Every organization will have some kind of hierarchical structure. The structure is a hierarchy of people and functions. The organization is decomposed into number of functions or departments or project team etc. based on ultimate goal and the nature of business of the organization. Organisation structures is one of the primary topics covered in PMP classes.
Organization structure can be seen various different forms. Some of the broad organization structures include the following:
The organization is broken down in the form of a number of different business functions such as sales, finance, engineering, quality, human resources etc. Each function will have its dedicated set of staff members who will be responsible for driving each function for overall business management.
Functional structures are best suited for managing traditional business functions which are more operational in nature such as manufacturing, trading, hotels, banks etc. Most of the government organizations are functional in nature. Functional teams are permanent teams as functions are ongoing and permanent. Functions are led by functional managers who are very powerful. This kind of structure does not support project management effectively. Another disadvantage of such structure includes each function operating in silos limiting inter functional collaboration.
Divisional structures are similar to functional structure. Here the whole organization is divided in to a number of divisions or verticals. Each division will have its core functions within it. Each division may relate with a line of business. For example, a very large automotive company can adopt a divisional structure. The large automotive company may have divisions such as passenger vehicle division, commercial vehicle division, defence vehicle division etc. Each division will be enabled with its own functions of sales, finance, manufacturing, quality, customer service, procurement etc.
There are certain businesses which are purely project driven such as infrastructure development, technology solution development, contract based research & development. Such organizations deliver their services to their customers through various projects. They do all work on contract basis. In such organization, a new contract will mean a new project for them. They will create new project teams when they receive a new project request.
The organization hierarchy consists of number of project teams. Teams are temporary and will exist as long as project exists. When project are completed, teams are dismantled. Here the project managers are given absolute power to drive the projects. Hence project management gains super priority. But the disadvantage of such organization is loss of team and knowledge once the projects are over.
Matrix structure is a structure which is an amalgamation of both functional as well as project based structures. Matrix structure thrives on its ability to create cross functional teams for various projects and initiatives of the organization.
Matrix organization promotes collaboration within departments and functions. It also promotes effective utilization of functional resources not only for regular functional job but also for new project initiatives. In matrix organization, the functional managers will be responsible for driving the functional work whereas a project manager, who operates independent of the functional managers, will drive the project initiatives. Project managers will have independent authority for taking project decisions and the functional managers will collaborate to provide the technical team members with required technical and domain expertise, to the project.
Matrix structure provides the coexistence of both functional as well as projectized structure in a single structure.
The organization structures are designed according the nature of business activities. We can have organizations where we can see a hybrid of all the above structures also. Different divisions may have different structures.
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