How Organizational Structures Affect Projects and Project Management

The structure of an organization can have a significant impact on project management.

Consider your own experiences. Are you finding it difficult to gain traction for your projects? Do you need to go through multiple levels of authority to get approvals for simple tasks? Is your budget being cut due to competition for scarce funding? Are your projects losing out to day-to-day operations? You thought it was something that you were doing or failing to do. It may have been true, but you’re more likely feeling the effects from the organizational structure in which you work. You can improve your understanding of your workplace environment and help you manage projects more effectively.

We will examine three types of organizational structures: projectised, matrix, and functional. This will allow us to see how each style impacts project management.

1. Functional Organizational Architecture. These companies are divided into functional divisions according to their primary functions, such as planning, engineering, finance, IT, policy, and human resources. Each functional division is independent and the workers within each division report to a functional manger. The function manager is responsible for assigning and monitoring work, as well as performing tasks like performance evaluations and setting payment rates. This model gives project managers very limited authority. This organizational structure is common in companies whose primary purpose it is to produce standard goods and services.
2. Matrix Organizational Structure. Control is shared in a matrix organization. A number of functional managers share responsibility for the project, including the project manager. The assignment of tasks and priorities to team members can be part of the shared responsibilities. Functional managers are still responsible to administer the project teams and make final decisions about who works on them. The work of the project manager is to allocate and organize the work for the assigned team. This structure allows for a balance between projects and ongoing operations. It is common to see in organizations with dual roles. Local bodies that have both ongoing operations (maintenance of existing infrastructure) and commissioning new infrastructure (projects), often use matrix structures.
3. Projected Organizational Structure. The project manager is the only person who has complete authority in a projectized organization. This authority includes the ability to assign priorities, use resources, and direct the work of the project manager. The project manager reports directly to all members of the team. Every member is assigned a project. Once the project is completed, all resources will be re-assigned for another project. This structure is common for firms working on large-scale, long-term projects such as the construction industry.

Before we discuss the impact of these organizational structures on projects, take a moment to reflect about which organizational structure you currently work in. Next, look at the highlighted issues and see if any of them are familiar.

What are the implications of this for project management?

Projects that are within one functional division of a functional organization do not pose any organizational problems. However, projects that cross functional divisions can prove difficult to manage. Why? Why? Because the project manager does not have direct functional authority. He must seek constant cooperation and support from functional managers in other divisions to achieve project objectives. This can become complicated.

The matrix structure gives both functional and project managers authority. This results in a smoother division of labor and a stronger team culture. There is still the possibility of conflict between project managers and functional managers due to resource conflict. Every member of a project team has two bosses: their functional manager and their project manager.

Authority is centralized in a project-oriented organization. Projects are separated from functional divisions, which reduces communication lines. These factors increase the speed of decisions. Team members feel a strong sense if belonging to a project team. Project-based organizations can build and sustain a long-term portfolio of skills and experience in specialized areas through their participation in similar projects.

Because the organization is designed for project management, it is easier to manage projects. If you manage a project in another organizational structure, understanding and recognizing the impact will help you to be more proactive about solving them. Your success will depend on your ability to communicate, resolve conflicts and build relationships.