Chapter 11: Understanding the Organizational Structure

In the previous chapter, we saw that an organizations policies and culture can have a significant impact on a project. Towards the end we also saw that, an organizations structure too would have an impact on a project. In this chapter, we are going to look closely at the organizational structure.

So, lets get started!!!

Organizational Structure

To do your job efficiently and effectively, you must figure out what kind of organizational structure you are in. Excepting the hand full of people who own the companies, the rest of us are all working class. We work for some company and get paid. Every individual must understand his/her organizations structure in order to blend into the organization as well as to carry out his/her duties without any issues.

Now, you as the project manager too are part of some organization and your organizations structure has a direct bearing on the project that you manage. So it is imperative that, you as the project manager understand the various structures an organization could take.

From the perspective of structure, organizations fall into three categories:
1. Functional organizations
2. Projectized organizations and
3. Matrix organizations.

Functional Organizations

A functional organization has a traditional organizational structure in which each functional department, such as engineering, marketing, and sales, is a separate entity. Look at the pictorial representation below:

As you can see, there are distinct departments and each has a manager and a set of staff who work for him. Each of these managers in turn report to someone higher up in the ladder, for ex: The CEO.

Depending on the size of the organization, there could be a hierarchy within these manager and other designations like director, managing director etc could be available who in turn report up to the CEO or the owner of the company.

The scope of a project in a functional organization is usually limited to the boundaries of the functional department. Therefore, each department runs its projects largely independent of other departments. When a communication needs to occur between two departments, it is carried through the hierarchy of functional managers.

For Ex: If someone from the Sales team needs to communicate with someone in the Marketing team, he would route it through the Sales Manager who in turn will route the information through the Marketing Manager.

All the managerial power or authority in simple terms, in a functional organization is vested in the functional managers, who control the team members’ performance evaluations, salaries, bonuses, hiring, and firing.

The Project Managers are held responsible for the project results even though they have little say over resource assignments and holding team members accountable for their work. (Because the power lies with the functional manager) As a result, project managers in a functional organization are often frustrated. Their work is, at best, challenging. You, as a project manager in a functional organization, can benefit greatly from your good relationships with functional managers and team members. Networking and leadership are the key points to your success in a functional organization.

A project manager in a functional organization has the following attributes:

• The project manager’s role and the project team are part-time.
• There is little or no authority over anything: resource assignments, team members, and so on.
• The project manager reports directly to a functional manager.
• There is little or no administrative staff to help with the project.

Projectized Organization

A projectized organization’s structure is organized around projects. Most of the organization’s resources are devoted to the projects. Look at the pictorial representation below:

As you can see, the project team members report directly to the project manager who has a great deal of independence and authority (Imagine the structure in the Functional Organization) He reports directly to the CEO and has great control over his team and especially on what happens to his team members (Unlike the functional structure where the team is at the mercy of the functional manager)

Along with the responsibility comes the high level of autonomy over the projects. The projects managers are a happy bunch of people in a Projectized organization. The functional and projectized organizations are like north and south poles of a magnet.

A project manager in a projectized organization has the following attributes:

• The project manager is full-time.
• The project manager has full authority over the project team.
• There is full-time administrative staff to help with the project.

Matrix Organization

A matrix organization is organized into functional departments, but a project is run by a project team, with members coming from different functional departments. Look at the pictorial representation below:

As you can see the project managers are a separate group and do not have any clash of interests like in a functional organization with the functional managers.
On the spectrum of a project manager’s authority, matrix organizations are in the middle of two extremes: functional and projectized organizations.

The matrix organizations are generally categorized into a strong matrix, which is closer to projectized structure; a weak matrix, which is closer to functional structure; and a balanced matrix, which is in the middle of strong and weak.


Let us Summarize the influences of the different organizational structures on a Project.

Influences of Organizational Structures on Projects

Project Characteristic	Functional	Matrix	Projectized
Project manager’s authority	None to little	Limited to high	High to full
Project manager’s role	Part-time	Part-time to full-time	Full-time
Project management administrative staff	None to part-time	Part-time to full-time	Full-time
Project budget controlled by	Functional manager	Functional manager, project manager, or both	Project manager
Resource availability	None to little	Limited to high	High to full

Let us wrap up this chapter by Summarizing the influence of various types of matrix organizations on a project.

Influences of Matrix Organizational Structures on Projects

Project Characteristic	Weak	Balanced	Strong
Project manager’s authority	Limited	Low to moderate	Moderate to high
Project manager’s role	Part-time	Full-time	Full-time
Project management administrative staff	Part-time	Part-time	Full-time
Project budget controlled by	Functional manager	Functional manager, project manager, or both	Project manager
Resource availability	Little	Low to moderate	Moderate to high

We have explored the three basic organizational structures. In the real world, some organizations use a hybrid (mix) of these structures to meet their varied needs. For example, a functional organization may run a specific project just like it would be run in a projectized organization. Such organizations are called composite organizations.

Obviously, organizational structure and organizational culture heavily determine the project environment. Two other important factors that influence the project environment are enterprise environmental factors and organizational process assets. We will be looking at these in the next chapter.

Previous: Organizational Influence on Projects

Next: Environmental Factors & Process Assets