Chapter 3 Project Organization – Core Concepts of Project Management


Project Organization

Key Points

  • Different forms of organization suitable for projects
  • Roles of project team members such as liaisons
  • Major risk categories (time, cost, quality)

Working on information systems projects will acquaint you with many forms of organization and to many project managers. This chapter reviews the primary types of organization used for information systems projects, and the reasons they are designed that way. The chapter also discusses features desirable in project managers, critical factors in project success.

The purpose of organization is to coordinate the efforts of many to accomplish goals. Organizational structure shows reporting relationships. Figure 3.1 shows a small subset of reporting relationships in a large organization.

Figure 3.1 Sample organization chart

Alternate Organization Structures

Organization structures represent the hierarchical reporting and official communications networks within organizations. The management hierarchy consists of reporting relationships, an official chain of control or authority. This chain of authority deals with official activities, such as hiring, firing, and promotion. It also includes directing the activities of subordinates. Organizations can be grouped into major subdivisions on the basis of a number of frameworks.

Informal organization can exist in parallel to the official organization structure. Informal organization consists of the network of personal contacts within the organization, and may consist of cliques and groups of people who work well together, and who may not work well with those outside of their subgroup. In organizations with high levels of ­professionalism (such as in information systems work), informal networks can be very powerful and positive forces. Informal communication is socially motivated. It is very fast, but is not necessarily thorough or dependable. Project managers, as we shall see, have relatively low levels of official authority.

There are three basic forms of project organization: functional, project, and matrix. Each form of organization has its own benefits, and each works well in certain types of environments. The appropriate organization structure depends on the goal of the organization, the type of work it is supposed to do, and the environment within which it operates.

Functional Organization

Functional differentiation organizes elements by specialization (see Figure 3.2). This form of organization relies more on formal rules, procedures, and coordinated plans and budgets to control operations. In a project context, the project is divided into segments that are assigned to the appropriate functional groups, with each functional group head responsible for his or her segment of the project.

Figure 3.2 Organizational elements by specialization

Functional organization works well in repetitive, stable environments. Organizational sub-elements are defined by activity or specialty function. All of the accountants in the firm are collected in one location, where they work together. The same is true for the functions of finance, marketing, and MIS. Operations is a separate function, and operational suborganizations are often grouped by geographic location, another optional form of organization. The primary benefit of the functional form of organization is that specialists work together, and can develop professional skills in the most efficient manner. Accountants focus on accounting problems, and become very well trained in accountancy. On the other hand, they gain little exposure to the problems of other organizational elements, such as operations or marketing.

Project Organization

Pure project organization involves creating a separate, independent organization specifically for accomplishing a particular project. One type of example would be the Olympic Committees created to make each Olympic Games work. Once the project is complete, there is no reason for the organization to continue (the next round of games or elections will involve other locations and candidates). Figure 3.3 demonstrates how skills can be grouped by project.

Figure 3.3 Skills grouping

The project center is linked to the parent organization to draw resources and personnel as needed. In the case of Olympic Committees, the permanent International Olympic Committee is available to provide continuity. In the case of committees for elections, there are permanent political parties to draw resources from. Task forces are often announced at a high level, such as the Task Force on Delivery System Reform and Health Information Technology (HITECH) where about $30 billion was invested as part of the Patient Protection and Affordable Care Act. Similar task forces are often created for relocation operations.

Sometimes project organizations are stand-alone organizations. These are newly created organizations for a specific mission, drawn from several organizations. Examples are large-scale public works, like Hoover Dam, or the Dallas-Fort Worth International Airport. NASA space station development drew people from a number of organizations. Often stand-alone joint ventures are used in the construction business for very large projects beyond the scope of participating firms on their own.

Partial project organizations also exist. In this form, the project manager is responsible for some activities, while other activities that are more support oriented, like accounting, remain with functional divisions. This is a common arrangement.

