Management of projects is highly dependent on the organizational structures within which they are executed. The ability of the organization to empower and assist the Project Manager and provide the tools and resources needed is essential to the success of any project.
Even though there is no clear cut delineation between different structures, but broadly speaking organizational structures can be divided into three types – Functional, Matrix and Projectized.
In these three, ultimately the PM authority, resources, time and commitment become stronger as you move from the functional style of organization to the projectized structure.
The overall organization structures do not organize specifically around projects, but they do impact how the projects are managed in a significant manner.
It is within the overall organizational power structure that the autonomy and power of a Project manager are defined.
Functional Organizations have been the oldest forms of structure and the most common. The first instinct of any organization is to organize groups along their expertise and functions. For example, there are departments like Human Resources, Finance, Marketing, Manufacturing etc.
Personnel within these groups report to the managers, directors and then VPs within those groups, who in turn report to the CEO.
This hierarchical structure creates functional silos of control and authority. Their operations, as well as projects, are defined and run within the purview of these boundaries. Inter-departmental communications and coordination is always a challenge, therefore.
In its Organization Planning Bulletin in September 1976, General Electric discussed the importance of Matrix organization structure for their company’s future.
We’ve highlighted matrix organization. not because it’s a bandwagon that we want you all to jump on, but rather that it’s a complex, difficult, and sometimes frustrating form of organization to live with. It’s also, however, a bellwether of things to come. But, when implemented well, it does offer much of the best of both worlds. And all of us are going to have to learn how to utilize organization to prepare managers to increasingly deal with high levels of complexity and ambiguity in situations where they have to get results from people and components not under their direct control…GE Organization Planning Bulletin (September, 1976)
With this, they turned a company that used to have siloed businesses with five functional managers reporting to one general manager hierarchy into a matrix structure.
Around that time – Bechtel, Citibank, Dow Chemical, Shell Oil, Texas Instruments, and TRW – also turned to matrix type.
In an era when business people thought that matrix organization structure was a call for anarchy this was a bold move.
Three types of Matrix organizations
It combines the strengths of both, the functional and projectized structures. The employees report to one functional manager and one project manager. Whichever project a person is working on, s/he reports to that PM for that project. For his/her career situation, however, the people are responsible to their functional managers, even when the performance reviews are contributed by both PMs and Functional managers.
Within the project, the Project manager and the team are free to make decisions, unlike the situation in the Functional organization.
As the solid line reporting for the employees is to the functional managers, they are also responsible for assigning resources. They manage the resources along with the resource manager.
This is the weakest form of a matrix organization. It is slightly better than a functional structure. In such a structure, the functional managers have the main power, while project managers are no more than project coordinators. The functional manager does the work assignments and the PM simply tries to push the project along.
This is the most typical matrix organization, where both – the PM and the functional manager are equal players.
Even when the assignment of resources to the project is done by functional managers, it is done with respect to the needs of the projects. It is not a function of how strong or weak the PM is in leveraging his/her personal capital.
Ultimately, the strength of a matrix organization depends on three things:
- Administrative Hierarchy defines who – between the project managers and functional managers – get more backing from the executive leadership.
- Physical proximity of the team members and the managers
- Time allocation of the managers for the different projects
In all these cases, in the strong matrix organization, project managers get precedence over the functional managers. The teams are in close physical proximity with the project and functional managers may not be nearby. And, typically, the whole performance measurement is based on billing on the projects.
An example of a strong matrix organization is a consulting organization, where the partner whom a person reports to may not be fully engaged in the project that a person is assigned to. The Client Manager or the Program Manager on the project engagement may be the most important person for every personnel.
Organizations that depend only on projects, for example, Construction project companies, the whole company revolves around projects. Project managers are supreme and they dictate the entire hierarchy. Functional managers are either not there or their roles are minimal.
In fact, in a projectized organization, supporting functions like human resources and accounting may be reporting to the project manager.
The resourcing of the projects with the right resources and acquiring and assigning the resources is something that the project manager does unlike other organizations types.
Teams are often co-located – which means that project team members are physically located at one and the same location.
The main disadvantage with this kind of structure and situation would be allocation of expert and highly skilled resources across different projects.
Everything depends on Organization goals
No structure is a magic pill. It all depends on what kind of organization you have and what works in that culture. Depending on that, the right structure should be selected and followed. Let us take a quick look at three structures and their pros and cons.
Considerations around the type of organization structure to adopt for your organization become important when you are trying to set up your Project Management Organization (PMO). What kind of PMO you want to have will be largely impacted by what kind of organizational culture you have.
It is, therefore, best to review your organization and see what really works and then structure your projects along the type of structure you have – functional, matrix or projectized. That will mean the difference between success and failure.