In this lesson, you’re expected to learn about:
– the functional organizational structure
– the project organizational structure
– the matrix organizational structure
Project structure is a characteristic of all projects that provides for all work being performed in some well-defined order.
For example, in research and development and product planning, specifications must be determined before drawings can be made. In advertising, artwork must be made before layouts can be done.
Project organization is where the reporting relationships and the work location rest predominantly with the project manager. Although there are various ways in which people can be organized to work on projects, the most common types of organization structures are functional, project, and matrix.
We’ll now look at each type in more detail.
Functional organization structures are typically used in businesses that primarily sell and produce standard products and seldom conduct external projects.
For example, a company that manufactures and sells video recorders and players may have a functional organization structure. In the functional organization structure, groups consist of individuals who perform the same function, such as engineering or manufacturing, or have the same expertise or skills, such as electronics engineering or testing.
Each functional group, or component, concentrates on performing its own activities in support of the company’s business mission. The focus is on the technical excellence and cost competitiveness of the company’s products, as well as the importance of the contribution of each functional component’s expertise to the company’s products.
A company with a functional structure may periodically undertake projects, but these are typically in-house projects rather than projects for external customers. Projects in a functional-type organization might involve developing new products, designing a company information system, redesigning the office floor plan, or updating company policy and procedures manual.
For such projects, a multifunctional project team or task force is formed, with members selected by company management from the appropriate sub-functions in marketing, engineering, manufacturing, and procurement.
Team members may be assigned to the project either full-time or part-time, for a part of the project or for the entire project
In most cases, however, individuals continue to perform their regular functional jobs while they serve part-time on the project task force. One of the team members or possibly one of the functional vice presidents is designated as the project leader or manager.
In a functional-type organization, the project manager does not have complete authority over the project team, since administratively the members still work for their respective functional managers. Because they view their contribution to the project in terms of their technical expertise, their allegiance
remains to their functional managers. If there is conflict among the team members, it usually works its way through the organization hierarchy to be resolved, slowing down the project effort.
On the other hand, if the company president does give the project manager the authority to make decisions when there is disagreement among team members, decisions might reflect the interests of the project manager’s own functional component rather than the best interests of the overall project.
For example, take the situation in which there is disagreement about the design of a new product, and the project manager, who is from the engineering function, makes a decision that reduces the engineering design cost of the product but increases the manufacturing cost.
In reporting project progress to the company president, the project manager then makes some biased comments regarding the viewpoints of team members from other functional components, such as, “If manufacturing were more willing to consider other production methods, they could make the product for a lower cost. Engineering has already reduced its design costs.”
Such a situation could require the company president to get drawn into handling the conflict.
The functional organization structure can be appropriate for internal company projects. However, since projects are not a part of the normal routine, it is necessary to establish a clear understanding of the role and responsibilities of each person assigned to the project task force.
If the project manager does not have full authority for project decisions, then he must rely on leadership and persuasion skills to build consensus, handle conflict, and unify the task force members to accomplish the project objective.
The project manager also needs to take time to regularly update other functional managers in the company on the project status and thank them for the support of their people assigned to the task force.
Companies with functional organization structures seldom perform projects involving external customers, as such organizations do not have project managers designated to manage customer-funded projects. Rather, functional-type organizations concentrate on producing their products and selling them to various customers.
In the project-type organization, each project is operated like a mini-company. All the resources needed to accomplish each project are assigned full-time to work on that project.
A full-time project manager has complete project and administrative authority over the project team. (In the functional-type organization, the project manager may have project authority, but the functional manager retains administrative and technical authority over his people who are assigned to the team.)
The project-type organization is well positioned to be highly responsive to the project objective and customer needs because each project team is strictly dedicated to only one project.
A project-type organization can be cost-inefficient both for individual projects and for the company. Each project must pay the salaries of its dedicated project team, even during parts of the project when they are not busy.
For example, if a delay in one part of the project leaves some resources with no work to do for several weeks, project funds must cover these costs. If the amount of unapplied time becomes excessive, the project can become unprofitable and drain the profits from other projects.