Matrix Organization

If an organization continually operates in a project mode (many organizations do in construction, in information systems, and in consulting), there is a need to quickly create large project groups. The matrix organization form is a grid-like structure of reporting and authority relationships overlaying those of a traditional functional organization (see Figure 3.4). It is used within organizations that make more than minimal use of project teams or product groups. The improved coordination obtained from project organization is combined with the strengths for each specialty that are provided by functional forms of organization. The matrix form of organization was originally adopted by NASA and by the Department of Defense in the 1960s, when contracting practices required contractors to use project management. For each particular project, the contracting firm had to develop a project organization. PMBOK has unique terminology, referring to functional matrix organization as a weak matrix and project matrix form as a strong matrix. These terms are commonly used by those strong advocates of the Project Management Institute.

Figure 3.4 Matrix organization

The key feature of matrix organization is multiple lines of authority. Specialists report to their functional managers with respect to issues involving their specialty, and report to their project managers for specific assignments. Functional specialists are assigned to the project, usually physically located wherever the project is being implemented. But these specialists depend for their personal career decisions on their permanent functional homes. The project accountant works with the project manager, and the project accountant’s job is to keep the project manager informed of the cost performance on the project. Since the accountant will work on a number of projects during his or her career, the project accountant’s promotion and raises are often decided by the chief accountant at the accountant’s permanent organization. Project managers have some input, but the chief accountant would be the project accountant’s permanent supervisor. Once the project is completed, the project accountant would return to the organization’s accounting office, where he or she would await the next project assignment, or else undertake professional development such as training, or maybe stay with the accounting office on a permanent basis. The same is true of the project engineer. It could be true for the project manager and production personnel as well, although these people often go into the open market to another organization when the project is completed.

Some problems are introduced by the matrix form of organization. The dual reporting structure creates a state of confusion for those who like high levels of structure. It is said that no man can serve two masters. There is also a military principle of unity of command. The matrix system, with two potential sources of direction, has been found to lead to conflict due to incompatible demands and priorities from two managers of a specific individual. Most people are able to cope with such mixed signals, but it causes distress in others. The ability of managers to compromise, and to deal with conflict, has proven very important in project management. While conflict can sometimes lead to improved performance, it needs to be managed carefully. Matrix forms of organizations call upon managers to do a great deal in a difficult environment.

The level of control used within a project organization should vary with the level of difficulty of the problems expected. If there are major technical issues, stronger centralized organization is merited, with a focus on the technical lines of organization. For instance, if a major engineering problem is expected to be critical to the project, engineering components would be centralized under a project engineer. On the other hand, if no major engineering problems were expected, there might not be a project engineer, but rather independent engineers assigned to each work group that needed one. This independence would allow focus on the tasks assigned to the work group rather than overall engineering coordination.

Comparison of Organization Structures in Projects

There are many variations to the three basic organization structures discussed so far in this chapter.

Task Forces

Task forces are temporary groupings of individuals created to solve a particular problem. The task force idea comes from the military, where combining different types of units under a temporary leader for some specific mission is often practiced. In project organizations, individuals with different specialties are grouped together to develop a solution for a specific problem. Long-term task forces can be turned into permanent teams.


Functional matrix and project matrix structures are hybrids of the three basic forms presented above.

A functional matrix organizational structure is used when a project manager is restricted to coordinated functional group assignments. Functional managers are responsible for technical work assignments. The project manager in this case acts as a staff assistant with indirect authority to expedite and monitor project activities.

In a project matrix form of organization, the project manager has more direct authority to decide personnel and work assignments. The functional manager is responsible for providing resources and advisory support to projects.

In the balanced matrix organization, project managers and functional managers have roughly equal authority and responsibility for the project. The project manager typically decides what needs to be accomplished, while the functional managers are responsible for deciding how work will be done and by whom.

Levels of Project Organization

Projects involve a nontraditional form of organization. Traditional organizational design is much more rigid. While no organization is truly permanent, traditional organizational forms are designed on the assumption that they will continue into the foreseeable future. They are not very flexible, and they react slowly to change.

