What Is Project Organization in Project Management?

The term project organization refers to the style of coordination, communication, and
management the project team uses throughout a project lifecycle. By applying project
organization, you optimize resources, provide clear communication about roles and
responsibilities, and reduce potential roadblocks.

Why Is Project Organization Important?

Project managers use project organization to align team members before and during a project.
The process minimizes disruption to your workflow and conflict among team members, as well
as leads to maximum productivity among team members involved in a project.

While excellent project organization strategy and execution are important, you also need to
consider the opportunity cost of a poorly organized project.

Anthony C. Taylor, Managing Partner and Lead Facilitator at SME Strategy Management
Consulting, works with senior leadership to help strategically implement organizational
management. He notes that the positive attributes of project organization are to prioritize and
better allocate resources, keeping in mind that the project will have various stakeholders.
According to Taylor, if project organization and strategy are not an essential part of a project,
it’s easy to fall into the “multiple destination trap” where people don’t know where they’re
going. This creates different expectations among the team members, causing them to spin in
circles and avoid risk. Well-executed project management organization is part of what creates
a “one destination” solution, says Taylor, where everyone knows where they’re going to
ultimately deliver business value.

Taylor elaborates on the opportunity cost: “What does it cost if it’s not working for you? If
team members are not focused on the right priorities, they will do x, y, and z outside of the
project priorities and inhibit progress. If people aren’t clear where they’re going, they’ll quit
without knowing the wants, needs, and expectations of everyone around them. What then is
the cost to attract, hire, retrain, and lose productivity?”

Creating and communicating a project management organization structure is one tool to help
connect strategy and vision across those involved in the project. Developing a project
organization structure ultimately reduces disruptions, overlaps, conflicts, uncertainty, and
confusion before a project even begins.

What Is Organizational Structure in Project Management?

A project management organizational structure is used to determine the hierarchy and authority
of people involved in a specific project. The structure defines each team member’s function
and the reporting lines on a chart for team members to reference during a project.

Types of Project Organizational Structures

There are three types of organizational structures in project management: functional, matrix,
and projectized. Each project structure framework is determined by the authority, roles, and
responsibilities of the team members within the existing organizational structure.

Because no two projects are alike, no organizational structure will be exactly the same. The
role of the project manager changes within each of these frameworks, and each project’s
organizational structure is highly nuanced. Understanding the vertical or horizontal
coordination of each framework and the role that the project manager will hold can help you
to develop a successful strategy.

Functional Project Organizational Structure

A functional project organizational structure organizes its hierarchy around traditionally

functioning departments. A functional manager heads each department and reports to an
executive. These functional managers — not other staff — coordinate the project, and they
select team members from each department to support the project, in addition to their functional
responsibilities.

Projectized Organizational Structure

A projectized or project-based organizational structure creates a dedicated project division

within an organization. The project coordination operates vertically under this division. Project
managers maintain sole authority for the project and are assigned dedicated staff who work
toward project goals.

Matrix Organizational Structure

A matrix organizational structure is set up on a grid to demonstrate staff reporting patterns to

more than one authority. It is a hybrid of functional and projectized organizational structures,
and project managers share authority with other program managers in this structure. Depending
on the decision-making capacity of the project manager, a matrix structure is one of three
subtypes: weak, balanced, or strong.

Weak Structure
A weak structure is similar to the functional organization structure, in which coordination
occurs horizontally among staff without a designated project manager. The primary difference
between a weak matrix and a functional structure is that the staff across departments, rather
than the functional managers, coordinate the project (but the functional manager maintains
decision-making authority).

Balanced Structure
In a balanced matrix, the project manager also holds a staff position and does not utilize the
project manager role to its full capacity. The project manager still has little authority over
project decisions, budget, staff, etc., and primarily serves as the point of contact and
coordinator.

Strong Structure
A strong matrix is most similar to a projectized organizational structure. In it, a dedicated
project manager falls under a functional project management department, has dedicated cross-
functional staff, and is supported by a manager of all the project managers. This subtype offers
the project manager the most authority as they work across a matrixed environment.

There is no perfect organizational structure. Instead, a project manager must weigh the pros
and cons of resource allocation and optimization within each structure, then select the most
optimal structure. In addition to the project team’s operational pros and cons, the authority
(decision-making power) of the project manager changes depending on the selected project
organization structure. This means that the project manager must have both the knowledge and
the skills to apply effective managerial and interpersonal techniques that lead to a high-
functioning project team.

Project Organizational Structure Quick-Reference Guide

Use this quick-reference guide to help determine the pros and cons of your project organization
structure, as well as the managerial skills you need to prioritize in order to ensure your project
runs as smoothly as possible.

FUNCTIONAL
Management Priorities
Project Pros Project Cons
for a Project Manager
Optimal
Resources: Resources PM Authority: Low
are not in competition Missing the Right
with other areas, which People: Projects may need Communication
leaves little need foradditional specialists if they Facilitation: Break down
competition ordo not have all the right silos across departments.
negotiation. people within the area.
Coordination: Engage
Familiarity: TeamCompeting Priorities of cross-functional teams.
members are alreadyTeam: Team members may
familiar with each other feel challenged to balance Teamwork
and share similar skills competing priorities of Emphasis: Engage teams
and functions. program responsibilities outside of their department.
and project responsibilities.
Operational Continuous Goal
Efficiency: Has theSiloed: This structure often Clarity: Keep project goals
potential to achievecreates organizational silos, at the forefront in
greatest operationalwhich can make strategic competition with
efficiency due to the rolealignment challenging. departmental goals
and communication distracting the project.
clarity.
MATRIX
Management Priorities
Project Pros Project Cons
for a Project Manager
People Costs: Administrative costs PM Authority: Medium
Optimization: Leverages are higher, due to the
FUNCTIONAL
each specialist’s skill setoperational complexity of Influencing and Negotiation
across multiple projects. the reporting relationships. Skills: Navigate limited
authority with other
Flexibility: Employees Workload program managers and
can work across Miscommunication: There interactions with the project
departmental units is a greater potential for team members.
without being bound tomisunderstanding a team's
one. workload, given that they Servant
report both to a project Leadership: Focus on
Project Control: Strong manager and a department building deep collaboration
coordination among teammanager. and communication with the
members eases team, and continuously
communication and Increased Conflict: Shared monitor the division of
information boundaries. authority among managers labor.
potentially creates
confusion on roles. Open Communication
Lines: These boundaries are
essential to spot and resolve
conflicts before bigger
issues come up.

Team
Recognition: Acknowledge
the team comes from
multiple parts of the
organization. Take time for
team building and
engagement opportunities.
PROJECTIZED
Management Priorities
Project Pros Project Cons
for a Project Manager
PM Authority: High
Resource
Duplication: Resources
Role Responsibility: Live
may not be optimized and
Authority: The projectcan be costly, due to the up to the trust and
manager owns all projectdoubling of resources leadership that comes with
decision making. full authority and ownership
across multiple projects.
of the project.
Clarity: ProjectStunted Team
alignment, lines, goals, Growth: Teams can be Maintain Team
and strategy are clear siloed, binding the team Morale: Build team trust
across the team. and keep the team moving
members to one project at a to meet tight deadlines.
time and limiting their
growth. Communication: Building
strong communication
 FUNCTIONAL
networks across projects is
essential in reducing the
duplication of efforts.

Features of an Organization Structure

The features of an organizational structure define the roles and relationships among members
of the project, as well as between projects. These relationships are determined by authority,
communication lines, coordination, supervision, and responsibilities.

Specifically, the primary features of a organizational structure are as follows:

 Hierarchy: The hierarchy should delineate a clear line of authority and define decision-making
responsibilities.
 Division of Labor: This refers to the workload (managerial, task oriented, etc.) associated with
the roles.
 Span of Control: Here, define who manages whom. Reporting structures will be based on this
concept.
 Position Type (Line vs. Staff): A line position is a team member who is directly involved with
the product. A staff position supports those in line positions, but are not directly involved with
the product.
 Centralization: This defines how the decision making occurs. In a centralized project, few
people own decisions, whereas in a decentralized project, decision-making authority is
distributed across the organization.

