Organizational Structures

Organizational Structures

David Oudiette - Jan 1, 2015 12:10:00 PM

Project management Strategic management

Business structures are essential variables to take into account, regardless of the sector of activity that we are looking at.Your project management practices will depend on your organization's structure. 

Understanding your organizational structure

Having a clear understanding of your business structure is essential, and even more for project managers. Here are the benefits in understanding your business' structure, we can summarize them in four main points:

  • Knowing the advantages and disadvantages of your own structure while maximizing them.
  • Having an effective stakeholder management where every interaction is clear and every role is taken into account.
  • Understanding the different levels of authority and responsibilities of each and knowing how to deal with issues that may arise. 
  • Improving customer satisfaction by having clear knowledge of the different departments within the company and the way they operate. 

Functional structure

The company is broken down into silos (marketing, finance, HR, and so on) and operates according to a vertical hierarchy. Each silo has its own functional manager (director of marketing, director of HR, and so on).

FunctionalStructure.jpg

If we focus on the project manager function, we will find four great advantages of operating a "functional structure":

  • Most functional groups will have the expertise to manage a project, with enough flexibility in the entire organization to access this expertise. 
  • Some experts can offer their support to transversal projects.
  • When a person leaves the company, there will not be a lack of technical expertise. In other words, because the technical expertise can be grouped and shared within the function, this knowledge remains within the company even if some resources were to change jobs.
  • Team members always have a sense of belonging even after the end of a project.

One of the disadvantages is the rigidity of this structure. Another one would be the lack of communication between the different project managers as well as the lack of collaboration between teams. In this structure, the objectives and results that are being fixed are most likely going to benefit the executive management rather than benefiting the project and the project manager as well. 

Matrix structure

Projects that involve different domains are superimposed on top of the functional structure described above, creating a matrix. Employees have both a functional manager (director of marketing, for example), and a project manager.

Depending on how authority is shared between functional and project managers, the structure will be referred to as weak (or functional) matrix when the functional manager keeps the upper hand, balanced matrix if the power is shared equally, or strong (or project) matrix if project managers lead.

MatrixStructure.jpg

A matrix structure will have several advantages for project managers. First of all, a better allocation of resources for each project, with a clearer view of the project portfolio. This avoids duplication, with a focus on customer satisfaction rather than purely internal considerations.

Nevertheless, such a structure also brings its share of disadvantages. Hierarchies of authorities and responsibilities are more difficult to identify here, which can jeopardize the realization of the project. Some department directors may interfere with the project, and loyalty games are likely to develop between the project manager and the department director.