Friday, July 21, 2017

PMP Protein: Types of Organizational Structures

By Sathish Babu, PMP



The execution of a project is about team work, coordination and collaboration among resources. But the availability of resources, the control of project budget or how your team works, depends on the type of organization you are in. As a Project Manager, it is very important that you understand how your organization is structured because it will impact your project’s execution.  It also helps when you look for a new role in your organization or the next time you need a new job. How does it help? Let’s take the following scenario to understand it, 

Scenario: You have offers from two organizations. Your role in one of the organization is that of a project coordinator while in the other organization your role is that of a project expediter. However, there are distinctions between these two roles. Which of the following statement is true?
A. There is really no difference between the two.
B. Project Expediter has no authority and cannot take decisions. Project co-ordinator has some authority and decision making authority.
C. Project co-ordinator has no authority and cannot take decisions. Project Expediter has some authority and decision making authority.
D. Project expediters are found in projectized organizations and Project co-ordinators are found in Functional organizations.
Answer: B
Reason: A project expediter has no authority or decision making ability. A project co-ordinator has some amount of authority and some amount of decision making ability. So, the correct answer is Option B.


Types of Organizational Structures
The PMBOK® Guide 5th edition sorts organization structure into the following four categories:
1. Functional Organization
2. Matrix Organization: – This can be further classified into: 
    1. Weak Matrix
    2. Balanced matrix
    3. Strong Matrix
3. Projectized Organization
4. Composite Organization

Below shows a simple diagram to remember the organizational structures.


Now that we know how organizational structures are categorized, let’s take a closer look at each one of them to see what makes them unique.

1. Functional Organization
Below are the key points.
  • In this type of organization, Functional Manager has full power and authority level. 
  • Project related decisions need to be clarified and cleared with functional managers.
  • Project budget, schedules and resource allocation are managed by functional managers.
  • PM role does not exist or part time (possibly act as a Project Expediter).
  • The coordination for projects is done among the functional managers.
  • The teams are in departments and directly report to functional or department managers.
  • Each department in a functional organization will do its project work independently of other departments. If any information is needed from another department, request is sent by the head of the department which is implementing the project to the head of the department from whom the information is needed.

Below shows a simple diagram to remember the functional organization. The co-ordination for project work is highlighted with dotted blue lines. 


2. Matrix Organization
This type of organization lying somewhere between the functional organizational structure and the projectized organizational structure depending on what type of matrix structure is being run. They can be classified as follows.

2.1 Weak Matrix
Below are the key points. 
  • In this type of organization, functional manager still has full power and authority level.
  • Project budget, schedules and resource allocation are managed by functional managers.
  • Project Manager has some authority level and they act as a Project Expeditor or Project Coordinator.
  • The coordination for projects is done among team members from each department.
Below shows a simple diagram to remember the Weak Matrix organization.


Project Expeditor has no power and they act primarily as a staff assistant and communications coordinator. They are not responsible for the success or failure of the project and they just keep everybody informed of its progress.
Project Coordinator has some authority, some power to make decisions and reports to a higher-level manager.

2.2 Balanced Matrix
Below are the key points for this type of organization. 
  • In this type of organization, project manager shared authority with functional managers.
  • Teams will report to a project manager and a functional manager equally.
  • The coordination for projects is done by project manager and reports to the functional manager.
  • The project budget and schedules are managed by project manager and resources are still managed by functional manager.
Below shows a simple diagram to remember the Balanced Matrix organization.


2.3 Strong Matrix
Below are the key points.
  • In this type of organization, project manager has more authority than functional manager. But the team still reports to both managers.
  • PM role is full time and FM role is part time and only specific to functional work.
  • Project budget, schedules and resources are managed by project manager.
  • Project managers are in a department named PMO (Project Management Office) which can be managed by a highly experienced and senior project manager.
  • The project coordination is done by project managers from PMO department.
Below shows a simple diagram to remember the Strong Matrix organization,


2.4 Projectized Organization
Below are the key points,
  • In this type of organization, the entire company is organized by projects and project manager has control of the project.
  • Project constraints and resources are managed by project manager.
  • The project coordination is done by project manager.
  • Teams are organized by projects. When a project is over, the team is released and move on to another project.
  • The project manager is responsible for the success or failure of the project.
Below shows a simple diagram to remember the Projectized organization.



