Project Management Organizational Structure

Project management structure is very vital to the success of any project team; an organization or
project team that is structured gives support to the work that’s being done. Misaligned project
management teams or organizations create a negative impact on the outcome of a project. This
is simply because the organizational structure has an influence on the authority of the project
manager, thereby affecting how projects are run. It goes without saying that non-structured
project management teams often lack guidance and a guided team drives successful projects.

we are going to be looking at the project management organizational structure from two angles;
we will be studying them in terms of who the project leader is and who is responsible for
decision making where the project is concerned.

As we know, an organization could be defined as a group of persons who come together to

accomplish set goals; in order to successfully achieve those set goals, a project manager would
need to familiarize himself with the project management office structure.

Three Types of Project Management Structures

An organizational structure could be described as the official line of authority and control within
an organization. Project management structures tell us how reporting relationships work in a
particular organization.

Depending on the environment the organization finds itself operating in, the goals they set for
themselves and the nature of work being done, you would find that organizations are structured
in 3 ways:

 Functional Organizational Structure

 Matrix Organizational Structure – This can be further broken down into – Balanced matrix,
Strong Matrix, and Weak Matrix
 Projectized Organization Structure

Now that we know how organizational structures are categorized, let’s take a closer look at each
one of them to see what makes them unique.

Functional Organizational Structure

In a functional organizational structure, you would find the components of a hierarchy
system where authority-driven decisions on budget, schedule, and equipment rest on the
shoulders of the functional manager who possesses a significant level of expertise in the same
field.

That is to say that the project manager, in this type of organization has little to no authority here;
in some functional organizations, that position does not even exist.
What would you find, however, is that the work is broken down into departments such as the
human resource department, sales department, finance, public relations, administration, etc.

In simple terms, it can be likened to that of a more traditional company where staff is presided
over by a supervisor, based on their functions within the organization and communication is
most often done through the department heads to senior management.

What is fascinating about this type of organizational structure is that employees appear to be
more skilled in their respective departments, thereby leading to greater work efficiency.
Everyone knows who to hold accountable if something were to go wrong as responsibilities are
predetermined.

On the downside, the work may prove monotonous over time, which could result in less
enthusiasm and reduced loyalty to the organization. In addition to that, you would also find that
cross-departmental communication becomes poor and the high level of bureaucracy could affect
decision-making negatively.

1. Functional Organization

The Functional Organization groups workers based on their area of specialization.

This structure is an extension of the Line Organization. The functional manager leads
the team and manages all the operations or businesses.

The Functional Organization manager enforces directives within a clearly defined

scope of authority. This concept originated with Fredrick W. Taylor.

Here you classify workers according to their functional roles and department. Some of
the general departments under this are

- Finance

- HR

- Sales

- Customer service

- Supply Chain, etc.,

The organization's head is the president, followed by the vice president, and the chain
goes on. Furthermore, the leaders of departments foresee their departmental
performance. So they collectively help the organization control quality and
uniformity.
The structure positions departments vertically and disconnected from others. Hence
the name “silos.” The department heads manage communication between the top
management and his subordinates.

The project manager has a minimal role to play or may not have a designated position.
Generally, you'll play the role of an expediter or work as a coordinator. While as a
functional manager, you'll deal with

- Budget allocation

- Resource allocation, and

- Decision making.

This type of organization is suitable for manufacturing or engineering companies. It

supports ongoing operations and practices for producing standard products.

Advantages

Some of the main benefits of this type of organization are:

 It groups employees based on functional skills for a higher degree of performance.

 Employees have experience in the same field, resulting in higher output. Also, they deliver high-
quality services and results.
 Accountability is evident, as the roles and responsibilities are clearly defined.
 Hierarchy is visible and no need for multiple reporting
 No duplication of work as each department is different. Also, the job description is clear.
 Career path for the staff is clear and visible
Disadvantages

 Employees get bored from the routine and lose enthusiasm.

 It limits the management skills of functional managers. Hence, they face restrictions on their growth
path and remain specialists. So they're not prepared for top management posts.
 Departments are more concerned with their departmental goals. Hence may be less responsive to the
organization’s overall objectives.
 Hiring costs are too high as high-skilled employees cost more.

