The 3 Key Types of Project Management Organizational Structure

The right project management organizational structure can make work so much easier. But how do you choose the right organizational structure for the job?

We’ve got answers for you. Meet our imaginary project manager, Steffie:

Steffie is working on a marketing project for the e-commerce company she works for. We’ll use Steffie and her work as an example throughout this article.

First, let’s cover the basics.

What is project management organizational structure?

Your project management organizational structure tells you who has authority over a project. The simplest way to think about it is to picture an org chart. Project managers have a different amount of authority in each structure.

Organizational structure determines how the team spends their time and who makes the final decisions. The project manager roles and responsibilities will be a little different depending on the structure you choose.

All of these structures work with most of your existing Agile practices. Strategies like work breakdown structures and well-planned workflows still apply.

Organizational structure types – pros and cons

There are 3 main project management organizational structures:

• Project Organizational Structure
• Functional Organizational Structure
• Matrix Organizational Structure

Steffie is going to help us get to know each one.

1. Project organizational structure

In this structure, the project manager is the decision-maker. Members of the team are dedicated to the project, and they report directly to the project manager.

Picture the project team as its own department with the project manager as its leader. This structure gives project managers the most authority.

Project management organizational structure works well for companies that have enough resources to dedicate an entire team to a single project. Working this way can be expensive, though. That means there’s more pressure to perform.

Pros	Cons
Dedicated teams can produce stellar results.	Dedicated teams take resources away from business-as-usual functions. This is expensive.
Because the project manager is the decision-maker, results are driven by project needs. There’s less noise from other business needs to influence the end result.	Depending on the length of the project, companies may need to backfill positions. Team members may not have a job at the end of the project.
The project timeline can be more aggressive since resources are fully focused.	Project managers are often responsible for managing the transition back to non-project work after delivery.
There’s no conflict between project work and business-as-usual.	Because resources are dedicated, companies must work on fewer projects at a time.
It’s easier for the project manager to schedule work because they don’t need to account for non-project work.
Creating a team culture is easiest in this structure.

Project managers in this structure have more leadership responsibility. This means that they might need to manage things like HR issues and professional development.

Let’s see how it goes for Steffie when she uses project organizational structure.

Steffie starts by building her team. She chooses resources from several departments, and she’s careful not to impact any single team too much because those people will no longer be doing their original jobs. Since it’s important to connect with the consumer, she also brings in a product owner to help keep the team on track.

Next, she builds out her project plan. She plans Sprints, assigns tasks, and the team gets to work.

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Outside of the project, Steffie’s marketing department is swamped. The marketing manager has to move responsibilities around to make up for the two people who moved to the project team. Five weeks into the project, the company is able to fill an open marketing position. Team workloads start to stabilize.

Steffie’s team delivers their project a week early.

Now that her project has been completed successfully, it’s up to Steffie to help her team transition back to their previous positions.

The team’s excellent performance gets noticed. That works out great for the designer who created the user interface. When he gets back to his department, he’s offered a promotion.

There’s one hiccup, though. The marketing director is under pressure to cut costs. Since he hired someone new, he doesn’t have the budget to bring back two members of his team. One of the marketers doesn’t have a job to come back to.

It turns out okay for that marketer, though. Because Steffie and her team did such a great job on the directory, the company asks her to lead an even bigger project. She offers the marketer a place on her new team.

2. Functional organizational structure

In a functional organization structure, the project team works within an existing department. The functional manager (such as the IT manager or director of marketing) has the ultimate authority, and the project manager reports to the functional manager.

This structure gives project managers the least amount of authority.

The team works closely together every day, just as they did before. Each team member is expected to complete their regular job responsibilities in addition to project tasks.

This is a good structure for projects that don’t need a ton of input from multiple departments. It’s also attractive for smaller teams that already expect everyone to multitask. If your culture is built around the idea that everyone wears many hats, this might work great for you.

Pros	Cons
There’s less disruption because team members continue working in their regular jobs.	It can be difficult getting help from other departments.
The project may be more aligned with company priorities.	Business-as-usual work may slow progress on project work.
The project team has deep expertise in their subject.	Since the functional manager holds the authority, routine work likely takes priority over project completion.
Team members have already worked together and know each other.	Project results may be skewed towards a single point of view because idea-sharing across departments is limited.
Resource allocation is clear — you know exactly what you have and don’t have.	Project managers may struggle to meet expectations without authority to make some decisions.
Success is very visible, so it opens paths for advancement.
HR issues are probably handled by the functional manager, not the PM.