How to Make a Project Organizational Chart

To make a project organizational chart, first assess the goals of the project, identify the core
team, and assign them appropriate roles to the project. Develop the organizational chart by
mapping out the roles and responsibilities of each team member.

The PM will make the organizational chart during the initiation phase of the project so that the
project manager can communicate with team members before the project begins. The team will
then use it in the project planning phase to help divide tasks among team members. Doing so
provides a clear understanding of each role, empowers team members to own their roles, and
brings respect to other positions within the project, which immediately builds trust.

The project organizational structure needs to be flexible and might require adjustments during
the other phases of the project. Make sure to communicate any adjustments to the
organizational chart (including staffing decisions) to the team members.

Developing a project organizational chart requires the following six main steps:

Step 1: Align the Project with Organizational Strategy

The project manager must have a deep understanding of how the project goals align with the
company or department’s strategy. This will bring the team onboard from the beginning,
develop shared meaning from project team members, and ultimately provide the most seamless
project execution.

Step 2: Analyze Projects on an Organizational Level

If an organization doesn’t have a PMO, the project manager must analyze the volume and
variety of projects when considering which organizational structure to select. The Project
Management Institute (PMI) uses the volume-variety matrix, a diagram that charts an
organization’s volume of projects in relation to the variety of projects on a low-to-high
continuum, to assist in determining a project organization structure strategy. A high variety and
low volume of projects suggests a projectized structure would best fit, whereas a low variety
and high volume of projects would suggest a functional structure. A matrix structure falls in
between these two spectrums.

Step 3: Determine Roles and Responsibilities

Focus on the necessary roles and responsibilities first, before considering personnel. If a project
manager has the authority to decide who is on the team, it is important to research potential
team members to find the most suitable people for the project. Regardless of how the core team
is assembled, it is essential to understand the strengths that each team member brings to the
project. Spend time getting to know everyone on the team; in the process, you can build rapport
and assess their skills.

Step 4: Structure the Chart

Structuring a chart can be complex, but you can make the process easier by approaching it from
the large structure to task details, or vice versa. Start by reviewing the strengths of the team,
the project tasks that need to be completed, and the existing structure of the organization.
Decide which people’s strengths fall into leadership roles and which people are more task
oriented.

Naturally, the organizational structure will begin to emerge as one of the three types of
organizational structures. Map out the workflow, reporting, and hierarchical roles and compare
them to see if a different organizational structure would be more fitting. Depending on your
learning style, it may be helpful to use sticky notes to move team members around before
drafting your structure online. As you plan, ensure that you distribute the workload evenly
among the team.

Step 5: Finalize the Organizational Chart

Develop and finalize the visual representation of the organizational chart. Include names and
contact information for team members to easily correspond with each other throughout the
project. Read this roundup of organizational structure templates to quickly create and adapt to
your project team.

Step 6: Communicate

A project organizational chart is only as good as the number of team members who are aware
of it. Often, team members don’t know that a chart exists and are confused as to who they
report to and the responsibilities of others. This leads to wasted time and causes unnecessary
 conflict. As simple as it may seem, sharing the project organization chart with all team
members before the start of the project reduces confusion. You also allow for team members
to not only understand their role prior to executing the work, but also give them a chance to
ask questions as they visualize how their work will be conducted in real time. During this
period, the PM and team can also determine how the project hierarchy will be governed.

What to Consider When Making a Project Organizational Chart

A project organizational chart is shaped by many factors, which create the environment for
project-related decision making. These factors can include internal project constraints (physical
and operational), as well as external factors, such as market conditions.

These factors can be grouped into three broad considerations for making a project organization
chart:

 Decision Making: Consider the complexity of both physical and operational boundaries for
how decisions are made. Ask: How simple are the relationships? Are responsibilities allocated
equally? Who will be given what authority? What tasks are weightier than others?
 Design: Remember that all features (division of labor, spans of control, etc.) must be part of
the design process, and take care to visualize how project team members will interact.
Assembling the control, coordination, and communication can feel like a puzzle. Try a few
different arrangements to envision how these three C’s will operate so that you can find the
cleanest lines between team members. Keep the design simple and flexible to allow for
changing roles as the project evolves.
 Balance: You can reduce administrative, social, and technical issues by paying attention to
how roles and responsibilities are distributed. Aim to limit the number of direct reports under
any one person (five max is suggested).

