Certain firms perform nothing but project work; large construction companies fit this model. The majority of their organization is devoted to specific projects. On the other end of the spectrum, utilities are operations-oriented. The majority of companies, however, conduct ongoing operations and projects. Choosing an organizational style that supports projects has never been easy. After all, if a project happens only one time, requires a unique mix of people, and has a unique reporting structure, how can any firm create an organization chart that will last beyond the end of the next project?
While projects can play havoc with organization charts, over the years there have been some classic organizational responses to the project environment. The following spectrum of organizational styles favors ongoing operations on the one end and projects on the other.
Function-driven firms are organized around primary functions such as advertising, engineering, information systems, manufacturing, and human resources. With this organizational style workers have one manager who both assigns and monitors their work and handles administrative tasks, such as compensation. Projects within functional groups pose no organizational problems, but projects that span functional groups are arduous to manage because project managers have no functional authority and must work through the functional managers to assign, monitor, and coordinate work.
Matrix organizations are required when many projects span functional boundaries. This structure gives authority to both project managers and functional managers by having both of them report to the same executive. Functional managers will be involved in deciding who will work on project teams and will maintain responsibility for long-term administration issues. Within this organizational style project managers assign, monitor, and coordinate work among the project team. The main problem with the matrix organizational style is that every person working on a project has two bosses—and if these people work on more than one project they will have even more.
Project-oriented organization is appropriate for firms that work on large, long-term projects. Rather than finding projects within and among functional departments, functional departments exist within the project. Project-oriented firms (also called projectized firms) may have redundant operations among multiple projects, but they’re willing to put up with that organizational inefficiency in order to maximize management effectiveness on the project. For example, in the heavy construction industry, such firms set up an entire organization for managing every aspect of their enormous projects.
Another style of project-oriented organization is the program. Programs consist of many related projects, but unlike a single project, they have no specific completion date expected. For example, when Boeing develops a new model aircraft, the company establishes a program that is responsible for everything from selling the aircraft to developing customer service processes—a wide variety of separate but related projects.
A variation of the program is a product-oriented structure, which uses the firm’s products as the driving organizational factor. Product-oriented organizations replicate functional disciplines such as marketing and product development for each product organization. An example is a software company that has marketing, development, and testing personnel assigned to specific product groups, such as word processing and spread-sheet groups.