Although there are various ways in which people can be organised to work on projects, the most common types of organisation structures are functional, project, and matrix. The examples here relate to industrial companies; however, the concepts are applicable to other sectors, such as service businesses and not-for-profit organisations (for example, educational institutions and hospitals).
You will become familiar with the characteristics of the three types of organisation structures the advantages and disadvantages of each. The basic building blocks of the traditional form of organisation are a functional division of management and a well-defined hierarchical structure. Typically, a firm is organised into various departments, such as production, purchasing, marketing, finance, engineering, and research and development.
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Some of these departments have a function and the others a staff function. Line managers have the principal responsibility for achieving the goals of the firm and are vested with decision making authority. Staffs managers primarily serve in an advisory capacity of course, within the staff departments enjoy administrative powers.
Forms of Project Organisation
The traditional form of Organisation is not suitable for project work for the following reasons:
- It has no means of integrating different departments at levels below the top management, and
- It does not facilitate effective communication, coordination, and control when several functional departments, with different professional backgrounds and orientations are involved in the project work under time and cost pressures, which optical for overlap, at least partial, of the development, design, procurement, construction, and commissioning work.
Hence there is a need for entrusting an individual (or group) with the responsibility for integrating the activities and functions of the various departments and external organisations involved in the project work. Such an individual may be called the project manager or project coordinator.
Depending on the authority that is given to the person responsible for the project, the project organisation may take one of the following four forms:
Line and Staff Organisation
In this form of project organisation, a person is appointed with the primary responsibility of coordinating the work of the people in the functional departments. Such a person, referred to commonly as the project coordinator, acts essentially in a staff position to facilitate the coordination of line management in functional departments.
The project coordinator does not have authority and direct responsibility of the line management. He serves as a focal point for receiving project-related information and seeks to promote the cause of the project by rendering advice, sharing information, and providing assistance. He may gently coax line executives to strive for the fulfillment of project goals.
Deprived of formal organisational authority, he may find it difficult to exert leadership and feel unsure of his role. His influence would depend on his professional competence, closeness to top management, and persuasive abilities. Clearly, this is a weak form of organisation which may be employed mostly for small projects and it is certainly not suitable for large projects.
Functional organisation structures are typically used in businesses that primarily sell and produce standard products and seldom conduct external projects. For example, a company that manufactures and sells video recorders and players may have a functional organisation structure. In the functional organisation structure, groups consist of individuals who perform the same function, such as engineering or manufacturing, or have the same expertise or skills, such as electronics engineering or testing.
Each functional group, or component, concentrates on performing its own activities in support of the company’s business mission. The focus is on the technical excellence and cost competitiveness of the company’s products, as well as the importance of the contribution of each functional component’s expertise to the company’s products.
In a functional-type organisation, the project manager does not have complete authority over the project team, because administratively the members still work for their respective functional managers. Because they view their contribution to the project in terms of their technical expertise their allegiance remains to their functional managers. If there is conflict among the team members, it usually works its way through the organisation hierarchy to be resolved, slowing down the project effort.
On the other hand, if the company president does the project manager the authority to make decisions when there is disagreement among team members; decisions might reflect the interests of the project manager’s own functional component rather than the best interests of the overall project. For example, take the situation in which there is disagreement about the design of a new product and the project manager, who is from the engineering function, makes the decision that reduces the engineering design cost of the product but increases the manufacturing cost.
In reporting project progress to the company president, the project manager then makes some biased comments regarding the viewpoints of team members from other functional components, such as, ‘If manufacturing were more willing to consider other production methods, they could make the product for a lower cost. Engineering has already reduced its design costs.’ Such a situation could require the company president to get drawn into handling the conflict.
The functional organisation structure can be appropriate for internal company projects. However, because projects are not a part of the normal routine, it’s necessary to establish a clear understanding of the role and responsibilities of each person assigned to the project task force. If the project manager does not have full authority for project decisions, then she or he must rely on leadership and persuasion skills to build consensus, handle conflict, and unify the task force members to accomplish the project objective. The project manager also needs to take the time to update the other functional managers in the company.
Under this form of project Organisation, a separate division is set up to implement the project. Headed by the project manager, this division has its complement of personnel over whom the project manager has full line authority. In effect, this form of Organisation implies the creation of a separate goal oriented division of the company, with its own functional departments. While the project manager still has the problem of coordinating the inputs of other Organisations involved in the project, he has total formal control over the division he heads.
A very strong form of project Organisation, the divisional project Organisation facilitates the process of planning and control, brings about better integration of efforts, and strengthens the commitment of project related personnel to the objectives of the project. It considerably improves the prospect of fulfilling the time and budget targets.