Projects, on the other hand, are organized with the understanding that they are temporary. Some projects can be very long in duration, such as the construction of a cathedral in the 11th to 14th centuries, taking hundreds of years. Other projects may last only weeks, and therefore have very temporary lives. Projects involve very high levels of uncertainty and change, so project organizations need to be flexible and adaptive. In the traditional form, people can enhance their professional training and development. Many organizations that contract to undertake projects typically adopt a functional form of organization for permanent assignments, drawing people for individual projects from their permanent assignments to temporarily work with other specialists on specific projects. This is true in construction, engineering, and large accounting firms specializing in consulting, including information system consulting. Careers with such organizations involve a great deal of relocation as individuals leave their home base for the duration of projects to which they are assigned. Between projects, the organizations may value their specialty skills enough to keep them on the payroll. Ultimately, however, new projects are needed in which these skills can be utilized.

Within project organizations, integrators are often used to facilitate communication. Liaisons are used to integrate two groups that are not part of the same organization. Liaisons are especially useful between the people who fund the project and the project team. Project expediters or coordinators are individuals whose job is to make sure that something happens. These individuals have no authority, but are assigned to be on top of problems, so that they can inform project managers of the need for additional resources for specific activities.

Criteria for Selection

Table 3.1 outlines the conditions for which a particular organizational form is most often appropriate.

Table 3.1 Comparative organizational forms





Task force

Small to medium

Short to medium

Low to medium

Project team



Low to medium

Multiple project teams

Medium to large


Medium to high


Medium to large


Medium to high

Other criteria that bear on the project type include uncertainty, cost and time criticality, and the uniqueness of the project. If the project involves high stakes, a matrix form or pure project form gives better control. If there are high levels of certainty, task forces and teams are appropriate because they involve less investment. If time and cost are not critical, task forms and teams are also appropriate. If the project is unique, a partial or full project form is appropriate.


Organizational structure is a means of achieving goals and responding to problems. Project personnel are often organized into project teams or matrix structures. These organizational forms are more flexible than functional structures that tend to be more bureaucratic. The positive and negative features of alternative organizational forms and their variants need to be understood by top management, so that they can select the organizational form most suitable for their situation. Understanding why these forms exist is also important to those working for them. The matrix form of organization is especially suitable for many projects for large organizations.


Coordinator. See Expediter.

Expediter (or coordinator). Individuals who monitor problems in an organization and work on alleviating them rapidly.

Functional organization. Organization by type of work group members do.

Hybrid. Mix between functional and matrix organizational forms.

Liaison. Individual integrating two or more groups through personal communication.

Matrix organization. Grid-like structure of dual reporting relationships combining functional and project organizational features.

Organization. Structure to coordinate efforts of many to accomplish shared goals.

Project organization. Organization by project task or groups of tasks.

Task force. Temporary grouping of people of diverse skills with the intent of accomplishing a specific job.

PMBOK Items Relating to Chapter 3

A project management office is a management structure that standardizes the project-related governance processes and facilitates the sharing of resources, methodologies, tools, and techniques.

Organizational structure is an enterprise environmental factor, which can affect the availability of resources and influence how projects are conducted.

Project governance is an oversight function that is aligned with the organization’s governance model and that encompasses the project life cycle.

The composition of project teams varies based on factors such as organizational culture, scope, and location.

9.1 Plan Resource Management—process of identifying and documenting project roles, responsibilities, required skills, reporting relationships, and creating a staffing management plan.

9.3 Acquire Resources—process of confirming human resource availability and obtaining the team necessary to complete project activities as well as material resources.

9.4 Develop Project Team—process of improving competencies, team member interaction, and overall team environment to enhance project performance.

9.5 Manage Team—process of providing guidance and training and applying human resources to tasks.

9.6 Control Resources—process of tracking project human and material resources.

Thought Questions

  1. What are the positive and negative features of matrix organization, and why is it often found in project environments?
  2. What are the tradeoffs inherent among time, cost, and quality in projects?