2.3 Organization Types (Project Context)

Organizations as far as the project managers’ authority level is concerned can be categorized as following[1]:


The organization is divided into functional units such as IT, HR, Finance, Sales, etc.  Employees are assigned to these units and report to functional managers.  The main challenge of the project managers in this type of organization is that they rarely have hire/fire authority as resources are owned by functional managers and not by specific projects.

In this setting, project managers have to win over both the functional managers as well as the subject matter experts they need for their project.  Typical example is a project manager with no staff and a project that requires cooperation from individuals who already have their share of tasks to perform and have no interest to participate in the project managers’ project.


In this type of organization, the division of power at the top tier of the organization is based on projects. The key difference between this type and the hierarchical is that in the hierarchical the organization from top to bottom is divided by function and projects subordinate to them, whereas in the projectized structure the entire organization is partitioned by projects and functional support is provided within the confines of each project.  For example the company has a cross country gas pipeline project that produces close to 18% of the entire company’s revenue, has 800 contract staff and has HR, Financial Management, Engineering, Procurement, Transportation, and all other functional support within its own domain and there are functional managers within the project reporting to the executive responsible for the project.

Matrix Organizations

Most companies do not conform to the specifications of the projectized organization or functional in the sense that in the case of projectized organizations the top tier of the organization is not made up of only projects, and in the case of functional organization the role of project managers might be elevated by having a PMO office and/or have higher authority in terms of defining the requirements of the project, and management of the project resources. Weak matrix organizations very closely resemble functional organizations with the difference that the project managers have limited rather than no authority over the specifications of the project and/or its resources, and in the balanced matrix have some budget decision making power.  In the other end of the spectrum strong matrix closely resembles projectized organizations with the difference that the highest level of the organization is not primarily made of project managers—i.e., project managers are sharing the power with other managers—functional managers have senior roles and the balance of power based on the project requirements and its specifics shifts from functional managers to project managers.[2]

Composite Organizations

Many organizations have the above structures in different levels.  For instance in a fully functional organization a department manager can create a unit that behaves much like a matrix organization with full time staff from other organizational units and operational and procedural standards mimicking that of a projectized organizational unit.  On the other end of the spectrum in a full projectized organization functional managers can be given the authority to run project along their functional divisions much like a hierarchical organization.  Many students have trouble distinguishing between matrix organizations and composite organizations.  The key difference is that for matrix organizations the entire company structure fall somewhere between projectized or functional (week, balanced, or strong matrix) whereas in composite organizations elements of a different organization type can exist within a bubble to serve a specific and usually short term interest.

Table 2-2 summarizes the points made above.  organizational structures on projectsBear in mind that at the root of this division of power is the difference between project and operation work.  Most organizations can’t survive without a mixture of these two different types of management.  Question is which one is more critical to the survival of the organization?  In a company that drives all its income from projects (e.g., a consulting firm) the answer is strong matrix or projectized organization as the interests of the projects win over the interest of the supporting functions to them.  On the other hand, in a company from a mature industry such as tobacco where most of the business operations are within the standard functional areas; projects and project management has less weight.


Influences of Organizational Structures on Projects

In essence what we are looking for in this section is the level of authority project managers have in the organization?  As a rule of thumb in hierarchical/functional organizations project managers have the least amount of power (refer to the example presented above) and it fully projectized organizations project managers have the most amount of power project managers can have.

As mentioned earlier in this chapter, management is the act of converting money, material, methods, and manpower to stated goals.  In project management the ability of project managers to get access to money, material, and manpower and get organizational support (method) depends on the approach the organization as a whole does to project management and it power sharing dynamism.

The key to understanding the different types of organizations is the difference between project and operational work.  Projects are unique have a definite start and end date and are initiated to create an end result that didn’t exist before; processes are ongoing and repeat similar functions in order to keep the business operational.  The organization types described above differ in the importance given to one of the two of these types of work.

The main reason different organization types were discussed in this section is the direct impact they have on the abilities of a project manager to define and execute projects.  In functional and weak or balanced matrix organizations the project manager has little more than personal charm and people skills to win over cooperation of other employees in getting her project done.  In many instances the project manager is simply tasked to deliver a product without even knowing which resources can be of assistance in her organization, and she has to go over the organizational chart and decipher by the role and position of individuals in teams that can contribute to her project which individual can be of help when and how (for instance she would need a marketing analyst now but down the road would need the support of a legal department account manager).

On the contrary, project managers in strong matrix and projectized organizations have much more power over the faith of their projects and allocation of resources to them (they too very heavily depend on interpersonal skills but don’t have to compete for them on an ongoing basis due to their higher authority level compared to their counterparts in functional and weak or balanced matrix organizations).


[1] For more information read Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK® Guide) –Fifth Edition,  Project Management Institute, Inc., 2013,  pages 21- 26

[2] For more information please read: Project Management Institute, A Guide to Project Management Body of Knowledge (PMBOK Guide) –Fifth Edition, Project Management Institute, Inc., 2013, Pages 21-26

[3] Project Management Institute, A Guide to Project Management Body of Knowledge (PMBOK Guide) –Fifth Edition, Project Management Institute, Inc., 2013, Table 2-1, Page 22

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