Understanding Types of Organization: PMP Study

Understanding Types of Organization: PMP Study

To become a PMP, you need to learn about organization types defined by the Project Management Institute. The PMI defines an organizational structure as a framework for determining the hierarchy of people, function, and workflow—along with the reporting system in an organization.

Every organization must have an established organization type in order to work efficiently and achieve its business goals.

Project managers should be aware of different types of organizations and how they operate so they can identify stakeholders and other team members. Here is the list of different type of organizations:

Projectized Organization

Such an organization is based on projects. Therefore, the company's entire work is divided into more minor project-sized activities, which are completed in a specific time frame.

For instance, you might work on a project expected to last for two years, but you will complete different tasks every day or week. If you are working in such an environment, it means that you are constantly working on other projects at the same time.

Projectized organizations can be found in various sectors of the economy: government agencies and private companies. Most large organizations rely on projected structures for their daily operations.

The main advantage of this type of organization is that it allows companies to rapidly adjust their resources according to changing customer and stakeholder demands.

For example, suppose there is a sudden increase in demand for one product or service offered by your company. In that case, you can quickly increase the number of employees working on this project without having to make any significant structural changes.

Functional Organization

The most common type of organization is the functional organization. This type of organization is designed to perform tasks in a specific area with a transparent chain of command, and it's usually used when several departments work together toward a common goal.

Functional organizations are also known as departmental organizations because they're broken down into individual departments or divisions that each have their own goals and responsibilities.

The different departments within this type of organization typically have separate budgets and may even report to other executives.

The most significant benefit of using a functional organization is efficiency.

If each department has its own goals, it will be able to focus on those goals without worrying about other areas or departments within the company. This allows each department to work independently and devote time and energy to achieving their purposes.

There are also some downsides associated with using this type of organizational structure.

 For example, one downside is that it can create silos within the company where information isn't shared between departments or divisions. This can cause problems when employees from different departments need access to data from other departments but aren't able to access it because they're not in contact with each other very often (or at all).

Composite Organization

The composite organization has two or more functional organizations combined into one. This type of organization is called a composite because it combines different functions. The advantages of this type of organization are:

• It can be very effective when there is a need for multiple types of skills and resources in the exact location or region.

For example, suppose an enterprise wants to combine the resources of its production and distribution operations. In that case, it can create a composite organization. This will help them reduce the cost of operating multiple facilities and increase the process's efficiency.

• It allows enterprises to take advantage of economies of scale by combining different functions into one unit.
• It helps enterprises access resources that they might not have been able to use effectively due to their specific needs or requirements.

Matrix Organization

A matrix organization combines elements of both functional and projectized structures.

A matrix organization has multiple divisions or departments but also has cross-functional teams that report to their functional manager and a project manager for each project team they are assigned.

The benefit of this type of structure is that it provides stability and flexibility within an organization because each employee can be assigned to multiple projects simultaneously, depending on their skill set and availability.

The disadvantage is that when an employee switches from one project team to another, he may have difficulty keeping up with the latest information because he was not present during critical meetings or decisions were made without input.

Conclusion

Before embarking on a new project, it's always helpful for a project manager to know what type of organization you are working in. This understanding will better prepare you for the challenges ahead and help make your job as easy as possible.

The good news is that most organizations listed on the PMBOK® Guide cover each of the different types and provide some ideas about the differences between them.