Basic forms of project organisation

A suitable project organisation is of central importance for the success of a project. It is not only about structuring the work processes, but also about the effective cooperation of the project members and the distribution of tasks. There are different ways of organising projects, which can be distinguished in their basic forms. The three basic organisational forms are the functional project organisation, the matrix organisation and the pure (autonomous) project organisation. In international projects, other organisational forms can also be used to ensure efficient project implementation and coordination. 

There are two aspects of project organisation that vary according to the form of organisation: resource autonomy and independence from the base organisation. Resource autonomy means the power of disposal over the human and material resources needed for the project. A high level of autonomy means that the resources are reserved exclusively for a specific project and the project manager can dispose of them freely. With low autonomy, other project managers or the base organisation can also access the same resources. Independence of the base organisation only occurs when the project is carried out outside the line and a separate project manager is appointed. In extreme cases, the project can even be completely legally spun off from the base organisation.

Functional project organisation refers to an organisational form in which the project manager has a functional role and thus has no authority to issue directives or make decisions vis-à-vis other units or project staff. His influence on the project is limited to his professional authority and negotiating skills. Since he is not allowed to make any major project decisions, he bears no responsibility for the course of the project, the project costs and the project result. Instead, he assumes the role of an information provider and distributor who must have unhindered access to all relevant project information. His tasks include identifying delays, preparing decisions, making recommendations to project stakeholders and initiating activities. Resource autonomy and independence from the base organisation are weak in this form of organisation.
The establishment of a functional project organisation represents a comparatively minor organisational intervention in the base organisation. This form of organisation is often chosen if the project has an impact on many areas of the company (e.g., organisational projects such as the introduction of company-wide binding software or the establishment of a quality management system) and many or even all employees of the company are affected.

Functional project management can be successful even in large projects with many departments and a high need for coordination if the project manager has a high level of personal and professional authority. However, relying on this authority alone is risky. It is better to give the project manager not only tasks but also authority.
If the coordinating functional unit is located with the company management, which has formal decision-making authority in the project, it can quickly become overburdened and no longer make effective decisions, especially if it is responsible for several projects at the same time. In this situation, many project managers resort to informal authority to keep the project running. They act pragmatically and, for example, take urgent decisions that they would not be allowed to take because of their formal powers (e.g. postponing a milestone). This often leads to conflicts with the formally responsible decision-makers in the base organisation.

The functional project organisation requires relatively little organisational intervention and therefore meets with little resistance from the line, partly because the project staff remain in their departments. As already mentioned, in the functional project organisation the project manager only has informal opportunities to exert influence (e.g., in personal discussions). Decisions are made exclusively by the line authorities. In case of project disruptions, no quick reaction is possible. Under certain circumstances, the project manager, who would have to intervene as coordinator, is even largely isolated from the project activities.

A matrix organisation is one in which project team members are assigned to both a functional department and one or more projects. In contrast to a pure line organisation, in a matrix organisation the project managers have more authority and responsibility for the project and the assigned project team members, while the functional superiors retain disciplinary responsibility for their employees (this includes issues such as remuneration, overtime regulations, holiday planning, but also technical training and further education). As employees in a matrix organisation have to adapt to different superiors and hierarchies within the organisation, a clear division of responsibilities between the project manager and the line departments is crucial. The matrix organisation is usually used when rapid adaptation to changing market conditions is required, as it allows more effective use of resources and faster and more flexible deployment of expertise. It has been used extensively in the aerospace industry since the 1960s. There are various forms of matrix organisation, of which three can be distinguished: The dominance of the base organisation, the dominance of the project organisation or a balance between the two.

In a matrix organisation, authority and responsibility are divided between line units (departments or divisions) and project units. Project staff receive instructions from at least two levels. If an employee is involved in more than one project, it is called a "multiple command system". In this case, the principle of unity of command is broken. The conflict between departmental and project management that this model inevitably creates is consciously accepted. Since both perspectives come into play when dealing with project problems, this is intended to be constructive for finding solutions. However, conflict can always demotivate a project team and thus cause considerable damage to both the project and the line organisation.

