21-Jan-23

Chapter 3

PROJECT MANAGEMENT
ORGANIZATIONAL
STRUCTURES

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Introduction
The tools and techniques used in project management are becoming more and more re

Tools and techniques are often shared. But we are witnessing

that some projects are failed and others were ‘too successful’

So where does the unpredictability come from?

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The ‘joker’ in the project management pack is the people,

and more specifically, how they are organized and managed.

People make decisions; they predict, plan for and control the
progress.
They make the correct decisions and they make the mistakes.

People are usually more difficult to organize and predict, and

therefore control, than schedule or cost performance.

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In most cases, the people themselves do not work randomly

and without direction on the project; they are organized into

n the system in terms of authority, span of control and the other classic organizational variables.

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What is organizational structure?

An organizational structure, also known as "organogram
structure" or "org structure," outlines the hierarchy within an organization and describes th

By establishing transparent relationships between departments,

organizational structures provide clarity, focus and efficiency to employees so that they kno

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The organizational structure defines the arrangement of

resources within an organization.
It refers to how various task are divided, resources are deployed and how units or departme

An organizational structure includes

a set of formal tasks assigned to individual and departments,
formal reporting relationship, and
a design to ensure effective coordination of employees across departments/units

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It shows the main components of the organization and how

they relate to each other in terms of control and communication, and in terms of any othe

the main components are usually shown as boxes; and

the communication or control links or other forms of linkages that hold the structure together are shown as

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In discussing organizational structure the following principles are important:

Authority – Is the right to make decisions, issue orders and allocate resources to achieve desired outcome
This power is granted to individuals (possibly by the position) so that they can make full decisions
Reliability – Is the degree to which the project team member can be dependent on to ensure the success
Responsibility – This is an obligation incurred by individuals in their roles in the formal organization effe
Accountability – The extent to which an individual or project team is answerable to the project stakeholde
(Accountability = authority + responsibility.)

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There may be no single specific solution for any given

organization.

There are numerous ways of forming project teams.The most obvious initial choice is betw
i.e., the project team can be established using internal or external resources and in some cases it may incorpor

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The most common project-management form is of a project

team working within an existing functional organization.
The project team draws members from the various functional sections and uses them to work on the project u

However, not all projects can operate within an existing functional organizational structure.

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Projects teams can therefore be established that are:

wholly internal to the organization;
wholly external to the organization;
partly internal to the organization but with external specialist support.

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The Project within an Existing Organization

The most common form of project management grouping is that of a project team set up wi

The project therefore acts differently in addition to the normal functional processes of the o

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What is the relationship between the organization and the

project?
This depends on many factors:
the size of the project relative to the organization;
the relative status and importance of the project;
the resources that are made available;
the strategic fit of the project with the overall strategic objectives of the organization

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Types of Project structures

Internal
Functional
Pure project
Matrix


External

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1. The Functional Structure

In this approach, the project shall have different sections and each section or division makes a
In a functional arrangement, power or status is defined by a vertical hierarchy through the OB
The most powerful people are at the top, the least powerful, at the bottom. The top people tend to be in regular
However, at lower power levels there are fewer contacts between the individuals working in the specific departm
This type of structure often used for manufacturing company

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In the functional organizational structure, projects are initiated

and executed by the divisional managers, who assume the project manager duties in additi
They are often given secondary titles such as “Coordinator of Project X.”

In this structure, project managers usually don’t have a lot of authority to obtain resources
They must obtain approvals to utilize resources from other departments, which can be a complex

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A project to install a cost control system could be planned and

executed within the maintenance department of the production system, or a project to mo
The functional structure is typical of large organizations that have continuous rolling pro

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benefits of the functional structure

It offers a clear and reliable reporting system
It mirrors the traditional authority structures of most organizations
relatively simple and straightforward
Functional objectives tend to be somewhat repetitive so people can use their experience from one aspe
Specialist knowledge can be stored within the functional unit and shared
Functional arrangements are preferred by highly inflexible organizations such as government departm

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Disadvantages
It is inflexible: strict lines of accountability and specialization
functional outputs, not project, tend to be the primary objective of the organization
Cross-functional activities are discouraged: functional people tend to prefer to stick to thei
Functional people tend to see the function as their future
Functional arrangements can only be justified where there is a continuous program o

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The main drawback with a pure functional structure is the

development of operational or organizational islands.
An operational island is a segment of the organization within the overall organizational struct
Control and communications tend to flow down through the various functional divisio
This is inefficient, as cross-transfer of co-operation could allow the formation of hori