Best Practices when Picking a Structure and Making a Chart

When picking an organizational structure, optimize talent and resources. Doing so creates a
high-performing team that can successfully deliver the goals of the project.

Verzuh, of Versatile Company, also recommends keeping things simple. He urges people to
ask, “‘What is the best organizational structure to help you accomplish your goals and vision?’
Without clear goals and vision, the structure you select may not make sense.” Read more of
Verzuh’s expertise in his book, The Fast Forward MBA in Project Management: The
Comprehensive Guide, Easy-to-Read Handbook for Beginners and Pros.

He continues, “There isn’t one best way. No matter what you come up with, there will be pros
and cons to each organizational structure. Your organization has to build, test, adapt, and see
which is going to be best for the project needs, resources, and ultimate goals.”

Taylor, of Strategy Management Consulting, adds that you should ask yourself, “How can I
structure my team so they can be high performing for maximum quality, output, money, and
communication?” Don’t force what doesn’t fit. When creating a team, the people aspect is more
important, along with communication. Keep in mind how people work together, especially
when adding a new team member. When one person on the team changes, you have a new
team.
 Below are some best practice key takeaways:

 Every project will be different.

 No organizational structure will be perfect. Keep goals, vision, people, and communication as
the top priorities.
 Take time to thoughtfully construct the chart. Identify primary decision makers and authorities,
and assign every individual to an appropriate, clearly defined role. Identify how the roles are
linked, and define and describe the reporting and communication channels. Build the chart.
Use an organizational chart template to simplify the process.

Examples of Project Management Organizational Structure

Project management organizational structures vary based on the needs of the project and the
organization. In an established organization, a management structure already exists. Examples
of project management structures will fit within the existing organizational structure to best
utilize resources.

When applied to real-world examples, we can see how industries like manufacturing,
construction, and software development use the functional, matrix, and projectized
organizational structures.

Example of Functional Project Organizational Structure for Manufacturing

A team using a functional organizational structure in manufacturing shows the straightforward

reporting structure of each department to the executive. The functional managers (the
manufacturing manager, marketing manager, engineering manager, etc.) are responsible for
coordinating all parts of the project, as indicated by the green highlight in the below image.
Note the true horizontal coordination of the project. This example also shows that existing
departments in the organizational structure (finance, HR, etc.) may not typically be involved
in projects.
Example of Projectized Project Organizational Structure for Construction

Construction teams most commonly use projectized organizational structures. Dedicated

project managers coordinate all aspects of the project, and multiple project managers report to
the company executive. Other supporting departments may also exist to run the business
operations of the company.

Example of Matrix Project Organizational Structure for Software Development

Software development project management structures can vary widely, but they most often
optimize for cross-functional teams. The matrix structure shown below is a visualization of
such cross-functional reporting, wherein each technical specialist reports to both a head of their
discipline and the product owner (in lieu of a project manager).

Organizational structure

Organizational structure refers to how various task are divided, resources are deployed and
how units/departments are coordinated in an organization. An organizational structure includes
 a set of formal tasks assigned to individual and departments, formal reporting relationship, and
a design to ensure effective coordination of employees across departments/units with the help
of authority, reliability, responsibility and accountability, which are fundamental to developing
organizational structures and workflow based on their clear understanding by all employees.
In discussing organizational structure the following principles are important:

Authority – Is the right to make decisions, issue orders and allocate resources to achieve desired
outcomes. This power is granted to individuals (possibly by the position) so that they can make
full decisions

Reliability – Is the degree to which the project team member can be dependent on to ensure the
success of the project with a sound and consistent effort.

Responsibility – This is an obligation incurred by individuals in their roles in the formal

organization effectively perform assignments or to work on the success of the project with or
without guidance or authorization.

