Understanding Organizational Structures for PMP® Exam

Organizational structure is an Enterprise Environmental Factor (EEF), internal to the organization.

Various types of organizational structures

The PMBOK^® Guide, Sixth Edition lists the following types of organizational structures:

• Organic or Simple
• Functional (centralized)
• Multi-divisional (may replicate functions for each division with little centralization)]
• Matrix-weak
• Matrix-balanced
• Matrix-strong
• Project-oriented
• Virtual
• Hybrid
• PMO

You can refer to Table 2-1, PMBOK^® Guide, Sixth Edition to understand the influences of the above organizational structures on project.

In this article, I am going to focus only on three major types of organizational structures, namely

1. Functional organization
2. Matrix organization and
3. Project-oriented (or Projectized) organization

Before moving on to the details of the organizational structures, let us understand the difference between the functional manager and the project manager.

• A functional manager provides management oversight for a functional unit in an organization.
• The project manager leads the team that is assigned to achieve the objectives of a project.

Organizational structures are about

• Who has control over the resources (physical resources, budget and the project team)? Is it the project manager or the functional manager? and
• How communication flows within a project?

Project Manager’s Authority

Functional organization

In a functional organization, staff members are grouped by specialty (like Engineering, Sales, Accounting, Manufacturing, etc.); specialties may be further sub-divided (for example, sales function may further be sub-divided into customer service and marketing).

Each department will do its project work independently of other departments.

Functional manager manages the project budget.

Project manager’s role is only part-time.

Advantages of functional organization

• Each employee has one clear superior.
• Clearly defined career paths for employees.

Disadvantages of functional organization

• The project manager has little or no authority.
• Employees are interested in functional work and may not be loyal to the project.
• Long communication channels as all communications have to be routed through the functional managers.

Matrix Organization

It is a blend of functional and project-oriented organizations.

Matrix organizations are classified as weak matrix, balanced matrix and strong matrix depending on the power and influence of the project manager.

Advantages of matrix organizations

• Clearly defined career paths for employees
• Better communication channels
• Improved authority to the project manager, compared to functional organization

Disadvantages of matrix organizations

• The main disadvantage of matrix organization is that the project staff is expected to report to “two bosses”, the functional manager and the project manager.

Weak Matrix Organization

Weak matrix maintains many of the characteristics of a functional organization.

Functional manager manages the project budget.

Project manager’s role is only part-time.

Here, the role of the project manager is limited to a Project Coordinator or Project Expediter.

• A project expediter works as staff assistant and communications coordinator. He cannot personally make or enforce decisions.
• Project Coordinators have power to make some decisions and have some authority.

Balanced Matrix Organization

While functional organization and weak matrix does not have a full-time project manager, balanced matrix recognizes the need for a project manager.

The project manager is a full-time role with more authority in balanced matrix. But, it does not provide the project manager with the full authority over the project and project funding.

As the name (Balanced) indicates, a balance is maintained between the functional manager and the project manager. Project decisions and budget responsibilities are shared between the functional manager and the project manager.

Strong Matrix Organization

Strong matrix maintains many of the characteristics of a project-oriented organization.

Strong matrix has full-time project managers with considerable authority.

Project manager’s role is full-time.

The project manager has more authority over the project than the functional manager. The functional manager is more concerned with making sure the team members’ professional development and organizational needs are met.

Project manager manages the project budget.

Project-oriented organization

Most of the organization’s resources are involved in the project work.

Project manager’s role is full-time.

Project managers have a great deal of independence and authority.

Project manager manages the project budget

Advantages of project-oriented organization

• Team members are loyal to the project.
• More effective communication.

Disadvantages of project-oriented organization

• Demotivation among the team members, especially towards the end of the project, as their services may be terminated after the project.
• Might lead to duplication of resources

Conclusion

What kind of organizational structure do you work in?

Share your thoughts about the various organizational structures and how it influences project management.