subsequent allocation to each project, whereas the authority boundary is set within the control frame. Table IX shows four cases’ performance of centralization. The quantitative evaluation comes from the statistical results of items including centralization in strategic level, decentralization in project level and the associativity of two factors. Associativity is represented by “strategic decision-making defined as the project authority boundary” and “there is no conflict between project targets and the firm’s long-term strategy,” to reflect the balance and consistency of authority in both strategic and project level.
From the lens of the decision-making theory, centralization and decentralization can affect the balance of efficiency and flexibility, to be specific, how fast decision-making affects an organization’s efficiency, while the degree of decentralization affects an organization’s flexibility. When the environment is changing dynamically, the effectiveness of decision-making is improved significantly through information sharing which is brought by decentralization (Goltza and Hietapeltoa, 2003). Decision-making process in project level is complex and changeable; decentralization to project team is beneficial for collective decision-making and timely response. Decision-making in strategic level is applied in uniform rules and prioritization and it depends on the planning by top management (Lin and Zhao, 2013). Thus, we make the proposition:
Centralization and decentralization constitute a pair of countervailing factors affecting the relationship between efficiency and flexibility in POOs. Associativity of centralization in strategic level and decentralization in project level promotes the balancing of efficiency and flexibility in POOs.
6. Conclusion and future research
In this paper, based on comparison of multiple cases, it is found that influencing and balancing mechanisms are the same in different situations. The key to achieve balance of efficiency and flexibility is the coordination in organization level and project level through organizational design. Figure 5 shows the balance model which is established on the basis of our findings.
The balance model consists of two sections: the first section is to identify the contradictory factors affecting efficiency and flexibility. From the data analysis, either Case D, which is in a balanced situation, or Cases A, B and C, which are in an unbalanced situation, are considering the same contradictory factors when respondents are asked about the performance of efficiency and flexibility. From complexity dimension, function structure and project structure are two distinctive forms of organizational structures. From formalization dimension, contradictions come from standard process and temporary planning. From centralization dimension, the choice of centralization or decentralization forms the major conflict.
From the comparison of four cases, it is proved that the reason why it is difficult to achieve the balance between efficiency and flexibility lies in the existence of these contradictory factors in POOs, and further in that, POOs fail to coordinate these factors. It shows that the balance of efficiency and flexibility does not mean to eliminate the contradictory factors. Instead, organizations need to manage these and ensure a controlled coordination of contradictory factors. These finding are supported by March (1991) who claimed that such contradictions or dilemmas can never be completely eliminated, and organizations have to find a way to work with these.
The results find that the relations between efficiency and flexibility in POOs can be divided into four different situations on the basis of organizational behaviors in complication, standardization and centralization. The contradictory factors between efficiency and flexibility in POOs are identified as functional structures and project structures, standard processes and temporary plans, strategic-level centralization and project-level decentralization. For example, Case A’s low efficiency is because of the missing functional structure, nonstandard process and weak centralization in strategic level. Incomplete project structure, immature temporary plan and insufficient decentralization in project level lead to insufficient flexibility in Case B. Thus, element design in organization level forms the basis of efficiency, whereas element design in project level solves the problem of organizational flexibility. Case D, which successfully maintains a good balance of efficiency and flexibility, achieves effective coordination between project and function in three basic organizational element design.
On this basis, the second section is to choose and match paths to balance efficiency and flexibility. The key to achieve a balance between efficiency and flexibility is to coordinate the relationship of the contradictory factors through the effective integration of organizational level and project level so that the coordination process can be embedded into organizational design.
This finding, which is based on coordination through two layers, is very close to the viewpoint of ambidexterity research. However, this study emphasizes on accommodating the contradictory factors from organization level and project level simultaneously in the organization and coordinating the interplay, rather than using the temporal or spatial separation (Liu et al., 2011).
6.2 Contribution and future research
As an exploratory study, this research discusses how to solve the dilemma of efficiency and flexibility through the analysis framework of traditional organizational design. Although the existing research on ambidexterity is mature and rich, these viewpoints are based on general organization theory, and little research has been done on POOs.