A rough division of competences between the departments and the project manager can be depicted as follows: The project manager determines the "what" and "when" in the project, while the heads of the departments are responsible for the "how" and "who". However, this simplification can lead to problems in practice. Especially in development projects that require highly qualified personnel, the quality of the work results and the time frame required depend heavily on the competence of the respective specialist. The departments, in turn, only assign their best staff to projects from which they directly benefit. Therefore, project managers often have to fight hard to recruit the best professionals from the respective departments for their project. Additional potential for conflict often arises when several project managers compete for scarce resources.
A more precise and realistic distribution of competences can be achieved if the project manager has more influence on the "what", "when" and "where", while the line instances have more influence on the "how", "with what", "where from" and "where to". A more differentiated view of the "who" is also important. In particular, the project manager should be given considerable influence over the selection of personnel, at least in later project phases.
Here is the importance of the questions in detail:
 

• What: the content of the task in qualitative and quantitative terms
• When: the timing of the task implementation
• Where: the place of performance
• How: the procedure used 
• With what: the required material resources 
• Where from: the procurement of persons and material resources 
• Where to: the use of people and material resources after the service has been provided.

By keeping people in their departments and allowing them to develop their skills, there are few organisational restructuring costs. Staffing levels can be easily adjusted to meet the changing needs of different projects. Smaller projects can continue to be managed by line departments, as not every project requires a matrix organisation. The project manager retains clear responsibility for the project objectives. However, the matrix organisation requires intensive communication, as a lack of delineation of responsibilities and tasks can lead to conflicts and uncertainty among staff, which can jeopardise the success of the project. In addition, the matrix organisation can lead to overlapping responsibilities between the department and the project, and thus to conflicts.

In a pure project organisation, the project manager is the highest authority and is responsible for all decisions in the project. They head a separate organisational unit that includes all project staff, who may be recruited from different parts of the organisation or from external sources. This form of organisation is mainly used for large, long-running R&D or investment projects and, in its most extreme form, is called a "project-specific single-purpose enterprise" or project company. The project manager is the disciplinary superior responsible for the cost, schedule and performance objectives of the project. He has human and material resources that are exclusively allocated to the project and therefore cannot be used by the base organisation. The project thus has a high degree of resource autonomy and is independent of the base organisation.

The advantage of a pure project organisation is that all resources are fully focused on the project task. The project manager is the technical and disciplinary superior of all project participants and can react quickly to disruptions in the project process. However, it is difficult to adjust staff as needed, which can lead to under-utilisation of project capacity. Resources may be procured more than once, resulting in unnecessary costs. As projects tend to require fewer staff in the inception, design and completion phases than in the implementation phase, staff may be under-utilised in these phases. The reintegration of staff into the line organisation at the end of the project can also be difficult and lead to uncertainty about future employment, which can result in a loss of motivation and productivity. The costs of setting up and dismantling project-related organisational units and infrastructure at the beginning and end of the project must also be taken into account.

International projects have specific requirements for the project organisation. Organisational forms such as the fractal project organisation (this occurs when an organisation is enlarged and the enlarged part looks very similar or even identical to the original) and the network organisation (this organisation consists of autonomous members who are linked to each other in the long term, e.g. by focusing on a project goal, and who coordinate their cooperation) can be useful here to meet the special circumstances. In a global environment, new roles in the project team also need to be filled, such as interface managers who oversee the connection between the different core and sub-teams and ensure that everyone is on the same page. The project manager must also take into account the cultural differences between team leaders and team members and ensure that communication and the exchange of instructions and information work smoothly. This includes ensuring that the expectations of different cultural backgrounds are sufficiently respected and taken into account. Effective project organisation is therefore crucial to the success of international projects.

The project organisation forms the hierarchical framework of a project and describes the vertical flow of information and the authority of the people involved and acting. It defines who receives which decisions from whom and to whom the decisions are passed on. In other words, it describes the organisation of formal power. From this it can be concluded that a project manager is concerned with questions of organisational structure and works from the very beginning of the project to establish and implement the most suitable organisation for his project.