Organizational Structures: How do they impact the project?

Organizational structureWhat management activities would you perform if you have absolute control over everything on the project?

Yes, quite a lot of them.

From managing people, to delivery, to planning and execution, to keeping customer as well as your own management happy with the progress of the project.

In short, a project manager is responsible for everything that is required to be done to make the project successful (unless she works with Functional organization, we shall see more of this later in this lesson).

Some of them are listed in the image below.

(Click on the image to see in new window)

Project manager's areas of responsibilitiesFigure 1: Areas of responsibilities for project manager

In reality thought, a project manager does not get to do all of it. What she can do actually depends on the type of organization, or the organizational structure, that she is part of.

A project manager’s work can be broadly categorized into two areas –

  1. People management
  2. Project management

Irrespective of which type of organization you work for, you get to handle some aspect of project management for sure, and may or may not get to do people management.

Consider the scenario –
Nancy has a designation of Project Manager. She attends all team meetings, makes notes of all decisions taken. She reports any issues team that members have with appropriate people, and even ends up doing some of administrative work for them. She does not get to decide on who will work on the team though, nor can she determine budget.

What kind of organization do you think she works in?

For one, she does not seem to have much of authority. She is a project coordinator or project expediter. These positions are found in a functional or weak-matrix organization.

Figure below shows the three types of project in an organization. Notice that as you move towards right of the spectrum, project manager gets more control over the project (represented by blue color gradient).

Matrix organizationFigure 2: Types of organization

Let us look at some of the organizational structures used.

Functional organization

…is where functional manager has complete control over the project. Project managers need to get a nod for pretty much everything from functional managers, and they assist them in getting the work done.

Functional organizationFigure 3: Organizational structure of a Functional Organization

What is a Function?
It is a area of specialty within the organization – such as Finance, Engineering, Sales, or Marketing. Functional Managers are also called Resource Managers in some organizations.

Functional manager decides everything – who works on the team, what is the budget, what is the plan, etc. Team members report directly to the functional manager.

Exam pointer: This structure is also called as ‘Classic organizational structure’.

Weak-matrix organization

…is still structured around functional organization. Project managers have limited powers, such as chairing project meetings, certain reporting functions – depending on the practices in the organization.

Balanced-matrix organization

…is where responsibilities are divided equally between functional and project manager.

Usually functional manager takes care of people management responsibilities and project managers take care of project management responsibilities. If project manager has to make any decision about people she runs it by the functional manager, and vice versa.

This organization can be a difficult place for team members to work in. If responsibilities of functional and project managers are not explicitly defined, team members may feel as if they are reporting to multiple people on same responsibilities of their work. One can imagine the pains of reporting to two managers!

This organization can lead to situations where functional and project managers both may feel responsible for certain management aspects, leading to issues that impact project delivery, cost and schedule.

Strong-matrix organization

…is the most likely scenario is most of the organizations. A place where project managers feel a bit more comfortable – they control good part of the decisions on the project, including selection of resources and decisions on the budget. Resources need to be made available by the functional managers.

Inputs for performance reviews of team members are shared – project performance inputs from the project manager and functional expertise inputs from the functional manager.

Projectized organization

…is where teams are organized around projects. Complete responsibility of the project lies with the project manager. Project team reports only to the project manager.

Consulting companies make use of this type of an organization. A team is assembled and a project manager is assigned for each project. She executes the project without any interference from any of the functions. She gets to make all decisions such as budgeting, human resources management and communication planning. If such a project requires functional expert(s) then PMO, sponsor or management will provide them to the project manager.

Exam pointer: From the exam perspective, unless stated otherwise it is assumed that a project manager is working in a matrixed organization. This means that she has to get the human resources from other functional manager or development manager or resource manager!

Composite Organization

Then there is a hybrid kind of organization called Composite Organization. This type evolves based on the needs to have different control structure at different levels of the organization. Such needs could be temporary or permanent.

This is a mixture of Projectized and functional organization. There might be a need to develop new accounting software in the functional organization for which a mix of full-time Accounting staff and project staff becomes necessary.

What are the aspects influencing organizational types?

Geography/Location –

If the organization is geographically distributed it can bring in challenges such as cultural differences, lack of visibility of progress, communication challenges and so on, which may bring down productivity.

However, with the use of Agile development practices, geographical distribution may actually be proving to be an advantage. This is because Agile practices have solutions built-in for some of the challenges mentioned above, while the ability to remotely will bring in the ability to hire best of the talent.

People allocation to projects –

The type of organizational type might dictate project needs people for different departments of Functions. When talent becomes scarce and demand high, people may be allocated to projects with higher priority, and may be asked to be allocated partially, and/or temporarily.

Size of project deliverables –

Reducing size of project deliverables may lead to frequent hand-offs. With team members coming from different functions or sub-organizations this may increase collaboration and add flexibility to the project mix.

Evolution of the organization

With newer project development methodologies such as Agile and hybrid (combination of different Agile methodologies mixed with traditional approaches) the organizational structure is evolving continuously.

More of incremental development approach is proving to be a de-risking strategy. A common practice is to maintain a backlog of project tasks ranked based on priority by the team itself. Kanban boards are another simple and highly effective method of tracking changes.

This has lead to the practice of experimentation of sorts, where a new practice can be attempted in one of the Agile Sprints and it’s result examined immediately. This helps evolve organizational structure based on the project business needs.

Test your knowledge about organizations

Look at the job description as advertised by companies. Decide whether the project has a Functional, Matrix or Projectized type of organization.

Job ad #1: ABC Inc is seeking a self-motivated and high energy person to fill a multi-faceted role comprised of systems design, project management, and client facing account management. This person will meet existing and prospective clients to gather requirements, up-sell services, and translate those requirements into a proposal, and into detailed specs for the development team. This person will be responsible for setting up development team, coming up with budget, and procuring all necessary project infrastructure.

Job ad #2: We are looking for a dynamic project manager to manage projects which are complex, multi-disciplinary and/or enterprise-wide, as directed by the SVP.

Key functions of this role include team development, scheduling, budgeting, and guidance; and working with resource manager to arrange and manage required resources. This role requires excellent communication skills, both written and verbal.

Job ad #3: We are looking for a highly motivated Project Manager to join our dynamic team of technical professionals in developing and executing the growing portfolio of Downstream and Midstream Natural Oil Projects. The Project Manager will work with a Resource Manager for resourcing needs and Development Manager for other needs of the project such as handling people, training and fitment issues. Additionally the Project Manager will be accountable for:

  • Reporting to the Sr. Project Manager
  • Ensuring that all decisions taken in project and client meetings are noted and circulated to team
  • Helping the Development Manager in preparing schedules and allocating work
  • Helping team members with any facilities or administration issues











.. scroll only when you have thought of your answers 🙂










Job ad#1: Projectized organization
Job ad#2: Matrix organization
Job ad#3: Functional organization

Here’s a table to remember the differences between these organizational types and PM’s involvement/impact

[table id=9 /]

like the post

<-- Liked this post? Help your friends by sharing this using social network buttons. Thanks for being awesome!

OSP sidebar

PMP Study Books

Help Run This Blog At No Cost To You.. Use this box to search and purchase your stuff on Amazon. Thanks!

{ 1 comment… add one }
Share via