Project Based Organization: PMP Concepts to Learn

Project Based Organization PMP PBO

Whether you are far along in your preparation for the PMP exam or if you are just starting out, one concept you have likely run across is Project Based Organization, or PBOs. The reason I make this assumption is PBOs, as a topic, are typically covered within the first few chapters of any PMP prep book.

PBOs are a general philosophy about organizational structure you will experience on the PMP exam. What I means is, PBOs relate, but are unique to the three overall organizational structures tested on the PMP exam. It is important for you to understand what PBOs are and how they relate to the three tested organizational structures. As well, you should understand how this concept will show up as a question on the PMP exam.

To fully understand Project Based Organizations, let’s start by clarifying what the three types of organizational structures are that you will see on the exam. Then with that general understanding we can better address what PBOs are and how they relate. Finally, we will address how you can expect to see this concept appear on the exam.

Organizational Structures

As I noted above there are three different types of organizational structure that you could experience as a project manager; which include, functional, projectized, and matrix.

Functional Organization

A functional organization is what you are likely most accustomed to, which makes sense because this organizational structure is the most common.

Functional organizations rely on traditional hierarchy created around areas of work specialization. What that means, for example, accounting would be its own functional area, or specialization. There could be an Accountant reporting to a Director of Accounting who reports to the CFO. All position specialize in the functional area of accounting.

What you need to remember for the exam is in a functional organizational structure a project manager has little authority over project team members. Evaluations, both positive and negative, are provided by the functional leader.

Projectized

A projectized organization is a company who is entirely organized around projects. This means that all employees are hired and retained for specific project work. When the project ends, so could their employment.

I say could, only because there might be another similar project in the works that the employee could be added to. However, if another similar project is not scheduled, employees would look for a new employer.

Projectized organizations do not provide work stability, they are solely focused on completing project work.

What you need to remember for the exam, is in a projectized organization the project manager has all the authority, as all employees report directly to the project manager.

Matrix

A matrix organization is a company that puts emphasis both on the functional work structure as well as the project work. What you need to understand about a matrix environment is project team members essentially have two bosses.

In a matrix environment team members work on their assigned project work – where the Project Manager has authority – as well as their operational tasks – where their functional manager has authority.

There is a spectrum for matrix environments that range from weak matrix to strong matrix.

In a weak matrix the functional manager has much more authority than the project manager. This authority is highlighted by the fact that in a weak matrix a project manager is typically not called a project manager, instead they are referred to as Project Expediter or Project Coordinator.

In a strong matrix the project manager has more authority. The team members look towards the project manager to provide their work assignments. The project manager provides all managerial functions including team member evaluation.

Finally, a moderate matrix falls somewhere in between. Where the functional manager and the project manager hold equal authority over the project team members. One for the operational work, and one for the project work respectively.

An important item you should note about a matrix environment, is it is the most typical type of organizational structure you will see on the exam. What I mean is a matrix environment is the PMIs ideal environment. Unless otherwise specified you should assume that all questions utilize the matrix organization structure as framing for your answer.

Project Based Organization

Okay, okay, enough with the extra stuff, let’s discuss PBOs – that is what you came here for.

A PBO is an organization that creates temporary reporting structures in support of project work. PBOs create these temporary structures to help reduce barriers, which might exist otherwise, to ultimately allow the project team to be more efficient.

PBOs have an overall philosophy that project work is important, regardless of the organization’s overall structure (i.e., functional, projectized, or matrix.)

One confusion you might experience is separating projectized organizational structure from PBOs. Think of it like this, projectized organizations will hire and release based on project needs, there is no long term guarantee of employment – as we discussed above.

However, PBOs want to reduce barriers to aid project success. Employees in a PBO will likely experience various reporting structures throughout their career, but they will have a home even when their current project is complete.

With that said, a PBO can be a projectized organization, but it could also be functional or matrix. Just remember that a PBO creates temporary structures to accommodate project work, because of of the organization’s belief in the importance of project success.

One additional note, project managers could have some authority over the project team within a PBO as they may receive some direct reporting within a temporary structure.

PBOs on the Exam

Although I have provided you with some tips throughout the post about how you will see this information on the exam, there are a few additional items to point out to help you connect the information to other concepts you have learned in your preparation.

Enterprise Environmental Factors

When you consider organizational structure, for the exam purposes, you should think of all the concepts we address in this post, PBOs included, as the organization’s Enterprise Environmental Factors (EEFs).

As you will read within my peers blog post, EEFs are important to consider. For example, the EEF of organization structure can showcases an organization’s commitment to projects and help you understand the direct effects to your ability as a project manager.

Typical PBO Exam Questions

Most exam questions that contain these organizational structure concepts as an answer choice should be pretty straight forward. Here is one example question.

1. Maria, a senior accountant, just completed her tasks for a year long project to update the financial management system at her company. She received word that she will soon be supporting a project to procure and implement a new ERP system for the company, but first she will spend a little time completing general operations within the accounting department. Based on this information it sounds like Maria is working in what type of environment?
a. Projectized
b. Weak Matrix
c. Functional
d. Project Based Organization

1. D. It sounds like this company is creating temporary structures that are both functional and projectized, which sounds like a PBO. Did you think this sounded like a projectized organization? Well the trick here was Maria completes some general operational work in between projects. In a projectized organization there is not operational work.

PBOs Final Thought

I hope you learned a little more about PBOs and how they relate to the overall organizational structure.

Although I know this was a long winded discussion of PBOs, if nothing else please remember for the exam that PBOs can be present in any type of organizational structure, whether functional, matrix, projectized. PBOs have a general philosophy that project work is important and the organization will try and reduce any barriers to ensure project success.

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2 Responses to Project Based Organization: PMP Concepts to Learn

  1. Jane December 23, 2017 at 4:13 pm #

    How did you figure that the sample exam question refers to a projectized organization? What info in the paragraph gave that away? I only see a Functional org (doing general operations work and projects). I may be missing something. Thanks.

    • Magoosh Test Prep Expert
      Magoosh Test Prep Expert December 27, 2017 at 10:58 am #

      Hi Jane,

      I think the key here is that Maria is moving from project to project. A PBO creates temporary reporting structures and are organized around projects. The passage very clearly states that she has just completed one project and is moving to another project with a brief interlude to work on general accounting work. In a functional organization, she would stay in the accounting department instead of moving from project to project. Because her work is based around projects instead of just general accounting work, the best evidence is that she is working in a PBO. Does that help?


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