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Functional to Matrixed Organization
By Coty Smith


The audience of this paper is not primarily project managers, but leaders of the organization that make decisions on the organizational structure of project management within a company. The paper will examine organizational structures that support project management, along with the benefits and challenges of each organizational type. The research questions addressed in this paper are: For a functional or line organization beginning to implement large projects, what is the best organizational structure? Once that structure is identified, what steps are required to implement that structure in the organization? While the project management function is the target of the organizational change, many of the processes that are addressed are broader business functions of the organization. In order to implement lasting change, general business processes must be revised to develop a sustainable environment. Some of these broader functions include the staffing process, performance and development processes, along with a general assessment of the overall organizational culture, and organizational change. The conclusion of the research recommends a functional organization to implement a matrixed environment. This is a reasonable first step for a functional organization beginning to implement large projects. Furthermore, the paper will outline a seven step process on how to accomplish this organizational change.


This paper will explore the potential move from a functional organization to a matrixed organization for large projects and programs. This paper will discuss the pro’s and con’s of each organization style and how to move to a matrixed organization in order to apply more robust program management skills. This paper will examine the potential program improvements and transition steps required to implement a matrixed environment and leverage project management skills. It will define the organizational structure best suited for the environment.

Organization Types

There are three basic organizational types: functional, matrixed, and projectized organizations (Larson & Gray, 2011). Each of these organization types has strengths and weaknesses.

Functional Organizations

The first organizational type to be discussed, and the most common, is known as the line or functional organization. “Staff departments are part of the normal organization and can be viewed as functional or line” (Lientz & Rea, 1998). Kerzner (1997) refers to the functional organization as the classical or traditional organization. Some refer to the functional organization as a “stovepipe” organization, which remains common for information technology departments even when implementing small projects (White, 2001). Some see the typical hierarchical line organization as bureaucratic, but the functional organization serves its purpose. It has survived for more than two centuries (Kerzner, 1997). There are several reasons the functional structure has survived this long. First, the functional organization represents stability for employees; it provides a home per se for individuals. Second, the functional organization establishes a vertical communications structure within the organization. The functional organization has a built in communication system. This organization allows for quick reaction; the time to identify and build a team or project is not required, the functional organization exists. Third, the line organization is effective at handling routine and reoccurring tasks such as operational duties and mass production (Lientz & Rea, 1998). There are several additional advantages such as: easier budgeting and cost controls, flexibility is the use of manpower, good control over personnel, and better technical control by using experts where most needed (Kerzner, 1997).

While functional organizations have many strengths, they also have weaknesses, especially in a project environment. There is lack of focus, no one individual is responsible for a project, and responsibility is spread across the organization. Project coordination and integration is slowed and may require lead times for decisions and approvals (Larson & Gray, 2011). When decisions are required, many times the strongest department drives the decision. There is no customer representation in the organization; reaction to the customer may be slow. Motivation and innovation are not encouraged in a more operational structure. Functional organizations tend to lead to conflict between departments. Most functional organizations are resistant to change (Kerzner, 1997). In general, projects in a functional organization take longer to complete (Larson & Gray, 2011).

Matrixed Organization

The matrix organization is a hybrid structure that overlays the project structure on the normal functional hierarchy. It has been recognized as “one of the biggest management innovation to emerge in the past 30 years” (Larson & Gray, 2011, p. 72). The matrix organization is an attempt to take advantages of the functional organization and leverage them in a projectized environment. A matrix organization appears as a table of rows and columns. The rows are the functional organization; the columns are the project organization. When resources are needed from the functional organization they are moved to the projects column (Lientz & Rea, 1998). When the resource has completed their responsibilities on a project, they return to the functional organization. It is desirable for a resource to be dedicated to the project to ensure a degree of loyalty. While not optimal, on smaller projects, it is possible for an individual to have both operational responsibilities and project responsibilities. It is also possible that critical resources may work across multiple projects in this environment (Lientz & Rea, 1998). In a matrix environment there are three widely recognized systems based on the authority of project managers and functional managers. A weak matrix is similar to a functional approach, except that a formal project manager is identified to lead project activities. Functional managers lead in their department and hold most of the power. Project managers typically coordinate, expedite, manage the schedule and collect status (Larson & Gray, 2011). The balanced matrix recognizes the need for a true project manager, but the project manager does not have full authority over the project and budget (Project Management Institute, 2008). The project manager is responsible for defining the project, setting the schedule and monitors progress. The functional manager assigns resources and completing work assigned by the project manager. In the strong matrix, the project manager controls almost all aspects of the project. This includes assigning functional resources and making decisions on project trade-offs. The strong matrix has much more of the feel of a projectized organization (Larson & Gray, 2011).

