MVSU Leading Projects in Organizations Structures Discussion Project Organizational Structures: Create a 12- to 16-slide presentation, including detailed speaker notes that expand on the content on the slides, in which you do the following: See attached files for book. PM LEADERSHIP, BUILDING CREATIVE TEAMS Chapter 4
Project Organization Structures
After reading this chapter you should be able to:
Understand the different types of organization structures used to manage projects.
Understand the advantages and disadvantages of the different organization structures.
Understand how to lead a matrix organization structure.
Project organization structures include a number of special organization structures
within the human resource knowledge area that enable the project manager to lead and
manage multi-discipline projects. It is, therefore, essential that the project manager
understands the characteristics and features of project organization structures to be able
to manage the process effectively.
This chapter will explain how to manage the three main types of project organization
structure: functional organization structures, matrix organization structures and pure
project organization structures.
As the single point of responsibility, the project managers challenge is to develop a
project organization structure that reflects the needs of the client (business case), the
needs of the project (project charter), the needs of the project team members (team
charter) and, just as importantly, the needs of the stakeholders.
1. What is a Project Organization Structure?
An organization structure enables a company to group people in a controlled manner for the
purpose of performing work. In the project context, a project organization structure includes all
of the elements set out in Table 4.1.
Table 4.1: Project Organization Structure
A temporary organization structure that can be set up to perform a
project, as outlined in the business case and project charter, and then
disbanded when the project is complete.
Reporting structures that outline who reports to whom, identifying the
relationship between the project participants, together with defining their
duties, responsibilities, authority and lines of communication.
A project organization structure that enables responsibilities to be
assigned to project participants to perform the work. In the project
context, the project manager is the single point of responsibility who
will, in turn, issue instructions to the resource providers.
A project organization structure that enables the work to be coordinated,
supervised, monitored and controlled, and guides the project towards
achieving the objectives.
A project organization structure that enables authority to be assigned to
the project manager to issue instructions and use company resources.
A project organization structure that provides the foundation on which to
apply the companys standard operating procedures and practices.
A project organization structure that enables team members and key
stakeholders to participate in the problem-solving and the decisionmaking processes.
A project organization structure that enables the project manager and
team members to make decisions that have collective support, and that
align with the project charter, the business case, the corporate
requirements and the corporate vision.
A project organization structure that interlinks the people working on a
project with both internal colleagues and external stakeholders.
Project Organization Structures: Due to the dynamic nature of projects it is possible to have
a number of organization structures running concurrently and, over the duration of the project, all
of the organization structures might be used at one time or another. These structures outline the
relationship between the various participants, the lines of responsibility, the lines of authority
and the lines of communication.
Within the organization structures used to manage projects there are a number of variants caused
mainly by the distribution of power (authority) between the project manager and the functional
manager(s) and the project managers access to resources.
On projects this relationship can be presented as a continuum of organization structures from
functional to pure project (see Figure 4.1).
Figure 4.1: Project Organization Structure Continuum shows the balance of power from the
functional organization structure to the matrix organization structure, to the pure project
Functional organization structure.
Matrix organization structure.
Pure project organization structure.
A characteristic of project management is that it relies on a number of functional departments
and subcontractors to supply the resources to produce the project, each appearing to act
autonomously and yet requiring strong communication links with each other. The project
manager needs to cut across organizational lines to coordinate and integrate specific resources
located in different departments. To achieve this the project manager must have appropriate
tools, in particular an information system that not only accommodates interdisciplinary tasks but
also has the cross-functional capability of retrieving data from the different departments.
Projects have traditionally been managed through a classic functional hierarchical type
organization structure but, with the increase in multi-discipline, multi-department, multicompany and multi-national projects, there has been a move towards management-by-projects,
project teams and matrix organization structures.
2. Functional Organization Structure
The most pervasive organization structure is the basic hierarchical structure which has been
handed down from the medieval kingdoms, the military and the church. The functional
organization structure groups people by specialization (production, marketing, accounts,
engineering, etc.). The principle behind the functional structure is that it is easier to manage
specialists if they are grouped together and supervised by an individual with similar skills and
experiences. This centralizes similar resources, gives an economy of scale, provides mutual
support by physical proximity and clearly defines line and staff divisions of responsibility and
Figure 4.2 outlines a typical functional structure with a number of functional departments
reporting to the general manager. This structure is ideal for projects within a department, and for
projects where the work of each department can be performed separately.
