What is a Project-Based Organization?

What is a Project-Based Organization?

According to PMBOK®, Project-based organizations (PBOs) refer to various organizational forms that create temporary systems for carrying out their work. Businesses that need and expect fast innovation are most likely to be and suited to project-based organizations. Many businesses like entertainment, construction, aerospace, etc. organize their work by dividing it into various projects. In a functional structure, departments are created to organize work based on specialties like marketing and finance. However, in a project-based organization, most of the business functions are organized in projects. A small-business manager should consider adopting a project-based structure as it improves the efficiency of the work. Implementation of project-based management also gives increased responsiveness, allowing him to adjust quickly to market changes.

Basic Project-Based Organization Structure

Basic Project-Based Organization Structure

As the name suggests, In PBOs, projects are the main units of conducting undertakings. There is a CEO or director at the top and managers of various departments under him. Under them are project teams consisting of various members like the analyst, architect, developer, tester, etc.

PBOs can be formed by different types of organizations including functional, matrix, or projectized. Implementation of project-based system in the organization may diminish the hierarchy and bureaucracy in the organization. PBOs’ focusses on the final result of the projects instead of unnecessary politics and positions.

Functioning of Project-Based Organization

A project focusses on one specific task or target. It could be for internal development or for a client. To utilize these business opportunities, companies set up projects to work according to individual needs. The client suggests feedback and the team works according to it.

The manager is responsible for overall quality of the project. He ensures that projects have access to the team with the right functional expertise. The project managers’ responsibilities include choosing team members, assigning tasks to them, and monitoring performances. The team members execute all the plans and do all the work.

Advantages of Project-Based Organization

Numerous advantages are associated with project-based organization:

  • Opportunity: Due to the close interactions between project tasks and strategies of the organization, its products and services are improved, which in turn increases the business value and thus, opportunities for innovations and improvements are also enhanced.

  • Tact: The dynamic nature of a project allows its members to be exposed to different knowledge and skills. They get expertise in dealing with new and emerging challenges.

  • Knowledge Management: An uninhibited flow of knowledge transfer is encouraged in project-based organizations. They create 'lessons learned' repositories in which they share and carry forward their experiences and knowledge to successive projects, thus improving the overall standard and quality of project performance.

  • Effectiveness: The structural flexibility of PBOs facilitates the allocation of physical and human resources to endeavors that are of most benefit to the organization.

  • Equality: The chances of internal politics and favoritism reduce to a great extent.

  • Appraisals: Since the manager pays individual attention to each member of his team appraisals, and dedication of team members increases.

  • Flexibility: The response time and flexibility improves because the manager has direct authority over project operations.

Disadvantages of Project-Based Organization

  • A project team is meant for delivering results, preferably without anyone’s help. Isolation from other teams could prove to be a drawback.

  • With less communication between teams, knowledge transfer might be a problem.

  • When personnel keeps shifting from one project to another, career continuity and professional growth of employees suffer.

The disadvantages in comparison to advantages are fairly insignificant and negligible. Project-based organizations are especially suitable for small or medium business organizations, desiring fast development of the organization and high-quality products. PBOs are based on and work on the philosophy that every little fragment of the work is important, irrespective of the size and structure of the organization. That’s why work is divided into projects so that individual and exclusive attention can be paid to the work.


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