From a company-wide viewpoint, a project-type organization can be cost-inefficient because of the duplication of resources or tasks on several concurrent projects.
Because resources are not shared, they may not be diverted to a similar concurrent project even when they are not busy on or being used for the project to which they are dedicated.
Also, there is little opportunity for members of different project teams to share knowledge or technical expertise, since each project team tends to be isolated and focused strictly on its own project.
However, there may be some company-wide support functions that serve all the projects such as the human resources function serves all projects.
In a project-type organization, detailed and accurate planning and an effective control system are required to assure optimum utilization of the project resources in successfully completing the project within budget.
Project organization structures are found primarily in companies that are involved in very large projects. Such projects can be of high (multimillion) dollar value and long (several years) duration. Project organization structures are prevalent in construction and aerospace industries. They are also used in the non-business environment, such as a volunteer-managed fundraising campaign, town centennial celebration, or variety show.
The matrix-type organization is a hybrid (a mix of both the functional and project organization structures). It provides the project and customer focus of the project structure, but it retains the functional expertise of the functional structure.
The project and functional components of the matrix structure each have their responsibilities in contributing jointly to the success of each project and the company. The project manager is responsible for project results, while functional managers are responsible for providing resources needed to achieve the results.
The matrix-type organization provides for effective utilization of company resources. The functional components (systems engineering, testing, and so forth), home of the technical staff, provide a pool of expertise to support ongoing projects.
Project managers come under the project component of the organization. When the company receives an order for a new system, the vice president of projects assigns a project manager to the project. A small project may be assigned to a project manager who is already managing several other small projects. A large project may be assigned a full-time project manager.
The matrix-type organization provides opportunities for people in the functional components to pursue career development through assignment to various types of projects. As they broaden their experience, individuals become more valuable for future
assignments and enhance their eligibility for higher-level positions within the company.
As each individual in a particular functional component develops a broad base of experience, the functional manager gains greater flexibility to assign individuals to different kinds of projects.
All of the individuals assigned to a given project comprise the project team, under the leadership of a project manager who integrates and unifies their efforts. Individuals assigned to several small projects will be members of several different project teams.
Each member of a project team has a dual reporting
relationship; in a sense, each member has two managers: a (temporary) project manager and a (permanent) functional manager. For a person assigned to several concurrent projects, changing work priorities can cause conflict and anxiety.
It is critical to specify to whom the team member reports and for what responsibilities or tasks. Therefore, it is important that project management responsibilities and functional management responsibilities be delineated in a matrix-type organization.
Role of the Project Manager
In the matrix organization structure, the project manager is the intermediary between the company and the customer. The project manager defines what has to be done (work scope), by when (schedule), and for how much money (budget) to meet the project objective and satisfy the customer.
He is responsible for leading the development of the project plan, establishing the project schedule and budget, and allocating specific tasks and budgets to the various functional components of the company organization. Throughout the project, the project manager is responsible both for controlling the performance of the work within the project schedule and budget and for reporting project performance to the customer and to the company’s upper management.
A project administrator may be assigned to each project to support the project manager and project team in planning, controlling, and reporting.
Each functional manager in a matrix organization structure is responsible for how the assigned work tasks will be accomplished and who (which specific people) will do each task. The functional manager of each organization component provides technical guidance and leadership to the individuals assigned to projects.
He is also responsible for ensuring that all tasks assigned to that functional component are completed in accordance with the project’s technical requirements, within the assigned budget, and on schedule.
The matrix-type organization provides a checks-and-balancesenvironment. The fact that potential problems can be identified through both its project and its functional structure reduces the likelihood that problems will be suppressed beyond the point where they can be corrected without jeopardizing the success of the project.
The matrix organization structure allows for fast response upon problem identification because it has both a horizontal (project) and a vertical (functional) path for the flow of information.
Advantages and Disadvantages of Project Structures
We discussed the characteristics of the functional-, project-, and matrix-type organizations. The following table lists some significant advantages and disadvantages particular to each of the three organization structures: