Organization structure

A project manager’s powers strongly depend on an organization’s structure. There are

  • functional organizations – structured by departments and grouping a company’s functions like “controlling” or “accounting”, “sales” etc.; function managers manage headcount under their hierarchical supervision; project managers depend on the functional managers to release resources for participation in a project
  • matrix organizations – project managers and functional managers share their powers
  • project-ized organizations – project-based organization which is created for a project and dissolved as soon as the project is completed
  • project based organizations (PBO for short) – organizational structure only put into place for a project, “short-cutting” any other existing functional or project structure within the organization

Functional organizations

A major drawback of functional organizations becomes visible when a project needs to involve multiple functions: usually, such projects are split up – the first department does it’s work, then hands the result over to the next department which starts own project to continue the overall work. Obviously, communication breakdowns and information loss at those interfaces are to be expected.

Additionally, project resources are bound to be more loyal to their functional manager than towards the project manager, because the function managers pays them and is responsible for their yearly performance rating. On the other hand, a clear advantage in this structure is that in general people only need to deal with one supervisor – their functional manager.

Project-ized organizations

Such organizations can be identified by the following factors:

  • Project managers have the ultimate authority over projects
  • Organization is project-focused and -driven, therefore its resources are focused on projects as well
  • Team members are co-located
  • There is no functional-manager loyalty like in a functional organization – loyalties are established towards the project manager
  • Project teams are dissolved after a project’s conclusion

Matrix organization

Whereas the project-ized organization can probably be seen as the “opposite” of a functional organization structure, the matrix organization is kind of in between. There are functions as well as project hierarchies in a matrix organization – the functional manager and project manager share their powers to manage daily business and projects alongside.

There is a strong, a weak and a balanced form of a matrix organization. In the strong form, the power balance between the functional and project manager tips towards the project manager; in the weak form, the functional manager gains the upper hand.

Only the balanced matrix organization fairly balances powers between the functional and project manager.

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