The term functional organization is used specifically for the purpose of describing a hierarchal group, company, or organization in which it is determined that each individual and particular employee should be charged with the task of defining an individual and unique person who will serve as the organizational leader and/or manager. Also, the functional organization should essentially take the entirety of the staff, analyze all of their strengths and weaknesses, group the individual staff members into categories based on the aforementioned strengths and weaknesses, and than allocate those staff members to tasks that effectively utilize those skills that they may posses. Additionally, each specific category should be managed by an individual who is of particularly advanced qualification in that area. The groups can be determined on a rolling basis, that is, as individuals seek to move to another group, or receive additional training, education, or certification, then they may be reassigned to different groups to most effectively utilize the strengths of all members of the project team.
This term is defined in the 3rd and the 4th edition of the PMBOK.