ANALYSING PROJECT ORGANISATION STRUCTURE

1. Definition of Functional Organizational Structure

A functional organizational structure is a type of organizational
structure where employees are grouped together based on their
specialized skills, expertise, and job functions.

The organization is divided into different departments or functional

units such as marketing, finance, operations, human resources, and
information technology.

Each functional unit is headed by a manager who oversees the

activities and performance of that particular function.

Advantages of Functional Organizational Structure

1. Specialization and Expertise: Grouping employees by function
allows them to develop deep expertise and specialized skills
within their domain. This leads to increased efficiency and
productivity.
2. Clarity of Roles and Responsibilities: The functional structure
clearly defines the roles, responsibilities, and reporting
relationships for each employee, which promotes operational
clarity.
3. Skill Development: The functional structure provides a clear
career path for employees to develop and advance their skills
within their functional area.
4. Operational Efficiency: Functional units can operate efficiently
by leveraging the specialized knowledge and skills of their team
members.
5. Coordination within Functions: Communication and coordination
are easier within each functional unit as employees share
common goals and expertise.
6. Minimized Operational Costs: Grouping similar tasks and
functions together can lead to economies of scale and reduced
operational costs.
Disadvantages of Functional Organizational Structure
1. Lack of Cross-Functional Coordination: The nature of functional
units can lead to a lack of communication and coordination
across different functions, which can hinder overall
organizational effectiveness.
2. Difficulty Adapting to Change: The functional structure can be
rigid and slow to adapt to changing market conditions or
customer needs, as decision-making and communication across
functions can be challenging.
3. Duplication of Efforts: Functional units may duplicate efforts or
work on overlapping tasks, leading to inefficiencies and waste of
resources.
4. Narrow Focus: Employees within functional units may become
too focused on their own functional goals and lose sight of the
overall organizational objectives.
5. Territorial Disputes: Functional units may engage in territorial
disputes and competition for resources, which can undermine
the overall performance of the organization.
6. Slow Decision-Making: The hierarchical nature of the functional
structure can slow down decision-making processes, as
decisions often need to be approved by multiple levels of
management.

2. Definition of Project-Based Organizational Structure

A project-based organizational structure is a type of organizational
structure where a company organizes its operations around
specialized teams working on specific projects.

Company/Organisation takes staff from each department, appoints

them to the project team, and assigns them a specific task to
complete.

Project managers have direct authority over the project team and
operations.
Advantages of Project-Based Organizational Structure
 Greater team control: Project managers have more control over
the project team as they focus solely on the project and do not
report to more than one boss.
 Synergy between employees: This structure facilitates
collaboration across departments, creating a strong team culture
focused on project success.
 Better utilization of resources and competencies: Companies can
maximize the knowledge and skills of existing employees and
allocate resources to the most beneficial projects.
 Work efficiency: Dedicated project teams make it easier to
schedule and organize work.
 Improved competence: Team members contribute different
knowledge and skills, enabling cross-functional learning and
knowledge transfer.
 Increased responsiveness: Project-based organizations can
adjust quickly to market changes.

Disadvantages of Project-Based Organizational Structure

 Isolation from other teams: Project teams may become isolated,
with less communication and knowledge transfer between
teams.
 Career continuity issues: When personnel keep shifting from one
project to another, the career continuity and professional growth
of employees may suffer.
 Blurred organizational lines: As staff is drawn from their
functional work, this structure can blur organizational
boundaries.
 Potential for duplication of efforts: Without proper coordination,
project teams may duplicate efforts or work on overlapping
tasks.
  Difficulty maintaining functional expertise: Employees may
struggle to maintain their functional expertise if they are
constantly shifting between projects.

In summary, a project-based organizational structure is well-suited for

companies with large, short-term projects that require flexibility,
innovation, and the ability to adapt quickly to changing market
conditions. However, it also presents challenges in terms of cross-
team communication, employee development, and potential
duplication of efforts that need to be carefully managed.

3. Definition of Matrix Organizational Structure

A matrix organizational structure is a hybrid structure that combines
elements of both functional and project structures.

Employees report to two managers - a functional manager who

oversees their department and a project manager who is responsible
for specific projects.

Advantages of Matrix Organizational Structure

 Efficient use of resources: By sharing employees across
projects, a matrix structure allows organizations to optimize the
utilization of their human resources and skills.
 Flexibility and adaptability: Matrix structures are well-suited for
dynamic environments as they enable organizations to quickly
adapt to changing priorities and allocate resources accordingly.
 Improved collaboration: The matrix structure encourages
collaboration and communication across functional departments,
facilitating knowledge sharing and cross-functional learning.
 Career development opportunities: Employees in a matrix
structure have the opportunity to work on diverse projects,
develop new skills, and broaden their experience.
  Balanced focus on both functions and projects: Matrix structures
maintain a balance between functional expertise and project-
based work, ensuring that both are given equal importance.

Disadvantages of Matrix Organizational Structure

 Complexity in reporting relationships: Dual reporting lines can
lead to confusion, conflicts, and ambiguity in roles and
responsibilities.
 Potential for power struggles: Project managers and functional
managers may engage in power struggles over resources and
decision-making authority.
 Increased communication challenges: The need for constant
communication and coordination between managers and across
departments can be time-consuming and challenging.
 Difficulty in performance evaluation: Evaluating employee
performance can be complex when they report to multiple
managers with different priorities and expectations.
 Potential for employee stress: Employees in a matrix structure
may experience increased stress due to the demands of multiple
managers and the need to balance competing priorities.
 Organizational culture challenges: Matrix structures may not
align well with organizational cultures that value clear
hierarchies and unambiguous reporting lines.

In summary, while a matrix organizational structure offers advantages

in terms of resource optimization, flexibility, and collaboration, it also
presents challenges related to complexity, communication, and
potential conflicts. Organizations considering a matrix structure
should carefully assess their readiness and ensure that they have the
necessary processes, tools, and leadership support in place to
effectively manage the inherent complexities.
Examples of companies that have successfully implemented
a matrix organizational structure:
1. Philips: An early adopter of the matrix structure in the 1970s,
Philips created a network of national organizations (NOs) and
product divisions (PDs). Despite initial challenges, Philips
upgraded its structure in the 1990s to separate powerful PDs
with worldwide profit and loss responsibilities. Employees
currently report to both product division and geographical
managers.
2. Starbucks: Starbucks has a matrix structure with a functional
hierarchy at the corporate headquarters, where independent
departments like finance, marketing, and HR make decisions
and implement policies. Geographically and product-based
divisions allow Starbucks to manage a wide variety of
products and services efficiently.
3. Amazon: While not immediately apparent, Amazon's well-
defined product categories and convenient shopping
experience are enabled by a matrix organizational structure.
Clearly defined functions and responsibilities allow Amazon to
manage a wide variety of products and services.
4. Caterpillar: Caterpillar, a leading manufacturer of construction
and mining equipment, has used a matrix organizational
structure at some point in time.
5. Spotify: Spotify has reinvented the matrix structure to be more
agile, dividing its workforce into "Tribes" based on engineering
functions. Teams are further divided into Squads, Chapters,
Guilds, Trios, Alliances, and overseen by a Chief Architect.
6. Google: Google has evolved its matrix structure to be more
non-hierarchical, with a greater emphasis on teamwork.