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Organization Structure

Organization structure – forms and functions!

Like it or not, the way the organisation in which the project takes place, is structured, will have a profound effect on how the project works. Each organisation has its own culture and style of working.

Most organisation structure arrangements are structured in one of 3 ways: functional, projectized, or matrix. As a project manager you must know how your organisation is designed.

The style of these three organization structure types will dictate how the project needs to be managed. There is another aspect of organisations to consider. Are they risk averse or willing to take on risky projects?

Organization Structure – The functional organisation

This is the traditional way of organizing a business, and has its name suggests, means that the organisation structure is split into its various functions. For example, under the leadership of the CEO, the main functions such as engineering, marketing, manufacturing, etc, report upwards to the CEO.

Each function has its own staff beneath it. Clearly, an employee reports to only one boss, and the chain of command is vital.

This type of organisation structure is sometimes called a stove pipe type of organisation. So-called, because each reporting line is only concerned with their own functions. Problems occur when one function employee needs to speak to another functions employee.

The only way to do this is to escalate upwards to the functional head, then across to the other functional head, and back down again. A clumsy and inefficient way of working, however each function works as a very effective team and is very goals focused.

Another advantage is that people with similar skills, knowledge, and experience are easier to manage, making work assignments much easier.

A big disadvantage to a functional organization structure for projects is that the project manager will have to work with other functions, but to do so with no formal authority.

Within a function, several projects at any one time may have to compete for the available resources, and project team members will have their first loyalty with their line or functional manager.

Organization  Structure – Projectized organisations

In this organisation structure, each project manager reports directly into the CEO. Each project manager will have their own full-time team members and staff. This would only suit and organisation where projects and their delivery were the core business.

Project managers have the ultimate authority over the project, but disadvantage is that as projects finish the project teams are dissolved and may find themselves out of work. Team members sit and work in the same physical area as each other.

Organization Structure – Matrix organisations

Employees in a matrix organisation are structured vertically in their functions, but horizontally to a given project manager or more.

Functional managers look after” pay and rations”, and the project manager gives out work for their projects.

Both the operational managers and the project managers contribute to performance reviews for the project teams.

The operational manager acts of course, as the resource manager and should be consulted when a project manager seeks resources for their projects. Some compromise is often needed when there is not enough functional staff to serve all projects. When this happens the project managers will need to negotiate with other project managers for resources.

There are two forms of Organization Structure matrix organisation; the strong matrix, and the week matrix. For both of these, the vertical functional teams are the same.

The weak matrix.

The functional managers have all the Power in a weak matrix, and project managers act as project organizers with little or no authority.

The strong matrix.

Here, the Power rests with the project manager, and they are able to force the functional managers to give them their best resources. The project managers can then negotiate these resources among themselves, leaving out the functional managers.

The project managers have their own boss, in effect a functional manager, who is the manager of project managers.

The balanced matrix.

For this, each manager has responsibility for their parts of the project organisation and staff get assigned based on the needs of the project not on the strength of the manager’s position.

These days it is rare than organisation would be a pure functional one or a pure projectized one.

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David spent 25 years as a senior project manager for US multinationals and now develops a wide range of project-related video training products under the Primer brand. In addition, David runs training seminars across the world, and is a prolific writer on the many topics of project management. He currently lives in Spain with his wife Jude.

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