Potential contributions of this paper are:
First, this study focuses on POO, which is a new organization form. Under the specific scenarios, we discuss how to solve the dilemma of efficiency and flexibility and find a new way of thinking, “achieve balance through integration and coordination between organization level and project level.” This study is a good enlightenment and supplement to existing ambidexterity research, especially the contribution of further levels of detail to the theory on balancing efficiency and flexibility, which is currently under development;
Second, based on the management practices in POOs, we introduce organizational design and ambidexterity research perspective, which helps to enrich the studies of POOs by taking the lens of organizational management and their associated paradoxical strategic challenges. Academics benefit from the study’s results through the contribution to theory development, where traditional project management research pays more attention to project level than organization level. This promotes the discussion to explore the root cause of project management problems, and responses to the call for developing the project management theory from a strategic perspective (Morris and Pinto, 2010).
For business practices, while facing the environmental uncertainty and flexible demand, traditional functional management is being challenged. To gain competitive advantage, POOs need to provide personalized and customized products and services. On the basis of multiple case studies, it is found that under current environment, tensions between flexibility and efficiency play a crucial role in the performance of project management. It is a necessity that POOs response to clients’ demands timely while maintaining cost advantage and sustainability, which contributes to scale effect and integration efficiency. From the perspective of organizational design, this study analyzes the paradoxical relationship between efficiency and flexibility and provides theoretical guidance to businesses on how to deal with the tension between efficiency and flexibility. The root causes to the paradox is the lack of comprehensive thinking of efficiency and flexibility in organizational element design and failure to establish the supporting mechanism to achieve these two objectives. Practitioners will benefit from this study through the insights in the integration and coordination between organization level and project level. Thus, practitioners can better prepare for enhancing the organizational design and management in POOs in the future.
However, this is only the beginning for researches to work on this topic, and many details and theoretical blind spots require further study. First, the paths to achieve balance in four cases are different because of the different organizational background and context. Therefore, how to coordinate various contradictory elements in different scenarios requires a detailed research. Second, this paper finds that the interplay between efficiency and flexibility is the key to influence the balance of efficiency and flexibility. However, further discussion on the mechanism of the interplay and how to guide and control these interplays correctly is needed. Finally, the conclusion of this paper comes from the study of four POOs. Whether these conclusions can be applied on non-POOs and how to feedback the balance of efficiency and flexibility theory in general management field need to be examined and verified. This can be achieved through incorporating more cases and large sample statistics to explore and validate.
Behavior of efficiency and flexibility in POOs
|Efficiency||Organizational elements and characteristics||Flexibility|
|Data (source > 3)||Behavior dimension||Behavior dimension||Data (source > 3)|
|“Break complex work down through work division”||Work division||Complexity||Flat organization||“Management level is no more than four layers”|
|“Practice makes perfect, keep accumulating and training”||Professional skills strengthen||Functional structure
|Functional project cooperation||“Transverse in project functions, each performs its own functions”|
|“To facilitate communication and information transfer”||Coordination convenience||Project organization||“Project manager and temporary group”|
|“Every function knows about its responsibility and external interface”||Clear functional boundary||Resource integration||“Flexible project personnel deployment”|
|“Every department has its work process”||Process standardization||Formalization||Management flexibility||“Rule is elastic”|
|“The rule by regulation is greater than the rule by man”||Centering on the institution||Standardized process
|Demand response mechanism||“Resolve customer problem quickly”|
|”Effective work depends on clear target and responsibility”||Clear responsibility, power and benefit||Project incentives||“Wages links with project performance”|
|“Best practice becomes the organization’s standard”||Knowledge deposition||Temporary plan||“Avoid conflict by resource management”|
|“Establish the channels of information collection, centralized decision-making”||Centralized decision-making||Centralization||Project autonomy||“The project team have autonomy”|
|“Control board centrally manage resource”||Unified command||Centralization
|Project manager authorization||“Project manager responsible for the project process”|
|“Ensure the consistency of goals and actions”||Internal consistency||Multiplicity of decision-making||“Decision-making information comes from a variety of channels”|
Overview of the case firms
|Case firm||Case 1||Case 2||Case 3||Case 4|
