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Organization Structures in Project Management
By Michael D. Taylor

While there are various types of organizations used today, the two most prominent are the functional and matrix forms.

Functional Organization Structure

Prior to about 1960 most corporate organizations favored a functional organization structure, also called a traditional organizational structure. The structure was very vertical with each employee having one boss. The simplified diagram below illustrates the basic form of this structure. Division managers and department heads were also included in some cases. Organizations still using this structure tend to be in the public sector where there is little if any competition and pressures to produce new products quickly are minimal.

Each functional manager was responsible for hiring employees having a specific field of knowledge or skill set. For instance, one functional manager would be responsible for hiring and administering individuals who were mechanical engineers. Another functional manager would be responsible for hiring and administering electrical engineers.

The advantage of this type of organization structure is that all specialists within a functional group tend to keep each other current with the latest technology. They “cross-pollinated” each other. Also, each employee had only one boss, making the chain of command simple and easy to understand.

There are several disadvantages to this type of structure. First, no one has overall responsibility for a given project. Each has his own “piece of the pie.” Second, many employees within a group are not gainfully employed all the time. Often they are challenged with attempting to find ways to fill up their work day. Third, customers become frustrated when trying to understand the status of their product. Each functional manager may know a specific aspect of the product’s development but none have a full knowledge of product development. This type of organization structure is very weak in product development integration.

Functional Organization Structure - An Example

Functional Organization Structure – An Example

Matrix Organization Structure

Many corporations today have moved toward the matrix form of organization structure. This structure has been found to alleviate many of the deficiencies with the functional form. As seen in the figure below, lines of authority flow both vertically and horizontally. Hence, the term “matrix.”

Matrix Organization Structure - An Example

Matrix Organization Structure – An Example

While employees still report administratively to their functional managers, they are assigned to project managers for the duration of their need. Once their support to a project is completed they return to their functional group ready to be assigned to another project. Project managers “extract” employees from the functional organizations as needed.

In many cases employees are assigned to multiple projects. This creates the problem of spreading an employee over too many projects resulting in lost time as they transition physically or mentally between projects. As the number of projects supported increases so does the lost time due to transitioning. An employee assigned to four projects is not available for 25% of their time to each one as might be expected. The available time is actually closer to 19%.3 The lost time, 6% is due to transitioning.

The tendency to spread employees over too many projects is precipitated by functional managers who are required to keep their assigned budgets to a minimum. In order to accomplish this they must assign their employees to projects which have their own budgets. These same pressures on functional managers cause them to hire fewer people than needed to prevent unassigned personnel from charging against their budgets.

MICHAEL D. TAYLOR, M.S. in systems management, B.S. in electrical engineering, has more than 30 years of project, outsourcing, and engineering experience. He is principal of Systems Management Services, and has conducted project management training at the University of California, Santa Cruz Extension in their PPM Certificate program for over 13 years, and at companies such as Sun Microsystems, GTE, Siemens, TRW, Loral, Santa Clara Valley Water District, and Inprise. He also taught courses in the UCSC Extension Leadership and Management Program (LAMP), and was a guest speaker at the 2001 Santa Cruz Technology Symposium. His website is

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