Explain formal and informal organization.
1 Answer

An organization's structure reveals the formal groupings and specializations of activities.

Generally, these groupings and activities are documented in an organizational chart to clarify and portray the lines of authority, communication, reporting relationships; and responsibilities of individuals and groups within the organization.

Formal Organiztion:

  1. An organization's formal structure provide us with an indication of how a project will interface with the parent or supporting organization.
  2. The formal organizational structure will determine how resources are allocated, who has authority over those resources, and who is really in charge of the project.

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  1. The above figure illustrates the three most common structures-the functional, matrix, and project-based organization.
  2. An organization may choose to combine these forms any number of ways to create a hybrid organization such as a functional, matrix or project matrix.

The Functional Organization:

  1. The functional organizational structure may be is a traditional organizational form.
  2. This structure is based upon organizing resources to pcrform specialized tasks or activities in order to attain the goals of the organization.

  3. The above figure illustrates individuals and subunits(i.e., groups of individuals) perform similar functions and have similar areas of expertise.

  4. Subsequently, projects are managed within the existing functional hierarchy.
  5. Projects in a functional organization are typically coordinated through customary channels and housed within a particular function. For example, a project to install a new machine would be a self-contained project within the manufacturing finction because the expertise requircd for the project would reside within the manufacturing subunit.
  6. The project manager would most likely be a senior manufacturing manager, and the project team would he made up of individuals from the engineering and production areas.
  7. As a result, the manufacturing subunit would be responsible for managing the project and for supplying 'and coordinating all of the resources dedicated to the project.
  8. However, a project may cross functional boundaries.
  9. In the case of an information technology project, the knowledge and expertise to design and develop an application may reside in the information systems subunit, while the domain or functional knowledge resides in one of the functional subunits.
  10. As a result, the project team may consist of individuals from two or more functional areas. There are two main issues that must be resolved at the outset of a project: Who will be responsible for the project? What resources will each subunit provide?

The Project Organization:

  1. At the other end of the spectrum from the functional organization is the projcct organization .
  2. Sometimes referred to as the pure project organizution, this organizational structure supports projects as the dominant form of business.
  3. Typically, a project organization will support multiple projects at one time and integrate project management tools and techniques throughout the organization.
  4. Each project is treated as a separate and relatively independent unit within the organization.
  5. The project manager has sole authority over and responsibility for theproject and its resources, while the parent or supporting organization provides financial andager and the project team are typically assigned to a particular project on a full-time basis.

The Matrix Organization

  1. The third type of organizational form is the matrix structure.
  2. The matrix organization is a combination of the vertical functional structure and the horizontal project structure.
  3. As a result, the matrix organization provides many of the opportunities and challenges associated with the functional and project organizations.
  4. The main feature of the matrix organization is the ability to integrate areas and resources throughout an organization.
  5. Moreover, people with specialized skills can be assigned to the project either on a part-time or on a more permanent basis.
  6. Unfortunately, unity of command is violated since each project team member will have more than one boss, leading to the possibility of confusion, frustration, conflict, and mixed loyalties.
  7. The functional manager will be responsible for providing many of the people and other resources to the project, while the project manager is responsible for coordinating these resources.
  8. In short, the project manager coordinates all the project activities for the functional areas, while the functional areas provide the wherewithal to carry out those activities.
  9. The matrix organization can take on various forms that can create hybrid organizations.
  10. The most common forms include:
    • Balanced matrix--In the balanced matrix form, the project manager focuses on defining all of the activities of the project, while the functional managers determine how those activities will be carried out.
    • Functional matrix-The functional matrix organization tends to take on more of the qualities of a functional organization. Here the project manager focuses on coordinating the project activities, while the functional managers are responsible for completing those activities that are related to theirparticular area.
    • Project matrix-It follows, then, that a project matrix structure would take on more of the qualities of a project organization. In this case, the project manager has most of the authority and responsibility for defining and completing the project activities, while the functional managers provide guidance and resources, as needed.

Informal Organization:

  1. The formal organization is the published structure that defines the official lines of authority, responsibilities, and reporting relationships.
  2. While the formal structure tells us how individuals or groups within an organization should relate to one another, it does not tell us how they actually relate.
  3. In many cases the informal organization bypasses the formal lines of communication and authority because of the inevitable positive and negative relationships that occur over time in any organization.
  4. While communication in the formal organization is supposed to flow through published channels, it can flow in any direction and at a much faster pace through the network of informal relationships-the famous grapevine.
  5. Power in an organization, therefore, is not only determined by one's place in the hierarchy, but also how well one is connected in the informal network.
  6. A person's degree of connectedness in the informal organization largely determines what information is received or not received.
  • Stakeholder: Stakeholders are individuals, groups, or even organizations that have a stake, or claim, in the project's outcome. Often we think of stakeholders as only those individuals or groups having an interest in the successful outcome of a project, but the sad truth is that there are many who can gain from a project's failure. While the formal organization tells us a little about the stakeholders and what their interests may be, the informal organization paints a much more interesting picture.
  • Stakeholder Analysis A published organizational chart is usually fairly easy to acquire or create. The informal organization may be more difficult to understand or explain, even for those well-connected individuals. To help the project manager and project team understand the informal organization better, one can develop a stakeholder analysis as a means of determining who should be involved with the project and understanding the role that they must play. To develop a stakeholder analysis, one may start with the published organi7ational chart and then add to it as the complexities of the informal organization become known. Since the purpose of the stakeholder analysis is to understand the informal organization, it may be best to view this as an exercise rather than a formal document to be made public. The following steps provide a guide for developing a stakeholder analysis:

i. Develop a list of stakeholders. Include individuals, groups, and organizations that must provide resources to the project or who have an interest in the successful or unsuccessful outcome of the project.

ii. Next to catch stakeholder, identify the stakeholder's interest in the project by giving the stakeholder a "1" if they have an positive interest in the project's outcome or a "-1" if they have a negative interest. Neutral individuals or groups can be given a "0". If you are not sure, then give a stakeholder a "?".

iii. Next, it may be useful to gauge the amount of influence each stakeholder has over the project. One can use a scale from 0 to 5, with zero meaning no influence and five meaning extremely high influence-that is, this person or group could terminate the project.

iv.The fourth step involves defining a role for each of the stakeholders. For example, every project should have a champion or someone prominent within the organization who will be a public supporter of the project. In addition, it is important to identify the owner of the project. This list may include an individual, group, or organization that will accept the transfer of the project's product. Other roles may include consultant, decision maker, advocate, ally, rival, foe, and so forth. Use adjectives or metaphors that provide a clear meaning and picture of the stakeholder.

v. Once you determine who has an interest in the project, what that interest is, and what influence they may have, it may be useful to identify an objective for each stakeholder. This may include such things as providing specific resources, expertise, or guidance navigating through the political waters of the organization. In the case of potential adversarial stakeholders, this may require getting their acceptance or approval concerning certain aspects of the proect.

vi. Lastly, it is important to identify various strategies for each stakeholder. These strategies may require building, maintaining, improving, or re-establishing relationships. In short, this list should include a short description of how the objective could be attained.

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