|Business sector||Port engineering design and consulting||Equipment manufacturing||Rubber and plastics machines||BPO|
|Years of project management||10||9||14||13|
|Number of projects per annum||120||50||30||30|
|Percentage of revenue from project||>90%||>90%||>90%||>90%|
|Project management status||“Most of projects are okay, the overall performance is uneven”||“The performance is acceptable when there is no new demand”||“Disappointing, no guarantee for quality and schedule”||“Project target completion is good”|
|Performance of efficiency and flexibility||“Fast in response to demand, but overall efficiency not high”||“Good efficiency, poor in response to changes”||“Low efficiency, not flexible either”||“Both efficiency and flexibility are good”|
Description of interviews
|No. of interviews||Data source|
|Case A||8||General manager (70 min), project managers (65 min × 2), project team members (58 and 54 min), general office manager (50 min) and QA (48 and 52 min)|
|Case B||10||Vice operation manager (65 min), project managers (55 and 45 min), project team members (50, 40 and 50 min), procurement manager (50 min), marketing manager (55 min) and production planner (45 and 35 min)|
|Case C||10||General manager (65 min), project managers (55 min × 2), project team members (50, 45 and 55 min), quality department director (50 min), process department director (45 min) and research staff (50 min × 2)|
|Case D||6||Project managers (70 and 65 min), project team members (55 min × 2), operation manager (70 min) and human resource specialist (60 min)|
|e1||The firm carries out work division||f1||Enterprise management level tends to be flat|
|e2||The firm pays attention to professional skill improvement||f2||Functional department and project team can cooperate effectively|
|e3||Internal communication and interaction||f3||Coordination across functions is smooth|
|e4||Function division boundary is clear||f4||Resource integration ability is good|
|e5||Degree of work process standardization is high||f5||High flexibility of corporate management|
|e6||Institution rules corporate management||f6||Fast response to client’s demand|
|e7||Employees fully understand their roles and responsibility||f7||Incentives linked to project performance is adopted|
|e8||Good project experience becomes the firm’s standard and work process||f8||The enterprise controls by plan|
|e9||Most of the decisions are made by the senior management||f9||The decision related to project is made by the team|
|e10||All the project teams accept unified command||f10||Overall management is done by project manager|
|e11||There is no conflict between project short-term behavior and enterprise’s long-term strategy||f11||Project level has other power other than strategic decision-making|
The number of valid data
|Case firm||Data type||Efficiency||Flexibility||Total|
Overview of relationship between efficiency and flexibility in four cases
|Case A||I. Distribute resources based on project team; each team is assigned with respective professional personnel and project manager. Each project team is relatively independent. There is not much technical exchange across project teams and professional development of employees is limited.
II. Pure project structure, where there is no functional department based on discipline
|I. Project manager is responsible for within-team coordination and communicates to clients directly. Project manager has greater freedom and flexibility. There is no unified allocation or control rules. The management performance varies across teams.
II. Remuneration is directly linked to project performance. Employees know little about company management system
|I. Project-related matters are completely commissioned to project managers. Project managers directly control everything. Clique phenomenon happens. Project managers own absol ute power. There is no unified command from the organization
II. Project related-decision-making is made through discussion within the team, for example whether to work overtime
|n = 8 Av(F) = 3.82 Av(E) = 2.33||Unbalanced high flexibility; low efficiency|
|Case B||I. Pay great attention to professional skill training. Interaction within the same discipline is frequent. Resource conflict of multi-projects is solved within the discipline. Project level is weak.
II. Consists of six major functional centers and there is no official project manager
|I. Each functional department has its clear and complete standards. Employees are clear about jobs that they are responsible for. Plans do not reflect the project requirements. Not effective for the process department.
II. Responsibilities and work process are complete, employees performance has nothing to do with project performance
|I. Obey orders, complete jobs within duties. Integration and coordination are pushed to the supervisors. Employees are just operators.
II. Manufacturing Vice President acting as project manager, there is no decision-making in the project level
|n = 10 Av(F) = 2.55 Av(E) = 3.85||Unbalanced high efficiency; low flexibility|
|Case C||I. Each department only takes care of its works that belong to its discipline and does not cooperate with other departments. Pass the buck to other departments. Lack of project management thinking. Interfaces are problematic.
II. Bureaucratic structure system and the hierarchical report is inefficient
|I . The entire company is not serious about rules and regulations. Regular work is not standardized. Jobs belong to functional department are not clear. Customer service is taken care by nobody. Eventually the problem is pushed back to the general manager.
