How Your Organizational Structure Impacts Your Projects

Published by Gavin Donnelly on

The structure of an organization can have big implications for how project management functions within the organization. The level of control project managers have over their projects is heavily influenced by factors such as chain of command, stakeholder influence, and competition for company resources. To see how different organizational structures can impact your projects, let’s take a look at three common types of organizational structures.

  1. Projectized Organizational Structure
  2. Functional Organizational Structure
  3. Matrix Organizational Structure

Projectized Organizational Structure

Project managers have the highest level of control in a projectized organization. In this type of organizational structure, the organization groups activities into portfolios and the project manager carries out these activities through projects. The project manager usually has dedicated resources, including full-time project teams, working under her/him. Project managers may be supported by a project management office in projectized organizations, but the project manager has the majority of the control over her/his projects and accepts full responsibility for their outcomes.

Impacts of Projectized Organization on Project Management

  • Project managers set priorities, assign resources, and directly manage team members.
  • Communication is quick and effective because there is a clear line of authority and reporting.
  • Decision making is fast and flexible.
  • Roles and responsibilities of team members can change from project to project.
  • Best suited to organizations that take on a variety of projects from outside clients.

Functional Organizational Structure

Functional organizational structure is the opposite of projectized organizational structure. These types of companies are structured into functional divisions that operate independently from one another and are managed by a functional manager. In these organizations, employees are grouped into a specialized division based on their field such as human resources, IT, or finance. In a functional organization structure, everyone reports to the functional manager of their department, instead of to a project manager. Project managers have the least amount of authority in these types of companies.

Impacts of Functional Organization on Project Management

  • Functional managers assign work and resources, instead of a project manager.
  • High levels of cooperation, communication, and accountability.
  • Roles and responsibilities of employees are fixed.
  • Project managers have minimal roles.
  • Works best for organizations that provide standardized goods and services.

Matrix Organizational Structure

In a company with a matrix structure, control is shared between project managers and functional managers. It is a combination between the projectized and functional structures. Resources can be transferred and shared between project departments and functional departments. Project managers are in charge of organising the work for their project teams, while functional managers retain control of their departments. Employees are considered to be shared resources between specialized functional departments and projects. The degree to which control is shared in a matrix organizational structure can vary from company to company.

Impacts of Matrix Organization on Project Management

  • Resources can be shared between projects and functional departments.
  • The organization is more integrated because employees communicate more across divisions.
  • Project managers retain control over their projects.
  • Functional managers are responsible for specialized functional operations.
  • Best suited to organizations that have a mix of ongoing operations and incoming projects.

Summarizing Organizational Structure’s Impact on Project Management

Project managers hold the most important role in a company with projectized organization and are completely responsible for the allocation of resources and the outcomes of all the different projects in their portfolio. This is especially beneficial in a project-based firm that takes on a lot of incoming projects, such as in the construction industry.

In a functionally-structured organization, project managers have little to no role in the allocation of resources and relies on the cooperation of functional managers to get the resources they need to complete projects. The functional managers have complete control over specialized departments in the company, and are responsible for that department’s productivity and results. This type of organizational structure works well in a company that does mainly repetitive ongoing work.

The matrix organizational structure is a dynamic structure that divides up control over resources between both project managers and functional managers. Resources are used very flexibly between functional departments and project teams, and the companies are much more integrated as a whole. When used effectively, a matrix organizational structure can provide the best of both worlds to maximize productivity within an organization.

Categories: Project management


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