There are advantages to the matrixed environment. This style works well for project oriented companies. It ensures that people on projects are utilized or returned to the available pool of resources. Project managers tend to have the authority to get the required resources. Accountability and tracking of projects is improved. It also provides the opportunity for resources to build skills as they move from project to project. This structure also helps track what people are working on through the project. The matrix organization is typically a good fit for medium to large projects (Lientz & Rea, 1998). One of the greater advantages is that the matrix is able to respond much more rapidly to issues than the functional organization (Kerzner, 1997).

There are some disadvantages to the matrixed organization. Qualified resources will be in heavy demand, while lesser skilled resources may sit in the resource pool. In a balanced or strong matrix, line managers may be weaker and function more as resource managers. In larger projects, the project may become strong at the expense of the functional organization. Large projects may over time become confused with the functional organization. It may also become difficult to share resources between projects. For resources there may be issues of dual reporting to the project and the functional manager. There may also be occasions where management’s goals conflict with that of the project, causing stress on individuals who try to balance the two. The matrixed organization is a compromise to try to capture the advantages of the functional and matrixed structures.

Projectized Organizations

Projectized organizations are at the opposite end of the spectrum from functional organizations. In this environment, there is a dedicated project team that is generally separated from the parent organization. The project manager is full-time and responsible for staffing the project team (Project Management Institute, 2008). If the projectized organization is supporting multiple projects, the organization may have its own human resource, legal, finance and marketing functions supporting the various projects. One famous example of a projectized environment is Lockheed Martin’s Skunk Works that developed many secret aircraft for the military (Larson & Gray, 2011).

The projectized organization has several strengths. It is simple and fast, allowing resources to focus on the project objectives and devote their full attention to the task at hand. Teams are also very cohesive while sharing a common goal and working closely together. This structure also allows for tight cross-functional integration where teams focus on optimizing the project, not their areas of expertise (Larson & Gray, 2011).

The projectized organization has associated weaknesses. This structure can be expensive since it is loaded with full-time resources. It is possible that some functions may become redundant across projects, adding to costs. Strife with the parent organization is another obstacle to overcome. It is possible for a “we – they” mentality to develop and effect the acceptance of the project into the mainstream. Another weakness is that self-contained teams limits technological expertise to the talent that is on the team. Talent does not rotate in when needed as it does in a matrix environment. Post-project transition can provide difficulties, after the project is complete, the personnel must be transitioned back to line organizations. It is often difficult to transition employees back to their original department after a prolonged absence (Larson & Gray, 2011).

Organizational and Project Considerations

The matrixed organization has many benefits over the functional organization when managing medium to large projects. A matrixed organization may not be for all companies, its success depends on both the work of the company and the type of projects.

If an organization’s work is comprised of 75 percent projects, it should consider a projectized environment. If an organization has standard products and projects, a matrixed environment would best fit. If an organization has mostly standard products and very few projects, dedicated teams could be formed on an as needed basis (Larson & Gray, 2011).

The type of project also has an impact on the type of organization needed. There are seven factors to consider when choosing a project structure: the size of the project, its strategic importance, the need for innovation, need to integrate a number of departments, the number of external interfaces (environmental complexity), budget and time constraints, and the stability of resource requirements. The higher the levels of these seven factors the more autonomy and authority the project manager and project team require to be successful (Larson & Gray, 2011).

