Advantages and Disadvantages of Functional Organization

Organizations have their own styles and cultures that influence how project work is performed. The functional organizations is probably the oldest style of organization and is therefore known as the traditional approach to organizing business.

Functional organizations are centered on specialties and grouped by function. As an example, the organization might have a human resource department, finance department, marketing department, information technology department, and so on. The work in these department is specialized and requires people who have the skill sets and experiences in these specialized functions to perform specific duties for the department.

Advantages

• There is an enduring organizational structure.
• There is a clear career path with separation of functions, allowing specialty skills to flourish.
• Employee have one supervisor with a clear chain of command.

Disadvantages

• Project managers have little to no formal authority.
• Multiple projects compete for limited resources and priority.
• Project team members are loyal to the functional manager.

Characteristics of Projectized Organization

Projectized organization is an organization that focus on project. In this type of organization, the staffs report directly the project manager.

Six characteristics of a projectized organization are:

1. Project managers have ultimate authority over the project.
2. The focus of the organization is the project.
3. The organization's resources are focuses on projects and project work.
4. Team members are co-located.
5. Loyalties are formed to the project, not to a functional manager.
6. Project team are dissolved at the conclusion of the project.

Organizational Structure in Project Management

Organizational structure is an enterprise environmental factor which can affect the availability of resources and influence how projects are conducted. Organizational structures range from functional to projectized, with a variety of matrix structures between them. The table below shows key project-related characteristics of the major types of organizational structures.



1. Functional organization, is a hierarchy where each employee has one clear superior. Staff members are grouped by specialty, such as production, marketing, engineering, and accounting at the top level. Specialties may be further subdivided into functional organizations, such as mechanical and electrical engineering. Each department in a functional organization will do its project work independent of other departments.

2. Matrix organization, is a blend of functional and projectized characteristics.

• Weak matrices maintain many of the characteristics of a functional organization, and the project manager role is more of a coordinator or expediter than that of a true project manager. 
• Strong matrices have many of the characteristics of the projectized organization, and can have full-time project managers with considerable authority and full-time project administrative staff. 
• Balanced matrix organization recognizes the need for a project manager, it does not provide the project manager with the full authority over the project and project funding.

3. Projectized organization, is a hierarchy where team members are often co-located, most of the organization's resources are involved in project work, and project managers have a great deal of independence and authority. Projectized organizations often have organizational units called departments, but these groups either report directly to the project manager or provide support services to the various projects.

Many organizations involve all these structures at various levels. For example, even a fundamentally functional organization may create a special project team to handle a critical project. Such a team may have many of the characteristics of a project team in a projectized organization. The team may include full-time staff from different functional departments, may develop its own set of operating procedures, and may operate outside the standard, formalized reporting structure.

Source: Project Management Body of Knowledge (PMBOK® Guide)