This form of Organisation, however, may entail an inefficient use of the resources of the firm. It may result in an unnecessary duplication of specialists in the company, because of the necessity to allocate them in total to each project. Further, it may be difficult to achieve a higher degree of specialization of expertise because the divisional project Organisation may have to manage with, say, one mechanical engineer, rather than two specialists.
Matrix organisation structure for a business that sells custom computer-based automation systems. Each customer order is for a unique system. Some systems sell for as little as ₹50,000 and take four to six months to design and produce; whereas others cost several million dollars and take up to three years to complete. Specialized Computer and customer focus Systems, Inc. is in the project’s business; however, its business involves greater number of smaller-sized projects. It’s working on multiple projects at any one time, and these projects vary in size and complexity. Projects are continually being completed and started.
The matrix-type organisation is kind of a hybrid – a mix of both the functional and project organisation structures. It provides the project and customer focus of the project structure, but it retains the functional expertise of the functional structure. The project and functional of the matrix structure each have their responsibilities in contributing jointly to the success of each project and the company. The project manager is responsible for the project results, whereas the functional managers are responsible for providing the resources needed to achieve the results.
The matrix-type organisation provides for effective utilization of company resources. The functional components (systems engineering, testing, and so forth), home of the technical staff; provide a pool of expertise to support ongoing projects.
Project managers come under the projects component of the organisation. When the company receives an order for a new system, the vice president of projects assigns a project manager to the project. A small project may be assigned to a project manager who is already managing several other small projects. A large project may be assigned a full-time project manager.
The project manager then meets with the appropriate functional managers to negotiate the assignment of various individuals from, the functional components to work on the project. These individuals are assigned to the project for the length of time they are needed. Some individuals may be assigned to the project full-time, where as others may be assigned only part-time.
In the matrix organisation structure, the project manager is the intermediary between the company and the customer. The project manager defines what has to be done (work scope), by when (schedule), and for how much money (budget) to meet the project objective and satisfy the customer. She or he is responsible for leading the development of the project plan, establishing the project schedule and budget, and allocating specific tasks and budgets to the various functional components of the company organisation.
The functional manager of each organisation component provides technical guidance and leadership to the individuals assigned to projects. He or she is also responsible for ensuring that all tasks assigned to that functional component are completed in accordance with the project’s technical requirements, within the assigned budget, and on schedule.
The matrix-type organisation provides a checks-and-balances environment. The fact that potential problems can be identified through both its project and its functional structure reduces the likelihood that problems will be suppressed beyond the point where they can be corrected without jeopardizing the success of the project. The matrix organisation structure allows for fast response upon problem identification because it has both a horizontal (project) and a vertical (functional) path for the flow of information.
The vice president of projects, to whom the project managers report, plays an important role in the matrix structure. This individual can resolve priority conflicts between two or more projects within the organisation.
What is Project Organisation?
Project organisation structure for a business sells rapid transit projects to cities and counties. An average customer order will be for a multimillion–dollar project that will require several years for engineering, manufacturing, and installation.
This company is in the project’s business; it does not produce standard products. It’s working on multiple projects at any, one time, at various stages of completion. As projects wind down and are completed, the company hopes to get contracts for new projects. People are hired to work on a specific project; they may be reassigned from a project just completed if they have the appropriate expertise. Each project team is dedicated to only one project. When their project is completed, unless team members are assigned to another project they might be laid off.
In the project-type organisation, each project is operated like a mini-company. All the resources needed to accomplish each project are full-time to work on that project. A full-time project manager has complete project and administrative authority over the project on a particular project team. (In the, functional-type organisation, the project manager may have project authority, but the functional manager retains administrative and technical authority over his or her people who are as signed to the team.) The project-type organisation is well positioned to be highly responsive to the project objective and customer needs because each project team is strictly dedicated to only one project.
A project-type organization can be cost inefficient both for individual projects and for the company. Each project must pay the salaries of its dedicated project team, even during parts of the project when they are not busy. For example, if a delay in one part of the project leaves some resources with no work to do for several weeks, project funds must cover these costs.
Also, there is little opportunity for members of different project teams to share knowledge or technical expertise, since each project team tends to be isolated and focused strictly on its own project. However, there may be some company wide support functions that serve all the projects. In a project-type organisation, detailed and accurate planning and an effective control system are required to assure optimum utilization of the project resources in successfully completing the project within budget.
Project organisation structures are found primarily in companies that are involved in very large projects. Such projects can be of high (multimillion) dollar value and long (several years) duration. Project organisation structures are prevalent in the construction and aerospace industries. They are also used in the non-business environment, such as for a volunteer managed fund-raising campaign, town centennial celebration, class reunion, or variety show.