Organizational structure defines the various entities within an organization and the condition in which the organization operates. It is an Enterprise Environmental Factor (EEF), that can affect the availability of resources and thereby influence how projects are conducted. There are different types of Organizational structures based on how the organization operates and the power structure in it. They are Functional Organizational Structure, Projectized Organizational Structure, Matrix Organizational Structure, etc.
Organizational Structure Types – Functional, Projectized, Matrix
Check PMBOK 6th Edition, Page 47, for the different types of Organizational structures, their comparison, and their influence on projects.
Functional Organization Structure
- The organization’s staff members are grouped by specialty, such as marketing, finance, engineering, etc.., forming departments.
- Each department will have its own projects, and each department executes its projects independently of other departments.
- Staff will have project work in addition to regular departmental work.
- The functional manager has the highest authority, manages the budget, etc.
- The role and authority of a Project manager in this type of Organization structure are little to none.
- The project Manager and Project Management staff role is part-time in many cases.
Projectized Organization Structure or Project-Oriented Organization
- The entire organization is organized in the form of projects.
- The project manager has full control of the project and its resources.
- The staff has only project work, and when the project finishes, they are assigned to another project.
Matrix Organization Structure
- It is a Blend of Functional and Projectized organization structures.
- Project team members report to two bosses 1) Functional Manager 2) Project Manager
- Team members do both project work and departmental work.
Based on the relative level of power and influence between the functional manager and Project manager, the matrix organization structure is further divided into three types
- Strong Matrix – Power is with the Project Manager (PM), and he has a full-time designated role.
- Weak Matrix – Power is with Functional Manager (FM), Project Manager’s role is part-time, he is just a Project Coordinator or Project Expediter
- Balanced Matrix – Power is shared between the Project Manager (PM) and Functional Manager (FM). The need for a PM is recognized, however, PM does not have full authority over the project and project funding. PM’s role is part-time, and may just be a Project coordinator or project expediter.
Hybrid or Composite Organization Structure
Multiple Organization structures are involved at various levels in a Hybrid or Composite organization structure. For example, A functional organization may create a special project team to handle a critical project and allow a Projectized structure for that project. Such a project may develop its own set of operating procedures and reporting formats etc.
Virtual Organization structure
- The Project Manager’s (PM) authority is low to moderate in this type of Organization.
- PM’s role and Project Management staff roles could be full-time or part-time.
- The project budget is managed by both the Project Manager (PM) and the Functional Manager (FM).
PMO Organization Structure
Here PMO means – Portfolio, Program, or Project Management Office
- PM’s authority is High to almost total
- The project Manager has full control over the project budget.
- Project Manager and Project Management staff are full-time roles.
How to select an Organizational Structure
There is no one-size-fits-all approach for choosing an Organizational structure for an Organization. Every organization is different and there are numerous factors in play, and each factor may carry a different level of importance in the process of choosing an organizational structure.
Important factors to consider while selecting an organizational structure are below
- Alignment with Organizational Objectives
- Special capabilities
- Clear authority structure
- Clear path for escalation of decisions
- Delegation capabilities
- Accountability and responsibility assignment
- Adaptability of design
- simplicity of design
- Cost considerations
- Physical location
- Clear communication