Accountability – The extent to which an individual or project team is answerable to the project
stakeholders and provides visible evidence of action.

(Accountability = authority + responsibility.)

Authority and responsibility can be delegated to lower levels in the organization, whereas
accountability usually rest with the individual. Yet many executives refuses to delegate and
argue that an individual can have total accountability just through responsibility.

Building an organizational structure engages managers in two activities: job specialization

(dividing tasks into jobs) and departmentalization (grouping jobs into units). An organizational
structure outlines the various roles within an organizational, which positions report to which,
and how an organization will departmentalize its work. Take note than an organizational
structure is an arrangement of positions that’s most appropriate for your company at a specific
point in time. Given the rapidly changing environment in which organizations operate, a
structure that works today might be outdated tomorrow. That’s why we hear so often about
organizations restructuring—altering existing organizational structures to become more
competitive/efficient once conditions have changed.

Traditional groupings of jobs result in different organizational structures, and these impact
project management because of possible conflicts in authority, responsibility and
accountability. Some examples of organizational structures are:

 Centralized
 Functional
 Matrix

Understanding organizational structures- and how projects fit within them gives project
managers insights into managing projects more effectively and efficiently.

Levels of Management: How Managers Are Organized

 A typical organization has several layers of management. Think of these layers as forming a
pyramid like the one in Figure 4.1, with top managers occupying the narrow space at the peak,
first-line managers the broad base, and middle-managers the levels in between. As you move
up the pyramid, management positions get more demanding, but they carry more authority and
responsibility (along with more power, prestige, and pay). Top managers spend most of their
time in planning and decision making, while first-line managers focus on day-to-day
operations. For obvious reasons, there are far more people with positions at the base of the
pyramid than there are at the other two levels.

Figure 4.1: Levels of Management

How is a typical law enforcement or public safety agency structured? Is this consistent with
the above model of Levels of Management?

Determining How Important a Project is to an Organization

The importance an organization places on a project directly influences the chances for the
project success. For example when conflicting demands for scarce resources arise, resources
are usually given to the projects that the organization feels will provide the greatest benefit. To
determine the importance of projects to the larger organization:

 Investigate how the project relates to the organization’s top priorities. The following four
organizational documents can help confirm that the project’s identified needs and objectives
are appropriate:
 Strategic plan (Determines organizational strategy – vision, mission & goals)
 Annual budget
 Capital appropriations plan
 Managers’ annual performance objectives (Management by Objectives).
 Examine the organization’s relationship with outside clients/stakeholders.
 Seek information from all possible sources.

Figure 4.2:
Projects and Organization Structure

Project Strategy

The project strategy is the general approach project managers’ plan to perform the work
necessary to achieve a project’s outcome. A strategy isn’t a detail list of activities to be
performed which is derived from a Work Breakdown Structure (WBS).

Defining Project Roles

Various individuals and groups are involved in a single project. The following people typically
play a critical role in a project success- project manager, functional manager, project team
members and upper management. We will discuss their roles in the next chapter.

The Project Management Office

Many large and even medium-sized organizations have created a department to oversee and
support projects throughout the organization. This is an attempt to reduce the high numbers of
failed projects (see the Project Management Overview chapter.) These offices are usually
called the project management office or PMO.

The PMO may be the home of all the project managers in an organization, or it may simply be
a resource for all project managers, who report to their line areas.

Typical objectives of a PMO are:

  Help ensure that projects are aligned with organizational objectives
 Provide templates and procedures for use by project managers
 Provide training and mentorship
 Provide facilitation
 Stay abreast of the latest trends in project management
 Serve as a repository for project reports and lessons learned

The existence and role of PMOs tends to be somewhat fluid. If a PMO is created, and greater
success is not experienced in organizational projects, the PMO is at risk of being disbanded as
a cost-saving measure. If an organization in which you are a project manager or a project team
member has a PMO, try to make good use of the resources available. If you are employed as a
resource person in a PMO, remember that your role is not to get in the way and create red tape,
but to enable and enhance the success of project managers and projects within the organization.