An organization that is using projects on a regular basis falls under one of two categories: projectized organizational structure or matrix organizational structure. Projectized organizations have unique deliverables as a normal part of daily operations and therefore require projects to manage the development of these deliverables. The efficiency of the organization is in the management of all the activities required to produce these unique deliverables, and project managers are hired to design a project as well as manage the project to closure. Matrix organizations are similar to functional organizations that simply utilize projects as a regular part of their day-to-day operations. This is typically in the form of new product development, process development and improvement exercises conducted, and engineering and manufacturing environments.
In the projectized and matrix organizational structures when projects are used on a regular basis, the need for further organization might require grouping of similar projects into what is called a program. If an organization has a requirement by a specific customer for several different project output deliverables, each of these projects can be grouped into one single program designated for a specific customer. In other cases, the organization might have several products that fall within a similar category and might want to group projects into a program based on product type. Organizations typically hire a program manager to oversee like projects within a program to ensure that the program directive is being carried out.
If an organization grows in size such that there might be several programs operating, as well as many projects, the organization might group programs and projects into larger categories called portfolios. Organizations typically hire a manager to oversee a portfolio because the portfolio is a large component of programs and projects specific to a particular customer, product type, or market. This is another way to strategically group projects and programs to accomplish organizational objectives. Organizations can divide the operations into large divisions called portfolios that focus on specific elements within the organization. The focus within the organization of grouping work activities into projects, grouping like projects into programs, and grouping various programs and projects into large portfolios is all part of an efficiency exercise in the strategic use of project management.