II. Extensive management, milestones only exist when they are mentioned in the contract
|I. Bad project performance affects company’s reputation. No one is responsible for the project objectives. When problem grows bigger and becomes serious, eventually people look for top management for decision-making.
II. Project management is centralized in the top management
|n = 10 Av(F) = 2.27 Av(E) = 2.76||Unbalanced low flexibility; low efficiency|
|Case D||I. Direct report to supervisor, strong resource integration capability to meet project requirements. The firm attaches great importance to both horizontal consolidation and longitudinal development.
II. Strong matrix design, segmentation of division
|I. Clear control standards, project incentives to the team members. Normative project process to decide how does the team meet client demands.
II. Project experience keeps deposited and eventually turns into standards. Project planning and control are mature
|I. Projects have full autonomy within boundaries. Top management makes strategic decisions for projects. The ways to complete project objectives are decided by project team.
II. Project managers’ level is low in hierarchy but high in reputation
|n = 6 Av(F) = 4.18 Av(E) = 4.67||Balanced high flexibility; high efficiency|
(I) is the interview data; (II) is the observation data; n is the number of valid questionnaires; Av(E) is the average of items related to efficiency; and Av(F) is the average of items related to flexibility
Coupling of functional structure and project structure
|Case||Functional structure||Project structure||Degree of coupling|
Average = 2.33
“There has been no improvement in competence level for many years”
Average = 4.11
“Completely operate by project teams”
Average = 3.22
“Competence level not able to ensure a sustainable development of projects”
Average = 4.08
“The company pays attention to specialization”
Average = 2.78
“Project teams have no clear work division”
Average = 3.22
“Boundary between projects and functions is vague”
Average = 3.25
“Lack of measures to improve competence level”
Average = 1.89
“Lack of horizontal coordination in projects”
Average = 2.33
“Lack of interconnection”
Average = 4.75
“Various departments are generally strong”
Average = 4.22
“Project integration capability is strong”
Average = 4.44
“Good cooperation between functions and projects”
Functional structure, project structure and average of coupling are calculated on the basis of arithmetic mean values of functional structures (e1, e2, e3 and e4), project structure (f1, f3 and f4) and degree of coupling (e4 and f4)
Complementation between standard process and temporary planning
|Case||Standard process||Temporary planning||Complementation|
|Case A||Not standard
Average = 2.22
“A lot of work has no standard”
Average = 3.75
“Plans are developed for every project”
Average = 3.00
“Everyone does things in his own way”
Average = 3.44
“A set of work procedures is consolidated”
Average = 2.50
“There is no independent project planning”
Average = 2.67
“To build a set of project management standards”
|Case C||Not standard
Average = 2.22
“The implementation of standards is not serious”
Average = 2.42
“The planning does not control the entire process”
Average = 1.67
“There is no mutual support process”
Average = 4.78
“Systematic and strict institutional system”
Average = 4.42
“Mature project planning routine”
Average = 4.83
“Process and planning are not contradictory, and they complement each other”
Process, planning and the average of the complementation of the two factors are calculated on the basis of process (e5, e6 and e7), planning (f5, f6, f7 and f8) and the average of the complementation (e8 and f8)
Associativity of centralization in strategic-level and project-level decentralization
|Case||Centralization in strategic level||Decentralization in project level||Associativity|
Average = 2.78
“A lot of work has no standard”
Average = 3.56
“Project managers have absolute power”
Average = 2.87
“Everyone believes that his project has the top priority”
Average = 4.11
“Overall control of all projects”
Average = 2.44
“The main task in project level is execution”
Average = 2.83
“Any decision-making has to be reported to bosses”
Average = 3.00
“An aggressive boss”
Average = 2.78
“I got the power, but I can’t use it”
Average = 2.67
“Still executing bosses’ orders”
Average = 4.33
“Strategic objective is decided by the group”
Average = 3.89
“Autonomous in a certain degree”
Average = 4.33
“Project serves for strategic objective”
Average of centralization in strategic level, decentralization in project level and associativity are calculated on the basis of centralization in strategic level (e9, e10 and e11), decentralization in project level (f9, f10 and f11) and associativity (e11 and f11)
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