For most companies, the first step in moving from a functional organization for projects is to move to a matrixed organization. It avoids the cost of the projectized environment while gaining benefits over the functional organization.

Moving from Functional to Matrixed

If it is found that the organization has sufficient projects and the factors above are indicating a needed change to a matrixed organization, the organization should plan its transition well before initiating change. This paper will suggest seven transition steps to develop a matrixed environment for a typical line or functional organization (White, 2001).

Step 1. Assess the Organizational Culture

The first step in the process is to develop a baseline of understanding of one’s organizational culture. The concept of culture has been borrowed from anthropology and is increasingly used in the study of organizations. Organizational culture includes customs, practices, knowledge, beliefs and conventional behavior of a social group. Organizational culture is of interest in project management because it unites individuals with a purpose, in a sense, principles by which to live and work. Some cultures are more receptive than others to a cross-functional or matrixed environment. A culture that is rigid, very hierarchal and bureaucratic will most likely resist a matrix and possibly display open hostility (Ford & Randolph, 1992). “Organisational culture is potentially also a dysfunctional factor. In attempting to establish project management as a new management discipline, especially in an organization with a functional hierarchy past, unexpected resistance may come from the culture of the organization” (Morrison, Brown & Smit, 2006). An organization that reflects openness, a willingness to learn and strong communication skills is much more likely to thrive in a matrixed environment. Understanding a company’s culture before attempting organizational change is paramount. A resistant culture could take years to change before reaping the benefits of a matrix structure.

Step 2. Obtain Senior Executive Support for Organizational Change

Clear support of senior executives is critical for any type of organizational change. This is the first step before initiating any type of change program. “Major change is often said to be impossible unless the head of the organization is an active supporter” (Kotter, 1996, p. 6). Any organizational change may make progress for a while, but without a strong guiding coalition it will eventually stall.

There is an entire discipline concerning organizational change, obtaining executive support is one of the first steps. If the organization has change leaders, leverage those resources in the matrix implementation. Unfortunately, the profile of a company implementing a matrixed environment from a functional structure is not likely to have an organizational change expertise. At a minimum, obtain enthusiastic senior executive support.

Step 3. Re-define Roles and Responsibilities

As with any position, a project manager’s roles and responsibilities should be clearly defined. The definition of roles and responsibilities should be extended to include the project team. The Project Management Body of Knowledge (PMBOK) identifies three characteristics the project manager must possess: knowledge about project management, performance – the ability to accomplish the designated task, and personal – attitude, characteristics and leadership abilities (Project Management Institute, 2008). A project manager’s job description should address the knowledge and the personal characteristics required. The performance aspect should be clearly documented in the project manager’s roles and responsibilities. This is the area that is most likely to be challenged by functional managers that feel they may lose some of their power. The level of authority must be documented in the project manager’s roles and responsibilities. For example, is the project manager responsible for the budget of the project, selection of resources, ability to identify trade-offs between time and scope? Some of these decisions will be based on the strength of matrix environment being implemented. In all cases, the roles and responsibilities must be detailed and clear to avoid power struggles with previously existing functional structures.

Step 4. Revise the Performance and Development Management Process

In a matrixed environment functional managers are responsible for personnel development and training. The project manager is responsible for project and training that may be associated with the delivery of the project or product. In some organizations the project manager is removed from the individual team members development and performance review process. There are potential problems in a matrixed environment if this process is disconnected. Several personnel concerns listed by Kerzner (1997) are related to this disconnect: personnel connected to projects suffer more anxieties about possible loss of employment, worry more about being set back in their careers, and feel no one is concerned about their personal development. To overcome these anxieties for personnel in a matrixed environment, the project manager and functional manager should be integrated in the performance and development process. The project manager should provide periodic performance related information to the functional manager. The functional manager should provide the project manager with the individual’s goals, objectives and development needs. The project manager should work to align project assignments with these goals and objectives. Aligning the development needs with the project will help alleviate some of the anxieties individuals have with the matrix environment.

