What is Project Organisation? Structures

  • Post last modified:8 February 2023
  • Reading time:13 mins read
  • Post category:Project Management
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What is Project Organisation?

Project organisation is a framework or chart that defines the roles of the members of a project team and relationships among them.

In other words, project organisation defines a governance structure that encompasses key responsibilities, accountabilities, authorities and decision making. It provides a standard set of roles and responsi- bilities that can be customised for a particular project.

In a nutshell, it can be said that project organisation:

  • Defines the terms of reference and accountabilities for all key roles in a project
  • Explains clear interfaces at all levels and associated responsibilities
  • Defines the ways of working for a project team
  • Develops key controls, specific measures of performance and metrics to be used by the project team

Project organisation categorises individuals involved in a project into three different groups, which are as follows:

  • Directors of a Project: This group includes a project manager, project secretary and managing director, who provide strategic direction during the project planning process.

  • Project team: This comprises a group of individuals who are assigned duties to complete a project within the stipulated time.

  • Steering committee: This group involves organisational peers, customers, and stakeholders, who provide a strategic direction to a project.

Here, it should be remembered that project organisation can be successfully implemented if project team members are well aware of their roles, responsibilities, and efforts required for each activity. Moreover, the members should know the objectives of the project and how they work as a team so that the project can be accomplished successfully.

Project Organisation Structures

The effectiveness of a project organisation structure is the basis for the success of the project planning process. A project organisation structure is a framework of activities performed by the project teams to accomplish the goals of a project. The project organisation structures are temporary structures as they last till the completion of a particular project. These structures comprise individuals from different organisations to complete tasks related to the specified project of the organisation.

The level at which the roles and responsibilities are assigned to individuals to fulfil the goals of a project is also determined in the project organisation structure. In this organisational structure, individuals related to the project coordinate among themselves in a hierarchy to accomplish a common goal. Thus, project organisation arranges its lines of authority and channels of communication and assigns rights and duties to individuals.

The project organisational structure depends on project objectives and strategies followed to attain them. Project Structure Plan (PSP) can be devised to form the project organisation structure, which involves the arrangement of project activities in the form of various sub-tasks. Tabular or structural form shows the relationship amongst the different sub-tasks/activities, which help in deciding the expiration, scheduling and cost planning of the project.

The most popular and widely accepted PSP is the tree structure. Therefore, PSP is a hierarchical arrangement of all the sub-tasks or activities of a project, which ensures the proper distribution of resources and employment of team members.

Designing a project organisation structure involves the following steps:

  • Dividing project work into divisions and sub-divisions, and then assigning it to individuals, groups, functional departments and organisational units
  • Classifying people involved in the project into higher, middle and lower levels
  • Identifying global project organisations
  • Defining the basis of grouping at various levels of the organisation
  • Integrating people, working on the project in terms of communication, coordination, reporting, team-building, conflict management, etc
  • Deciding how authority, decision making, and responsibilities are delegated within the project organisational structure

The following criteria should be considered while determining the structure of a project organisation:

  • Strengths and weaknesses of different project organisational forms
  • Legal aspects of all available project organisational structures
  • Growth patterns of the project organisation
  • Decision-making roles and accountabilities
  • Relationships between a manager and his/her subordinates
  • Flow of information and the frequency of communication
  • Number of subordinates under a manager
  • Autonomy given to employees at various levels of the project organisation
  • Flexibility and need for innovation

Project organisations can have different types of structures that may vary according to the type of a project and other aspects, such as budget and duration of the project and availability of resources. The two most common types of project organisation structures are functional organisation and matrix organisation. Let us discuss these two structures in the subsequent sections.

Functional Organisations

In this type of project organisation structure, grouping of individuals is done on the basis of their functional roles. Here, individuals with similar functional areas or skills are grouped in separate units, which are directly controlled and coordinated by the top management of the organisation. Thus, the functional organisation structure is suitable for organisations that handle a single project. This structure works well in a steady environment where there are lesser changes in business strategies. However, the functional organisation structure is also suitable for large-scale organisations having a limited number of products.

Usually, the specialised units in a functional organisation structure directly report to the top management, as sharing of a superior’s expertise with subordinates maximises the level of performance. Each aspect of a project is handled by a separate functional unit, which, in turn, is coordinated by the top management. Figure shows an example of functional organisation structure:

The functional organisation structure offers greater operational efficiencies for employees as it is formed on the basis of various functional areas like IT, finance, and marketing. Employees having similar roles form departmental units and the projects are accomplished inside these units. The efficiency of employees tends to increase with shared skills and knowledge.