Let’s check in with Steffie to see how she handles this organizational structure.

Since this is a marketing initiative, it is handled by the marketing department. Steffie reports to the Senior Manager, and after Steffie creates her project plan, she assigns the work.

Preliminary work goes better than expected. Three weeks into the project, she’s ahead of schedule. Challenges arise when it’s time for software development, though.

Steffie approaches the manager of the development team to ask for a resource. It takes several requests before she gets a response. The manager agrees to assign a developer to the project, but doesn’t want the extra work to distract from their main responsibilities.

Development proceeds slower than Steffie estimated. This puts the project behind schedule.

Approaching the development team manager doesn’t speed things along. The development team has their own priorities and deadlines. If they slip on their deliverables, there will be negative consequences. There’s no repercussions for the dev team if the marketing team’s project is late, though.

The marketing manager steps in to ask the development team to five the project higher priority. The project starts to move faster, and Steffie is able to adjust other tasks to finish on time.

The project is a success!

The Senior Manager of Marketing gets credit for a job well done.

3. Matrix organizational structure

In the other two structures, authority is clearly placed with either the project manager or the functional manager.

Matrix organizational structure is almost like a blend between project and functional structures. Authority is shared. The project manager is responsible for project-related decisions, and the functional manager is responsible for business-as-usual decisions. Team members report to both.

You see this most often when a company wants to pull resources from multiple departments to complete a project, but those people still need to continue working on their regular job responsibilities. It can even be used to share resources between multiple projects at the same time.

Pros	Cons
This is the most flexible structure.	There may be some competition for resources between project needs and business-as-usual needs.
Resources can be allocated as needed and team size can be scaled up or down at any time.	Team members might be less productive as they try to split their time between multiple demands.
There’s less disruption to business as usual.	This structure may create a feeling of competition between managers.
Team members get a chance to showcase their skills and earn recognition.	Team members may feel that they are stretched too thin to the point where morale is affected.
Ideas can be easily shared across departments.	Communication issues can arise when multiple PMs and functional managers have different priorities.
It’s possible to work on many projects at the same time despite limited resources.	It’s harder to build a team culture when people share time between many projects.
Multiple departments are invested in the success of the project.

Let’s check in with Steffie and see how she handles this organizational structure.

Steffie creates a project plan and expects to complete this project in 12 weeks.

During the first sprint, she only needs a few people from marketing, and all tasks are completed on time.

The next few sprints require a lot more help. She brings in developers, designers, and some public relations specialists from marketing. As these people join the project team, the team members who kicked off the project focus more on their regular work.

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Another project starts, and some of Steffie’s team members dedicate time to both. They’re a little stressed out, but Steffie works closely with the other project manager to make sure they can share resources efficiently. The workload is a little too heavy for their shared developer, so Steffie decides to recruit another developer and split up some tasks.

In fact, sharing team members turns out to be an advantage. Some of the research that Steffie’s team completed in the first sprint is useful for the new project. Using the same resources saves time because the work has already been done once.

For the final sprints, the original marketing team members jump back in while the developers and designers move to a different project. The project is finished on time.

Choosing the right type

Which project management organizational structure is best?

All three structures are useful in different situations. If your team is too small to dedicate resources, you should look at matrix and functional project management organizational structures. If you’re on a very tight timeline and budget isn’t an issue, then project organizational structure is a good choice.

Some project managers also consider whether or not they have the authority to get the job done. Experienced project managers may shy away from functional organizational structure because they have less control and influence over their team.

At the same time, some businesses are concerned that giving the project manager total authority is a risk. A project manager might be more concerned about their own vision for the project than they are with actual business needs. This leads some companies to shy away from project organizational structure.

No matter which structure you choose, make sure you have a solid communication strategy. It’s too easy to lose conversations that get buried in email. Have you ever spent way too long clicking through Slack conversations trying to find a past discussion? That’s not an effective way to lead a project team.

Hubstaff Tasks makes project communication easier and more efficient. Your team can comment directly on the task so that the most important information is always easy to find.

With the right tools, you can succeed using any of these organizational structures. Which ones have you used? Tell us in the comments.

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