Step 5. Revise Staffing Processes

The staffing process must become a collaborative effort between the functional managers and project manager. Functional managers should be integrated into project initiation activities, they have the best insight into the staff’s skills and development needs. “Mutual trust between project and line managers is crucial, especially during staffing sessions” (Kerzner, 1997, p. 187). The project manager and functional manager must work together to align team member’s skillsets, objectives, goals and development needs with that of the projects objectives. From a practical perspective, there should be regularly scheduled staffing sessions for the project manager to provide performance feedback on existing team members and outline future needs as the project progresses or new projects are initiated.

Step 6. Assign Project Managers

With executive support and the previous processes defined, project managers and teams can be identified and assigned. This may be a more challenging exercise than expected for an organization that has not been cultivating project management experience. For most organizations there are two options, developing from within or bringing in an external resource. There may be individuals with the interest and competency to be developed into a project manager. This could be a challenging experience for a new project manager to function in a newly created matrix environment. A better alternative may be to bring in an experienced resource to help the organization through the organizational change. This resource could be an external hire or a consultant to help “kick start” the transition. This resource could then also help mentor and train other project managers for the organization. If the organization is a part of a larger entity (such as a department in a corporation), it may be possible to “borrow” project management office resources to aid in the initial transition.

Step 7. Establish a Communications Plan

Volumes have been written about project management and communication. It is an integral part of the project manager’s role. The PMBOK includes an entire chapter on the topic of project communications management (Project Management Institute, 2008). The PMBOK defines project communications management as “the process required to ensure timely and appropriate generation, collection, distribution, storage, retrieval, and ultimate disposition of project information” (Project Management Institute, 2008, p. 243). The project manager is responsible for communicating across multiple functional lines while coordinating and integrating activities (Kerzner, 1997).

The communication plan is especially significant to an organization that is moving from to a matrixed environment. Functional managers will not know what type of communication will occur. A robust communication plan is required to alleviate this concern. The communications plan should include all project stakeholders: project sponsor, project team, project manager, customers, partners, functional managers, project management office, program manager, portfolio manager and any other identified stakeholders (Project Management Institute, 2008). The content of the plan should identify who reports what to whom and when the communications occur. With the matrix environment being a new structure to the organization, special care should be taken to meet the needs of the functional managers. Their input while developing the communications plan is important.


Not all organizations are capable of functioning in a matrixed environment. Depending on the type of work and size of projects, a matrixed organization may not be beneficial to an organization. An organization should take a concerted look at its organization and project work before deciding to institute a matrix. If the decision is made to continue to a matrix structure, the company should closely examine its organizational culture. Attempting to implement a matrixed structure in a ridged, hierarchal environment could be challenging if not devastating.

Requisitioning assistance from a practitioner of organizational change could be of great benefit.

The seven steps of moving from a functional to matrix environment include:

  • Step 1. Assess the Organizational Culture
  • Step 2. Obtain Senior Executive Support for Organizational Change
  • Step 3. Re-define Roles and Responsibilities
  • Step 4. Revise the Performance and Development Management Process
  • Step 5. Revise Staffing Processes
  • Step 6. Assign Project Managers
  • Step 7. Establish a Communications Plan

Following these steps to implementing a matrixed environment should help smooth some of the problems many experience. It cannot be a recipe for every organization, but is a general template that can be embellished or changed to fit an organizations specific need.


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Ford, R. C. & Randolph, W. A. (1992). Cross-Functional Structure: A Review and Integration of Matrix Organization and Project Management. Journal of Management, 18(2), 267-294, Retrieved January 20, 2012 from EBSCOHost.
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Project Management Institute (2008). A Guide To The Project Management Body Of Knowledge (PMBOK Guide). Project Management Institute, Inc., Newtown Square, PA.
White, K. R. J. (2001). The Functional to Matrix Transition: Common Pitfalls. Expert Series. PM Solutions.

Coty Smith has an MBA in project management.

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