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Project Portfolio Management

Project Management Organization: The Basics

Published By Team AdaptiveWork

The classic definition of an organization is “a body of people with a particular purpose.” However, the manner in which this “body of people” is configured and composed directly impacts – sometimes for better, and sometimes for worse – how, when, and whether the “particular purpose” is fulfilled. In other words, to understand project management organization, we need to grasp and evaluate its underlying structure.

Project Management Organization

Project Management Organization Structure

Below is an overview of four common project management organization structure types: functional, matrix, projectized, and composite.

Functional Organizational Structure

In a functional organizational structure (also referred to as a conventional and traditional organizational structure), decision-making power rests with functional managers. As such, departments, divisions, teams and work groups are arranged by the type of work being done (e.g. engineering, R&D, sales, professional services, etc.).

Project managers have little or no authority, and as such working on projects is typically a part-time rather than full-time activity. For example, an individual may be assigned to serve as a project manager on a particular initiative, during which she or he reports to a functional manager who controls budget allocation, resource allocation, etc. Once the project is over, the individual returns to their normal (functional) role.

Projectized Organizational Structure

In a projectized organizational structure, project managers are given a high degree of power (and in some cases complete and total authority) to make various decisions regarding budget allocation, resource allocation, scheduling, and so on. Since these organizations are fundamentally designed to operate projects, project managers do not have a functional role that they revert to between initiatives. They work from project to project, and may often lead multiple smaller projects at the same time.

Matrix Organizational Structure

A matrix organizational structure is a blend of functional and projectized. In this configuration – which is the most common type of structure – functional managers and project managers both have a degree of power and autonomy. For the former, the authority moves vertically (up and down the organizational chart). For the latter, the authority moves vertically (across departments and teams).

Employees who work in a matrix organizational structure may report to multiple managers. For example, an electrician who typically works 40 hours a week may be assigned to spend 10 hours a week on a construction project. During those 10 hours, she reports to the project manager. For the other 30 hours, she reports to her functional manager.

Generally, there are three sub-types of matrix organizational structures: strong, weak and balanced:

  • Strong: Project managers have more authority than functional managers.
  • Weak: Functional managers have more authority than project managers.
  • Balanced: Both project managers and functional managers have equal (or similar) levels of authority.

While a balanced matrix organizational structure may seem ideal and democratic, it can be quite challenging to make this approach work in an efficient way. This is because, invariably, issues will arise that will benefit one type of manager over another.

Returning to the example above, imagine that the project manager on the construction project wants the electrician to spend 20 hours a week on the project instead of ten. Although this request may be perfectly legitimate and justified – say, the builder has moved the deadline up by three months and as such the timeline must be accelerated – the functional manager may be opposed to this request.

To avoid ongoing conflict on the construction project organization chart, both the functional manager and the project manager must have clear protocols and processes for decision-making. In some cases, this may involve escalating certain matters to an executive (or executive team) for a final decision.

Composite Organizational Structure

A composite organizational structure combines all three of the types discussed above: functional, projectized and hybrid.

At first glance, this kind of configuration may seem excessively – if not impossibly – complex and impractical. However, this combination does not mean that project managers have fluctuating degrees of authority on the same project (i.e. on Monday they have full power, and on Tuesday they have no power). Such a setup would truly be chaotic!

Rather, in a composite organizational structure, project managers are given different levels of authority on various projects. For example:

  • On “Project A” they may have full authority (as is the case in projectized organizations).
  • On “Project B” they may have little authority and serve more as a project coordinator or facilitator (as is the case in functional organizations).
  • On “Project C” they may share authority with a functional manager (as is the case in matrix organizations).

Due to the complex nature of a composite organizational structure, this approach is rarely used by smaller or mid-sized organizations. Instead, it is adopted by some large enterprises and government agencies that focus on multiple sectors of the same industry. Google is often cited as an example of a composite organizational structure (with a significant emphasis on a matrix organizational structure).

Project Organization and Management

The following diagram illustrates the relative amount of authority that project managers have in each type of structure, with the level of authority increasing from left to right:

project management organization structure

Source: PMI: Project Management Body of Knowledge (PMBOK Guide)

A Word on PMOs

Project Management Offices (PMOs) can exist in all types of organizational structures. However, PMOs have the most authority and control in projectized organizations, and the least in functional organizations (in which case the PMO typically plays a supportive role vs. a controlling or directing role).

Factors in Choosing an Organizational Structure

As highlighted by the Project Management Institute (PMI), which is one of the world’s foremost project management associations, there are a variety of factors that must be taken into consideration when choosing an organizational structure. These include (but are not limited to):

  • Extent of alignment with organizational objectives
  • Specialization capabilities
  • Delegation capabilities
  • Span of control, effectiveness and efficiency
  • Clear lines for escalating decisions
  • Communications (e.g., policies, vision, status of work)
  • Scope of authority
  • Accountability assignment
  • Responsibility assignment
  • Simplicity and adaptability of design
  • Efficiency of performance
  • Cost considerations,
  • Physical locations (co-located, regional and/or virtual)

Project Management Organization Software

Regardless of structure, good project management organization software is essential for keeping initiatives on schedule and within budget. Key features and functions include: 

  • Cloud-based access
  • Configurable workflows
  • In-context collaboration
  • Automated business processes
  • Real-time visibility
  • Flexible UI
  • Dynamic reports and dashboards
  • Integration with other systems and tools in the environment (e.g. CRM, ERP, file repository, chat, task management, presentation, etc.).
Increase your business agility with Planview AdaptiveWork’s project management software

When evaluating various project management organization software solutions, it is also important to pay attention to aspects such as out-of-the-box-readiness, onboarding ease, and information security (both data transmission and data-at-rest). And of course, it is wise to focus on customer reviews,analyst reviews and awards

The Bottom Line on Project Management Organization

A project management structure is not static and fixed. Rather, it is dynamic and adaptive. Organizations that combine fundamental stability with responsive agility are typically those that rise to the top of their marketplace, set the pace, and lead the way.

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Written by Team AdaptiveWork