In my experience, projects just seem to work best in a balanced matrix type of organization. This is because the resources of the company are permanent (or relatively permanent) and projects are not. A project is a temporary undertaking with a known ending. Project teams are formed for the life of a project. This means that we are able to bring the right resources together for a project and use them for the amount of time they are needed. But where do they come from?
As we try to answer this question, we start thinking about the most efficient type of organization for managing projects. To do that, we first have to take a look at the types of organizations developed through history as people learned how to manage their businesses best.
There are really only three ways to organize to accomplish work. Nearly every organization fits one of these types or is a combination of them. These are the pure project organization, the functional organization, and the matrix organization. The pure project organization and the functional organization have been around for hundreds of years; the matrix organization is a rather recent development.
The Pure Project Organization
In the pure project organization, the project manager is the supreme authority. He or she is the ultimate decision-maker for the project and is not subject to any but the highest level of review. This review is generally at the project level for the budget, schedule, and deliverables. These projects are usually quite large and are done in a remote location. Building dams or remote power plants in Third World countries would be typical applications for the pure project organization.
The Functional Organization
The functional organization, has been around since long before the industrial revolution and was the preferable type for commercial enterprises in the beginning and middle of the twentieth century. The functional organization is organized on the basis of skills. A typical company sets up departments within the company, and each of these departments will have persons of similar skills within it. This type of organization is not strictly organized by skills. In the mechanical engineering department, for example, there may be a few engineers with different skills such as electrical engineers or computer engineers.
The Matrix Organization
The matrix organization, is a mixture of the pure project organization and the functional organization. It is the one that allows the concept of project management to work best. In the matrix organization we try to have the best of both organizations without the negative aspects of each. We try to have an organization that has a manager with authority who can be reached easily, an organization with a lot of flexibility, and customer focus. It should be an organization that can quickly bring the proper skills together on a temporary basis for the duration of a project. Resources in this organization are shared. And when the project is over they have other work to go back to. The end of the project does not mean the end of the line for them.