CHAPTER SUMMARY

Organizations create a specific structure to support a particular strategy. If the organization performs poorly, then the firm will often develop a new strategy and/or formal organizational structure. Three different formal organizational structures were discussed in this chapter: the functional organization, the project organization, and the matrix organization. These organizational structures represent a continuum of possible structures, and an organization can create structures that are between functional and matrix organizations or matrix and project organizations.

Each organizational structure presents opportunities and challenges for projects in terms of flexibility, knowledge and expertise available, and authority and responsibilities. While the formal organization, in terms of an organizational or hierarchical chart, defines the official line of authority and communication, the informal organization includes the informal relationships and internetworking of people within the organization that develops over time. Understanding the formal and informal sides of an organization is important because it will help the project manager and project team better understand the politics and culture of the organization and provide greater insight into the decision-making process.