As a project manager, the organizational structure of where you work largely determines how you manage projects as well as your authority.
Most companies use either a functional, matrix, or projectized organizational structure. Each has strengths and weaknesses depending on factors like company size, industry, and objectives.
In this article, we’ll compare functional vs matrix vs projectized organizations to understand the key distinctions between them, as well as their pros and cons, and examples of each structure.
A knowledge of how organizational structures operate is also very important for PMP certification exam aspirants hence the article is structured to provide an understanding required to answer any questions you come across in the exam.
Types of Project Organizational Structure
An organizational structure defines how a company arranges its staff to achieve its objectives.
It establishes lines of authority and communication, allocates resources, and affects many aspects of business operations, including workflow, resource utilization, and project outcomes.
There are 3 types of organizational structures that companies generally adopt. These are functional, matrix, or projectized organizational structures which are explained in-depth in this article.
There is no one-size-fits-all approach and each of these structures has its advantages and disadvantages depending on the company size, industry, and strategic goals.
How Does a Company’s Organizational Structure Impact Project Management?
An organization’s structure directly impactsproject success in a ton of ways. It determines:
Functional Organizational Structure
In a functional organization, the company is divided into different functional areas, such as IT, finance, marketing, sales, HR, etc.
It has tall hierarchies with narrow spans of control and communication moves vertically within siloed units.
Each department works independently and is led by a department manager who reports to the top management.
In this type of setup, projects are usually managed within the functional unit and project resources are likely to report to their functional manager who has the highest authority and decision-making power.
This structure is common in organizations where projects often serve the ongoing operations of the company
Functional structures promote specialization as employees build expertise in their field by repeating similar tasks with their focus aligned with their department’s singular purpose.
For organizations operating a functional structure, project managershave limitedauthority and cannot dictate resource usage across functions. This role is sometimes fulfilled by a project coordinator or expeditor.
When to Use Functional Organizational Structure
Functional organizations leverage skill specialization and consistency and suit simple, stable environments focused on core competencies.
Industries like manufacturing and insurance often use functional structures.
Here are some specific situations where functional organizational models thrive:
Advantages and Disadvantages of Functional Organizational Structures
Functional organizationshave these key advantages:
Conversely, functional models present these disadvantages:
Projectized Organizational Structure
In a projectized organization, the organization is structured around projects. That means the team is assembled to complete a project.
In projectized models, theproject managerhas completeauthorityover the project. They make resource allocation decisions and manage the budget while the project team focuses solely on their project with no competing priorities.
Once projects end, resources are reassigned to new teams. Projectized organizations maintain a small support staff to handle functions like legal, HR, and facilities. However, most employees are dedicated to project work.
Communication flows horizontally between team members, with the project manager as the hub. Vertical hierarchies are flat, with just project sponsors or executives above the project manager.
This structure is common in consultancies, construction, and other fields where a team comes together to accomplish a defined project and then moves on to different projects.
When to Use Projectized Organizational Structure
Projectized organizations suit environments focused on projects versus core operations. Industries like construction, consulting, and software development commonly use projectized approaches.
Specific situations where projectized models excel include:
Advantages and Disadvantages of Projectized Organizational Structure
Projectized organizationshave these key advantages:
On the other hand, projectized models have the following drawbacks:
Matrix Organizational Structure
The matrix structure is a blend of functional and projectized structures. In a matrix organization, team members report to both a functional manager and one or more project managers.
Communication flows vertically and horizontally in this organizational structure as employees collaborate and share knowledge across functions and teams.
Since the team members report to more than 1 manager, the amount ofauthoritydivided between the two managers defines the type of matrix.
There are 3 types of matrix organizational structures:
The weak matrixresembles functional structures where project managersact as coordinators with limited power while the strong matrixhas features of projectized models with empoweredproject managers.
When to Use Matrix Organizational Structure
Matrix organizations provide flexibility, enabling companies to shift resources as needs evolve. Tech, construction, and professional services commonly use matrix approaches.
Specific situations where a matrix structure may be best include:
Advantages and Disadvantages of Matrix Organizations
Here are some key advantages of matrix organizations:
Conversely, here are some drawbacks of matrix organizational structures:
Functional vs Matrix vs Projectized Organizations Comparison
Now you have a deeper understanding of the 3 types of organizational structures in project management, let’s do a head-to-head comparison to highlight the key differences between them:
1. Definition
A functional organization is an organization where staff are grouped by areas of specialization and managed by a person with expertise in that area.
In a projectized organization, teams are formed to achieve specific projects and are led by a project manager.
While a matrix organization combines aspects of both functional and projectized structures such that team members report to both a functional manager and one or more project managers.
2. Project Manager Authority
In a functional organization, the authority lies with the functional manager, while the project manager has full authority in a projectized organization.
In matrix organizations, the project manager shares authority with functional managers.
3. Resource Allocation
Resources are controlled by functional managers and are assigned to projects as needed in functional organizations.
Resources are dedicated to specific projects in projectized organizations, while resources are shared across both projects and functional work in matrix organizations.
4. Communication
Communication in functional organizations mainly happens within the same functional area.
On the other hand, communication in projectized organizations is project-focused and happens across the organization. While communication happens both within functional areas and across projects in matrix organizations.
5. Project Management Emphasis
In functional organizations, the focus is more on functional work and less on projects while the entire organization is focused on projects in projectized organizations.
Project management is important in matrix organizations, but so is ongoing functional work.
What Should Be Considered When Choosing a Type of Project Organization?
For a company or business, selecting anorganizational structureinvolves weighing many complex factors as there is no ideal model for every company. Leaders must align the structure to the business context and strategic goals.
There are key factors to consider and these include:
Implementing Organizational Change
Transitioning from oneorganizational structureto another is a major undertaking. Therefore, leaders must carefully plan and manage the change to minimize disruption.
Some of the key challenges when changingorganizational structuresinclude:
Change Management Best Practices
With careful preparation, communication, and support, companies can implement majororganizational restructuringwith less disruption and better results.
To promote an orderly, sustainable transition, follow these change management best practices:
Conclusion
Theorganizational structurehas profound impacts onproject executionand business performance. Hence companies must align their structure with objectives, industry demands, stage of maturity, and overall corporate strategy.
While functionalorganizations promote specialized expertise and operational stability,projectizedmodels allow flexibility and cross-functional teamwork, andmatrixstructures balance functional depth and project responsiveness.
Organizational leaders must analyze their context and select the model that best fits company size, project diversity, rate of change, and strategic goals as no single structure works universally.
Adapting theorganizational designover time is crucial as the business evolves. With these insights, companies can optimizeorganizational structurefor enhancing project and operational success.
This article was originally published on Dee Project Manager website at https://deeprojectmanager.com/functional-vs-matrix-vs-projectized-organizations/