How do organizational structures affect projects and project management?

Project Life Cycle and Organizational StructuresTo answer the question – How do organizational structures affect projects and project management? – requires an understanding of the different organizational structures and their effects.

It’s true that the structure of an organization can have a major impact on project management. Think about your own experience. Is it difficult to get traction on your projects? Are there numerous layers of authority that you have to navigate to get approvals for basic tasks? Does your budget get cut because of competition for limited funding? Do your projects lose out in favor of day-to-day routine operations?

And you thought it was something you were doing, or failing to do! Well it may have been, but it’s more likely that you are feeling the effects of the organizational structure within which you work. Understanding your working environment better will help you to rise above organizational issues and smooth the way to successful project management.

By looking at three different organizational structures – functional, matrix and projectised – we will discover how each distinct organizational style affects project management.

  • Functional Organizational Structure. These firms are organized into functional divisions based on primary functions such as engineering, human resources, finance, IT, planning and policy. Each different functional division operates independently and isolated groups of workers in a division report to a functional manager. The functional manager generally both allocates and monitors the work and carries out tasks such as performance evaluation and setting payment levels. In this model project managers have very limited authority. Functional organisations are set up for ongoing operations rather than projects and so this organisational structure is often found in firms whose primary purpose is to produce standardised goods and services.
  • Matrix Organizational Structure.In a matrix organisation control is shared. The project manager shares responsibility for the project with a number of individual functional managers. Shared responsibilities can include assigning priorities and tasks to individual team members. But functional managers still make the final decisions on who will work on projects and are still responsible for administration. Project managers take charge of allocating and organising the work for the designated project team. In this type of structure there is a balance between ongoing operations and projects, so it is a common structure for organisations that have these dual roles. For instance, local body organisations that are responsible for both maintaining existing infrastructure (ongoing operations) and commissioning the construction of new infrastructure (projects) often have matrix structures.
  • Projectised Organizational Structure. In a projectised organisation the project manager has full authority over the project. This includes the authority to set priorities, apply resources, and to direct the work of team members assigned to the project. All members of the project team report directly to the project manager and everybody is assigned to a project. After completion of the project, resources will be re-assigned to another project. This type of structure is common in firms that work on sizeable, long-term projects, such as in the construction industry.

Take a moment to reflect on which type of organizational structure you work in before we move on to discuss how these organizational structures affect projects and project management. Then see if you recognise any of the issues raised.

So what are the implications for project management?

In a functional organisation, projects that exist within a single functional division generate no particular organisational issues, but projects that cut across functional divisions can be challenging. Why? Projects that extend across functional divisions are demanding to manage because the project manager has no direct functional authority and must obtain continual cooperation and support from functional managers of other divisions in order to meet project objectives. This can get complicated.

Because the matrix structure gives authority to both project managers and functional managers the outcome is to provide a more seamless division of labour and ultimately to build a stronger team culture. However, the potential for conflict between functional managers and project managers still exists because there is still resource conflict. Everyone who is on a project team still has two bosses – their functional manager and their project manager.

In a projectised organisation authority is centralised. Because projects are removed from functional divisions the lines of communication are shortened. Both these factors enhance the ability to make swift decisions. Project teams develop a strong sense of identity which in turn creates a high level of commitment from team members. Due to their involvement in consecutive projects of a similar nature projectised organizations can develop and maintain a long-term body of experience and skills in specific areas.

It is clear that projectised organizations make it easier to run projects because the entire structure is set up for that purpose. But if you are managing a project within other organisational structures, then recognising and understanding the impacts will raise your awareness of the potential project management pitfalls, so that you can be proactive about resolving them.  Communication, conflict resolution and team building will be key to your success.

Continuing Professional Development offers a series of online project management courses to advance your project management skills and your career while adding to the intellectual wealth of individuals and organizations . Click here to find out more about online courses on Organizational Structures and Project Management

About the Author

Vivian’s career in professional engineering spanned 35 years of technical, business, management and governance experience. She draws on her industry experience to write articles that are practical and relevant to a wide range of readers. Her aim is to get you thinking and help you meet your continuing professional development requirements.


  1. Pradeepa says:

    Very good

  2. Anne-Marie says:

    A project in an organisation typically requires inputs from people in several departments at differing levels of authority; but the person managing the project isn’t their boss. What problems could arise, and what should be in place to prevent them?

    • Hello Anne-Marie

      It sounds as though you are describing an organisation with a functional structure, where departments or divisions are organised into separate silos, headed by functional managers. Project managers face many challenges in this type of organisation because their authority is very limited.

      Problems that can arise include project team members having to report to at least two bosses, with their work from the functional manager usually taking precedence.

      Key things that project managers can do are:
      – Keep the lines of communication open. With limited authority, the project manager needs to rely strongly on their skills of negotiation, conflict resolution and influencing to keep their projects on track.
      – Get early buy-in and commitment from senior management to support the project. The Project Sponsor plays a key role in this regard, as does the preparation of a Project Charter authorising the project and the project manager.
      – Spend some time on your Stakeholder Analysis so that you understand your key internal stakeholders and how you need to engage with and manage them.

      These topics are covered in our online course Project Management Essentials-Part 1

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