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Figure 4.3 Organizational barriers to communication

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2. Pure Project Structure

Antithesis of the functional structure.
It is appropriate to an entirely different range of organizational types
used for projects that are difficult to plan accurately and where resource requirements
where the work itself is new or innovative.
e.g. in research and development projects
R&D projects have to have flexible teams so that the team can respond to changes in the development of the pro

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The pure project nucleus could also exist within a functional

organization as shown below

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A project team will generally be disbanded upon completion

of its project and the individual project team members will return to the pool for use

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Benefits of a pure project structure

The system is flexible and responsive to change.
Innovation and evolution are not restricted.
The project manager in sole charge of that project and has complete authority and control ove
Formal communication lines are generally much shorter than in a functional structure.
Project team members do not have any functional loyalties
etc

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Disadvantages of a pure project structure

Several projects running concurrently may lead to a duplication of effort unless these projects can be executed
Initial operating costs may be high as it may take a considerable time before any projects are actually comp
Project team members tend to have an underlying concern about long term commitment. A pure project struct
Project deadlines may create a culture where team members attempt to ‘cut corners’ in order to maintain good
Most staff in a project structure will have some form of original functional specialization. Prolonged absence
etc

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Matrix Structure
Pure project and pure function really represent the extremes of organizational structure.
In reality, not all organizations exist at one of these two extremes.
Most large organizations occupy the middle ground, where pure functional or pure project approaches would not make o
‘matrix’ structure is one type of compromise between the two extremes, that still makes use of the characteris

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The matrix structure is the pure project structure overlaid on the

functional divisions of the parent organization.
It encourages horizontal communication and accountability, neither of which is promoted in the pure f
It is an attempt to combine the benefits of the functional organization with those of the pure project or
The matrix structure is suitable for projects of all sizes and natures, where team members can

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This arrangement of each project team within an existing

functional organizational structure is often referred to as
internal, or non-executive, project management.
It is ‘internal’ because all aspects are within the organizational boundary.
It is ‘non-executive’ in that the project manager has limited (non- executive) authority within the system.

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Matrix structures may be very strong or very weak or

anywhere in between, depending upon the nature of the projects undertaken.
Strong matrix structures veer towards pure project structures and tend to be used on large pro
Weak structures exist where the only full-time employee on a project is the project manager a

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Internal project-management systems have a number of distinctive

characteristics.
The main characteristics of an internal project-management structure are:
functional boundaries;
power or status boundaries;
organizational islands;
a project sponsor;
the project management chair;
interfaces;
interface management;
the process of bidding;
Time recording and cost-centre charging.

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Mixed or Hybrid Structure

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4- External (Executive) Project Management Structu

External project management tends to be more applicable to smaller organizations.
It is a far more flexible approach and is much more suited to organizations with variable wo
External project management structures are sometimes referred to as ‘executive’ project m
The term ‘executive’ refers to the fact the project manager in this approach is the only team leader a
In an external system, different consultants act as agents on behalf of a client.

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external project management systems have a number of

distinctive characteristics
multidisciplinary and shared loyalty group characteristics;
fee structures;
external contractual linkages;
external non-contractual linkages

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Please read the advantages and disadvantages

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Selecting the Organizational Structure

Choosing the most appropriate structure for a particular project depends on many elements
the project, its objectives, task, location and required resources;
the existing structure of the organization;
previous experience of the type of project;
the client and the contract;
the project life span.

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The following broad considerations may be taken in to

account while choosing organization structure
Authority:
The pure functional form uses a traditional reporting structure with a clear line of authority running down throu

Communication.
Formal communication is easiest in a functional structure but the informal communication network may encoun
A pure project structure makes the greatest use of informal communications and offers the most flexible commu

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Knowledge transfer
Functional knowledge is the easiest type of knowledge to store and use in future operations.
Knowledge transfer in a pure project structure tends to be restricted to areas of commonality between indi

Loyalty
A functional structure tends to develop the greatest individual loyalty as employees tend to associate their c
In a pure project structure, individual progression may or may not be related to the success of individual pr

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Technology
Functional sections tend to rely on the use of existing technology in order to manufacture or produce someth
Pure project structures tend to produce the greatest demand for innovative technology.They may make use of

Cost.
Pure functional structures tend to have large fixed costs. They are inflexible to changes in workload
The pure project structure is the most flexible approach and can produce the lowest running costs.

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Co-ordination

Support functions

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A pure functional organizational structure should be chosen

in the following circumstances.
Where the workload is constant and only varies slightly;

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● Where fast project response time is

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END

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