Figure 4.2: Functional Organization Structure shows a functional organization breakdown
structure subdivided into civil, structural and mechanical
For example, on a construction project, the civil department would complete its scope of work
and then hand it over to the structural department, which, in turn, would complete its scope of
work before handing it over to the mechanical department (see Figure 4.3).
Figure 4.3: Gantt Chart shows project work being performed sequentially as separate projects
2.1 Functional Organization Structure Advantages
Table 4.2 considers some of the advantages inherent in a functional organization structure,
particularly for projects within a department.
Table 4.2: Advantages of a Functional Organization Structure
The functional department is a simple structure which is easy to understand
and easy to use.
Functional departments provide a home for technical expertise and a
platform for continuing technical development.
Functional departments provide good support for work carried out within
Functional departments can achieve a high degree of flexibility for projects
within the department, because people in the department can be assigned to
the project, then immediately reassigned to another project. Switching back
and forth between projects is easily achieved.
Functional departments provide the normal career path within a company
for advancement and promotion.
A functional departments work is simpler to estimate and simpler to
manage as the scope of work is usually restricted to the departments field
of expertise, and the functional database should contain information from
previous projects (closeout reports).
Communication Lines of communication within the department are short and well
There is a quick reaction time to problems within the department.
As the functional department staff are continually working together, the
team building should be well developed in the performing phase (see
Chapter 15 on Team Development Phases).
Consistent Work Some employees prefer working in a consistent work environment with
similar work routines, rather than the changeable and challenging work
environment of diverse multi-disciplined projects.
Functional departments clearly define the team members responsibility and
authority within a well-established chain of command.
These advantages clearly show that a functional organization structure is an efficient and
effective way of managing projects within the functional department.
2.2 Functional Organization Structure Disadvantages
Table 4.3 considers some of the disadvantages inherent in a functional organization structure,
particularly when being used to manage multi-disciplined projects.
Table 4.3: Disadvantages of a Functional Organization Structure
There is no single point of responsibility on multi-disciplined projects
Single Point of
as the projects work moves from one department to another; this can
lead to coordinating chaos. Without a nominated project manager, the
coordinating and linking role must fall to the project sponsor. As
projects become larger and more complex, it becomes increasingly
difficult for senior management to coordinate the day-to-day problems
of individual projects.
On multi-disciplined projects there are no formal lines of
communication between the workers in the different departments; like
a funnel, information flows straight up and down. Generally, the only
formal line of communication between departments is through the
functional managers, which lengthens the lines of communication and
slows down the response time. With these long communication cycles,
problem solving and decision making will be self-limiting. In practice,
out of necessity, informal links may be established between the people
working on the project.
Competition and conflict between functional departments could limit
effective communication of important project information.
Departmental work might take priority over project work. If there is a
resource overload, the departments work will take preference over the
projects work. If the activities are critical, the projects schedule will
be pushed out, which could delay the handover to the next department
and, ultimately, delay the projects completion.
For functional managers the projects work is not always their main
focus of concern, particularly when the work has moved to another
department. The client (project sponsor) might feel like a football being
passed from one department to another. Clients prefer to deal with one
person; the project manager.
Without a clear project manager the project sponsor might actually end
up coordinating the different functional departments himself.
The responsibility for external coordination with the client, contractors,
suppliers and other stakeholders might become muddled because of
overlapping, underlapping and inadequately defined responsibilities.
The department might myopically focus only on its scope of work in
preference to a holistic view of the project and, consequently, a
departmental solution might not result in the best solution for the
project as a whole. For example, the production department might want
standardization, while the marketing department might want to offer a
range of products to attract a wider market.
Functional structures are not effective in a multi-project environment
because of the conflicts associated with assessing the relative
importance and priorities as each project competes for limited
No single department is responsible for the overall projects success;
this could lead to decision by committee.
Initially, the career growth for graduates could be quicker and more
focused within a functional department, but they could soon reach a
limit as they will be constrained by the departments single field of
Multi-discipline projects call for horizontal coordination, a
characteristic that is foreign to vertically orientated functional hierarchy
3. Matrix Organization Structure
The topology of the matrix structure has the same format as a mathematical matrix (columns and
rows). In this case, the vertical lines represent the functional departments responsibility and
authority, while the horizontal lines represent the projects responsibility and authority, thus
giving the matrix structure its unique appearance and name (see Figure 4.4).
