The project organization, simply stated, should be an organization that best accomplishes the goals of the project.
There are several ways a project team structure can be organized. Again, the best project structure is the structure that maximizes the team and organizational capabilities to accomplish the project goals. Within that framework, the project organization will take one of the following forms:
In an individual project organization the project consists of only one person—the project manager. It may be that the project only requires one person, such as a technical survey to determine the best software and equipment to use on an upcoming IT initiative. But often we think of an individual project organization as being one where the project manager has project control of the functional people doing the actual project work, but the team members are not 100 percent dedicated to the project. Actually, the project manager, in this case, is better described as a project coordinator.
The functional project organization is one that is embedded within a particular functional group. That is, the project manager is assigned along with functional people in the group to do a project. Although the project manager has project control, he still does not have functional control of the team members. Nevertheless, the team is formally organized along functional lines, and although the team members still may not be 100 percent dedicated to the project, they tend to have more of a personal commitment to the task work. That is, the project has a more defined organizational quality to it than the individual project discussed above. There are many advantages to this type of structure, the most obvious being that any needed expertise is resident within the functional group. But there is also a very significant disadvantage to the structure. When the team is working within its functional group and does not have functional reporting responsibility to the project manager, there is often confusion among the team members about who actually is in charge of the project. This is because there is always the potential for a functional manager to interject herself into the project leadership role and usurp the project manager's authority. When that happens, it usually takes the project manager a few days to get the project stable again, but in the process he has to reestablish his leadership authority.
The matrix organizational structure is one in which the project manager has project control and the team members are assigned to the project from various functional groups. The project manager still does not have functional responsibility for the team members—they report functionally to their own organization—but his authority tends to be better defined. In addition, the team members are even more dedicated (during work) to the project. It is worth noting that many organizations are structured along matrix lines, but even those that are functionally organized (such as a military service branch) often use a cross-functional team concept to enjoy the advantages of the matrix concept.
Perhaps the best organization of all, at least from the project manager's viewpoint, is the project organization. In this type of organization, every team is organized to support a specific project, and every team member is 100 percent dedicated to the project—the team does not work on any other projects. In this concept, every team member reports directly to the project manager both from a project control perspective and a functional perspective. The project manager has complete authority and responsibility for the project. The primary disadvantage of this structure is that it is usually too expensive—many project functions, principally administrative, financial, and legal, could be shared by all the ongoing project initiatives, so there is significant duplication of resources within the total organization.
Of course, it is unlikely that your organization will exactly mirror one of the ones discussed here. It is more likely that it will be a variant of one or even a combination of one or more. It is not usual for you to change your project's organizational structure during the life of the project to suit the needs as they arise. For example, during a proposal effort, the structure is likely to be an individual type where there is a project manager/proposal manager who borrows people from various organizations to develop the proposal. After the contract, perhaps a matrix organization best meets the needs of the team. Then, after delivery of the system, perhaps some type of staff organization with customer and technical services will be sufficient.
When the project organization structure is put into place, it must support the team's efforts to deliver the product/system to the customer's requirements, and it must be one that enables the project manager to manage her stakeholders.