It causes conflicts in making critical decisions as a result of bureaucratic hierarchy. Functional managers have
full authority and may make arbitrary decisions.

Projectized Organizational Structure

The projectized organizational structure is the complete opposite of the functional organizational
structure even though the organization may still group staff according to their work functions.

In this case, the project management team structure is organized in such a way that the project
manager has project authority. He has jurisdiction over the project’s budget, schedule, and the
project team. You would find him at the top of the hierarchical structure, calling all the shots;
with employees playing supporting roles for the project. At the end of the project, the project
team members are released and resources directed towards more relevant areas.

What’s great about this kind of structure is that there is a clear, established line of authority;
resulting in faster decision-making and approval. Communication becomes easier and more
effective and project team members gain more experience working on different types of projects
as the need for them arises.

A major disadvantage to this type of organizational structure, however, would be that employees
could see themselves being under a lot of pressure most of the time, especially if they happen to
work on multiple projects at the same time. This often leads to poor communication amongst the
team members as everyone is left more or less playing “catch-up”.

Project organization is a temporary setup formed for specific projects. It's also called
“projectized organizational structure.” The project manager assigned for the project is
the head of this structure.

Once the project is complete, you may choose to dismantle this setup or move it to
form a new project. In the case of a new project, the project manager might have to
reshuffle the staff to fit the new plan. You’ll hire resources or specialists from
different functional departments.
As a project manager, you can use allotted resources until completion and closeout.
Albeit you're accountable for all the activities and timely completion of the project. In
other words, you must spend based on the project budget.

The manager assigns clearly defined tasks to each of the team members, along with
the complete schedule.

These types of organizations are useful when:

- The project scope is complete, and objectives are clearly defined

- Project is unique and independent

Advantages

 Easy to communicate, hence can stay up to date

 The team can have a strong sense of identity as all are working together to achieve a common goal
 Manage resources efficiently and effectively

Disadvantages

 No clear growth path for the team once the project gets completed
It's expensive because the organization dedicates all the specialists for one single project.

Matrix Organization

Matrix Organizational Structure

The matrix organizational structure can be found lying somewhere between the functional
organizational structure and the projectized organizational structure depending on what type of
matrix structure is being run.

For instance, the strong matrix organizational structure has some similarities with that of a
projectized organizational structure in the sense that the project manager is responsible for a
project. If the organization is running a weak matrix structure, then the project authority would
fall to the hands of a functional manager – as it is in a functional organization. Interestingly
enough, in a balanced matrix organization, both the project manager and the functional manager
shares equal authority for the project.

If an organization finds itself working in a dynamic environment, then this might be the right
structure to run with it and it promotes greater efficiency, helping the organization respond to
customer demands or changes in the marketplace, faster.

This is easily achieved because while the project manager exhibits project authority in a
horizontal manner, the functional manager does so in a vertical, flowing downwards. For
example, the project manager could be responsible for handling project schedule or budget while
the functional manager would be responsible for outlining and distributing responsibilities,
overseeing the performance of the equipment, etc.

This one is the combination of a projectized and functional organization. This hybrid
organization overcomes the limitations of each organization. Here, both the functional
and project managers share their respective authorities.

Project managers are generally responsible for

- Overall integration

- Project planning

- Execution of the project, and

- Completion of project activities.

All activities must be done using the assigned resources.

The functional managers are concerned with the operational aspects of the project.
They’re also responsible for providing technical guidance.

The functional staff specializes in the skills required for the project. Though project
managers manage the project staff, functional managers control the process.

This type of organization is most useful when workers must share available resources.
The combination achieves high efficiency and better usage of available resources.
Also, they adapt better to the changing trends.

You can further classify the Matrix Organization into

- Balanced

- Strong and

- Weak

The authority level that both functional and project managers share determines its
strength.

Advantages

 It helps in sharing resources efficiently

 Decision making is balanced and flexible
 Staff members can communicate with each other across boundaries
  Pleasant environment
 It has a clear career graph and job security; hence, members would be more loyal to the organization

Disadvantages

 The dual reporting structure add confusion and results in conflicts

 Create issues when there is no coordination between functional and project managers
 Resources may be under-utilized if you don't assign them with skill-related tasks
 Costly to maintain as it has many managers

You need to maintain resources throughout the project, no matter how long it takes