Figure 4.4: Matrix Organization Structure shows the project managers (project 1 and project
2) lines of responsibility and authority overlaid on the functional managers vertical lines of
responsibility and authority
The matrix structure is considered by many practitioners to be the natural project organization
structure, as it formalizes the informal links (mentioned in the previous section). On multidisciplined projects, employees need to communicate vertically within their department to
perform their tasks, and horizontally with other departments and the Project Management Office
The matrix structure is a temporary structure superimposed on the existing functional structure.
The matrix structure is created to respond to the needs of the project where people from the
functional departments are assigned to the project on a full-time or part-time basis. When the
project is complete, the matrix structure is removed and the functional structure remains intact.
The aerospace industry finds this structure works well on medium-sized projects, but for large
capital projects they prefer to use the pure project organization structure (see next section).
Table 4.4 considers some of the advantages inherent in the typical matrix organization
Table 4.4: Advantages of a Matrix Organization Structure
Responsibility The project manager is the clear single point of responsibility.
The project can draw on the entire resources of the company. When several
projects are operating concurrently, the matrix structure allows a time-share
of expertise, which should lead to a higher degree of resource utilization.
By sharing the use of equipment the capital costs can be shared between
projects and functional departments.
The project manager communicating directly with the project sponsor
achieves a rapid response to the clients needs.
Problem Solving Problem solving (brainstorming) can draw on a much wider input for ideas
and innovative solutions.
The needs of the project manager and functional manager can be addressed
simultaneously by negotiation and trade-off. The project manager is mainly
concerned with what and when (scope and planning), while the functional
manager is mainly concerned with who and how (resources and technical).
Teams of experts within the functional department are kept together as the
projects come and go.
The multi-disciplinary environment exposes people to a wider range of
By retaining their functional home, specialists keep their career path.
Table 4.5 considers some of the disadvantages inherent in the matrix organization structure.
Table 4.5: Disadvantages of a Matrix Organization Structure
The matrix organization structure is complex and more difficult to
understand than the simpler functional or pure project organization
More communication links are required to keep the additional number of
managers informed and consulted.
Dual responsibility and authority leads to confusion, divided loyalties,
Responsibilities unclear responsibilities and conflicts over priorities and allocation of
The cost of running a matrix organization is higher than a functional or
pure project organization because of the increased number of managers
involved in the administration and decision-making process.
Decision Making With functional projects and pure projects, it is clear who has the power to
make decisions, whereas with the matrix structure, the power would be
balanced between departments. This could cause doubt and confusion,
which means the productivity of the project might suffer.
In the matrix structure the project manager controls the administrative
decisions, while the functional managers control the technical decisions.
Division of power and responsibility could lead to an overly complex
Where the project and functional lines of influence cross there exists a twoboss situation, which is a recipe for conflict.
Functional departments are unlikely to give up their best personnel to the
project, so internal team selection might be self-limiting.
For the matrix organization structure to work successfully the functional departments might have
to make some major adjustments to the way they work on projects. The matrix structure
introduces new management interfaces and these will increase the potential for conflict. New
management skills will be required for the functional managers to accommodate conflicting
goals, priorities and resource demands.
The onus is on the project manager to practice an appropriate leadership style towards the
functional managers, which would certainly include negotiation to address the trade-off between
who controls the what, when, who and how.
A characteristic of the matrix organization structure is that it relies on the functional departments
for resources. Although the project and functional departments might appear to work
autonomously, for project success, they need strong communication links with each other. The
project manager needs to cut across organizational lines to coordinate and integrate specific
resources located in the functional departments. To achieve this the project manager must have
both a fully integrated information and control system and the means of addressing the
responsibilityauthority gap (see Chapter 7 on Power to Influence).
3.1 Matrix Organization Structure Leadership
In the leadership role, when managing projects within a matrix organization structure, project
managers should consider the points outlined in Table 4.6.
Table 4.6: Considerations for a Matrix Organization Structure
Project managers should use the project charter to substantiate their
position and state how the project will be managed. This should
particularly outline the relationship between the project manager
and the functional managers. If there is no project charter, the
project manager should take the initiative and write the project
charter and have it signed off by the project sponsor.
Balance of Power
Matrix structures are usually categorized by the balance of power
between the project manager and the functional managers.
Because project managers do not have line authority over the
resources, they must be prepared to be flexible and adjust the
project schedules to fit in with the other functional departments
Project managers must realize they can achieve little on their own,
they need the cooperation and support of the functional managers.
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