Exercises 
Test yourself! The questions in the PMP® exam are mostly situational, many are ambiguous and very wordy, and some even seem like they have two or more right answers. Be prepared for the following types of questions so you will not waste time or be caught off guard when you are taking the exam.

Scenario 1:
You head the engineering department in your company. Lately you have observed that certain deliveries are missing the schedule. On closer scrutiny, you observe this to be occurring with a specific team member. You decide to discuss it out with the team member. Initially the team member is reluctant to discuss but finally opens and indicates that the cause of the delays is often different instructions coming in from you as well as the project manager. She indicates that at such times she is confused related to whose instructions to follow - thereby causing delays. 
Question: What kind of an Organizational structure is this most likely to be?
A.    Functional
B.    Projectized
C.    Weak Matrix
D.    Balanced Matrix

Answer: D
Reason: Here the team member is being expected to follow instructions from both the Project Manager and the Functional Manager. This is never the case in a Functional or Projectized organization where the lines of authority are clearly defined. A weak matrix organization is more like a Functional Organization where the project manager has almost no authority. The scenario explained above is typical of a balanced matrix organization where power resides equally distributed between the functional and project manager. Here the correct answer is Option D - Balanced Matrix.

Scenario 2: 
Your friend who works as a project manager in a pharmaceutical company meets you over dinner. You see a drastic change in his temperament as compared to when you last met him. He seems dejected and complains that in his present organization - as a project manager - he has almost no authority and hardly any decision-making ability.
Question: What kind of an organizational structure does your friend work in?
A.    Product organization
B.    Functional Organizational Structure
C.    Strong Matrix Organizational Structure
D.    Projectized Organizational Structure
Answer: B
Reason: Your friend works in a Functional Organizational Structure. In such an organizational structure, all the power and authority resides with the Functional Manager. Such organizations are hierarchical in nature - where each employee has one clear superior. People are grouped by specialties (Functional) - Example - Mechanical, Accounts, Marketing etc. These departments work independently of each other. So, the correct answer is option B - Functional Organization.

Scenario 3:
You and your team have worked hard and are about to successfully deliver the project. The customer is also happy with the deliverables and overall everyone is happy with how the project was delivered. You have written up the performance reviews of everyone in the project team. As a Project Manager in your current organization you know that the team will get disbanded and in the next project you may not get the same team members who so successfully delivered the current project.
Question: What kind of Organization Structure does this represent?
A.    Weak Matrix
B.    Balanced Matrix
C.    Projectized
D.    Functional

Answer: C
Reason: This represents a Projectized Organization structure. In a Projectized organization, teams are disbanded at the end of the project. In a Functional organization teams report to the Functional manager and are never disbanded. They continue in their own departments and continue to report to the Functional Manager. A weak matrix organization is very similar to a Functional Organization and role of Project Manager is limited. In a balanced matrix organization, the staff reports to a Project manager and a Functional Manager - in the question above there is no mention of a functional manager - so Balanced Matrix is also not the correct option. Hence the answer is Projectized - Option C.

References: 
1. “2.1.3 Organizational Structures” from PMBOK Guide 5th Edition.
2. “Chapter – 2: Organizational Influence and Project Life Cycles” from Book “I Want To Be A PMP” by Satya Narayan Dash.
3. “2. Organizations, constraints, and projects” from Head First PMP 3rd Edition.
4. “2. Project Management Framework” from Rita Mulcahy’s PMP Exam Prep 8th edition.

Written by Sathish Babu:
Sathish Babu is working for Kodiak Networks as a Project Manager and having 11+ years of experience in Product, Project Management and Service Delivery in Telecom domain.



New Book Available for PMP Exam:


No comments:

Post a Comment

Any comment is welcome - comments, review or criticism. But off-topic, abusive, defamatory comments will be moderated or may be removed.