For example, accounting, marketing, finance, and human resources departments are brought together to perform a certain task based on the functions they perform. Suzlon, which is one of the world’s leading wind turbine suppliers, is an example of an organisation having a functional structure.

There are certain limitations found in the functional organisation structure. As the functional units report directly to the top management, it sometimes leads to complicated communication and decision-making processes. Consequently, the project completion process be- comes more bureaucratic and takes longer to accomplish.

Matrix Organisations

In the matrix organisation structure, employees from different departments of an organisation temporarily work together for completing a project. For example, a machinery development project requires specialists from different departments, such as finance, engineering, and research and development. The matrix structure does not follow any definite direction of authority and responsibility. In this structure, command may be issued from two different sources to a single subordinate at the same time.

Two or more organisation structures like functional organisation structure and pure project management organisation structure combine to form a matrix organisation structure. In this structure, the organisation is divided into various functions like purchase, production, R&D, etc., and each function is headed by a functional manager like purchase manager, production manager, marketing manager, etc.

Apart from functional division, the organisation is also divided on the basis of various on-going projects. Each project has a separate project manager. The project team members work under two authorities and report to them simultaneously.

Therefore, in this organisational structure, the functional manager and project manager together share the responsibility of accomplishing a project. On one hand, the project manager decides which tasks need to be done, what should be the time schedule, etc.

On the other hand, the functional manager decides which individual would be suitable to work on the project and the technologies that will be used in the project. In other words, the functional managers are responsible for the project managers’ staffing and for directing the administrative work needed for project team members. The project managers direct the bulk of the work done by employees.

In the case of functional manager, the authority flows horizontally, whereas in the case of project manager, the authority flows vertically. General Electric, Citibank, Dow Chemicals, Shell Oil, etc., are some organisations that have such type of organisational structure.

Let us now discuss the features of a matrix organisation structure:

  • Hybrid Structure: The matrix organisation structure is a hybrid of two or more organisation structures. Therefore, it has both merits and demerits of the component structures.

  • Problem of Unity of command: In the matrix organisation structure, the subordinates receive orders from two different heads, namely project manager and functional manager, thus, there ex- ists a problem of the unity of command. This sometimes results in confusion, disorder, disruption, inefficiency, etc., which, in turn, reduce the productivity of the project.

  • Specialisation: The matrix organisation structure works as a specialised structure. The project manager looks after the administrative aspects of a project, while the functional manager deals with the technical aspects of the project.

  • Suitability: The matrix organisation structure is suitable for organisations that deal in multiple projects. It is mostly used by large construction organisations that work in different locations at the same time. Each project is handled by a project manager who is supported by the functional managers and employees of the or-

One of the advantages of a matrix organisation structure is that the main focus is on the project. As a result, the client’s needs are ad- dressed faster. In case of multiple projects, the matrix structure facili- tates better utilisation of resources of the organisation. This structure is recommended for those projects where the integration of inputs from different functions is required. However, there are several limitations found in the matrix organisation structure.

It is one of the most complex organisation structures with very high work load. In this organisation structure, apart from regular work, managers and employees have to do additional work related to other projects. Moreover, it incurs a high operational cost as it involves a lot of paperwork, reports, meetings, etc. The matrix structure also lacks a unity of command. Sometimes, because of the power struggle between the project manager and the functional man- ager, it becomes difficult to balance responsibilities assigned by them simultaneously.

Best Project Management Courses

Project management skills are in demand. If you are ready to get started, consider enrolling in the Google Project Management: Professional Certificate Learn the job-ready essentials of project management in six months or less, such as initiating projects, risk management and change management. Also we have made list of best project management courses as there are a plethora of options available, and it can be challenging to identify the best one.

Google Project Management
Google Project Management
Project Management for Professionals
Project Management for Professionals

Best Project Management Tool

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Best for:

  • Mid & Large Size Team
  • Higher Plan
  • Standard Feature
  • Flexible Database & Stability

Best for:

The ideal project management tool selection will eventually rely on the particular requirements of your team. We suggest experimenting with the free versions of various tools to gauge your team’s comfort level and then proceeding accordingly.

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