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Project Organizational Structures 

 December 23, 2020

By  Dave Litten

Diving into Project Organizational Structures

You will want to understand the reasons why certain Project Organizational Structures exist and why one type of organizational structure may be considered more suitable than another. It is possible for a single organization to adopt all three structures in different situations and to deliver effectively under varying circumstances.

Project management within a functional structure

Typically, the low-level complexity and value of the project make the functional structure ideal for a small, mainly internal project, which although has typical project characteristics is in reality very close to the business-as-usual activity

In this structure, people are divided into groups largely along functional lines and work together to carry out the same or similar functions.

In organizations where the functional divisions are relatively rigid, project work can either be performed within a functional department itself or handed from one functional team to another in order to complete the work.

Project Organizational Structures

The head of the functional area would take overall responsibility for project delivery.

A member of the department would be assigned to deliver the project, acting as the project manager, although may not carry that title, most probably they would maintain whatever title accompanies their role within the department.

The funding would come directly from the operating budget for the department, but there may be a supplementary fund provided directly by the board of the organization if the degree of change was a one-off exception. In this respect the head of the department is acting as project sponsor.

The strength of this approach is that the people with the technical skills in the department are delivering a project requiring these skills.

The project is actually very close to business-as-usual (BAU) but has the characteristics of a project in that it has time, cost, and quality constraints.

The main weakness of this approach is the setting of priorities between the project and BAU, considering that staff may not appreciate project working, particularly if the project has low visibility within the overall department or organization.

Depending on the culture of the organization, it is common that functional departments work in silos and so may be unwilling to supply resources to support projects in other parts of the organization, especially if they feel their department has very little to gain from the project.

Project Organizational Structures: Project management within a matrix structure


The matrix structure has projects that alternatively may need considerably more project process application.

The widest range of projects that would be internal or carried out for clients of an organization (external), could be delivered effectively using a matrix structure.

Visibility of the project to the wider organization is a major aspect, and that two management structures exist alongside each other, the delivery organization functional structure and the project organization structure, both of which are integrated using matrix principles.

project organizational structures

The matrix structure is one of the structures most commonly found in projects. Team members may report to different managers for different aspects of their work on the project.

Team members are responsible to the project manager for their part in the project, while their functional line manager will be responsible for other aspects of their work such as appraising their performance, training and routine day-to-day tasks.

The project manager may be appointed from one of the functional areas or maybe contracted into the organization just for the period of the project duration.

In this form of organisational structure staff are assigned to the project to perform their role within it; once this duty has been completed, they would return to the main organisation structure and continue their role there or be assigned to start working on another project.

The strength of this approach is that the project is likely to be visible to the whole organization, rather than just an individual department as in the functional structure.

It also creates the need for organizations to manage resources more effectively to the degree that project work does not adversely affect BAU.

Staff becomes aware of project working and moving from project to project becomes the norm.

While the matrix structure is particularly effective its common disadvantage is that when an individual is working on the project, they are reporting to the project manager as well as their functional line manager (dual reporting) and there can be priority conflicts.

A solution to the two-boss problem is ensuring good interpersonal relationships as well as regular effective communication between all areas of the organization, which results in more complex communication channels than would exist in a functional structure, for example.

Along similar lines the project manager is usually not the line manager of the project team members and so has no structural power to wield to get things done.

The matrix structure relies on project managers understanding how they can influence others in the absence of organisational authority within line management.

Project Organizational Structures: Project management within a project/product structure


This structure the organization is made up of projects, each having a project manager or project director, depending on the size of the project, reporting directly into the board of what is often a holding company.

The structure consists of groups of people who are all dedicated only to the project assigned and report to the project director on a daily basis.

All work is project-related and once the project is completed (projects using this structure may last for many years) that part of the organization ceases to exist.

project organizational structures

The project/product structure is the least common as it would only be the largest of enterprises that would justify this type of structure or where the project was particularly high value, complex, and had multiple parties involved in its creation.

Here the project is the organization structure, there is no other entity involved in project delivery.

The main strength of this structure is to focus on the project, there is no other objective such as BAU, loyalty is absolute to the project.

Projects may have their own equivalent of BAU service functions such as procurement, finance, human resources as well as specialist technical expertise.

Clear project processes combined with well-defined roles and responsibilities mean that teams become technically proficient.

In this type of Project Organizational Structure, the strengths can become the weaknesses.

The very strong job security while the project is being carried out is then a weakness at project completion when there is no longer a requirement for the people who were employed in delivery.

Projects can also become very insular and not communicate with each other this can lead to underutilization of staff overall as availability in one project is not used to solve a need in another.

Once each project is completed, teams will leave on mass and the organization may not get the opportunity to maintain the learning gained by the individuals while working on the project.

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Dave Litten


David spent 25 years as a senior project manager for USA multinationals, and has deep experience in project management. He now develops a wide range of Project Management Masterclasses, under the Projex Academy brand name. In addition, David runs project management training seminars across the world, and is a prolific writer on the many topics of project management.

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