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Organizational Structures

Author: Sophia
PDF Version

what's covered
In this lesson, you will learn about organization structure types, their impact on project management, as well as project management office (PMO) structure types.

Specifically, this lesson will cover the following:

Table of Contents

1. Organization Project Determination

Organizational structure significantly impacts project management by defining reporting lines, resource allocation, and authority. The three primary structures are functional, matrix, and projectized, each with varying degrees of project manager influence. The chosen structure affects how projects are managed, resources are allocated, and decisions are made.

The importance an organization places on a project directly influences the chances of the project’s success.

EXAMPLE

A project manager should check how a project aligns with the organization’s main goals, based on its structure (matrix, functional, or projectized). Four key documents help ensure the project meets the organization’s needs and objectives:

  • Strategic plan (determines organizational strategy: vision, mission, & goals)
  • Annual budget
  • Capital appropriations plan
  • Managers’ annual performance objectives (management by objectives)
The project manager should look at how the organization interacts with clients and stakeholders and gather information from all sources. Picking the right project for the organization’s structure is crucial because it impacts how smoothly the project runs and if it meets its goals.

2. Organization Structure Types

Organizational structure refers to how various tasks are divided, resources are deployed, and units/departments are coordinated in an organization. An organizational structure includes a set of formal tasks assigned to individuals and departments, the formal reporting relationship, and a design to ensure the effective coordination of employees across departments/units with authority, reliability, responsibility, and accountability, which are fundamental to developing organizational structures and workflows that are clearly understood by all employees. In discussing organizational structure, the following principles are important:

  • Authority: This is the right to make decisions, issue orders, and allocate resources to achieve the desired outcomes. This power is granted to individuals (possibly by the position) so that they can make full decisions.
A gavel on a wooden table with a person in judicial robes writing in a legal document.
Authority is important in organizational design, because it relates to who has the power and the right to make decisions based on the power they hold.

  • Reliability: This is the degree to which the project team member can be depended on to ensure the success of the project with sound and consistent effort.
  • Responsibility: This refers to the obligation individuals have in their roles in a formal organization to effectively perform assignments or to work on the success of the project with or without guidance or authorization.
  • Accountability: This is 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 rests with the individual. Yet, many executives refuse to delegate and argue that an individual can have total accountability just through responsibility.

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

There are many organization types, but we will focus on the following in this lesson:

  • Functional
  • Matrix
  • Projectized
Understanding organizational structures and how projects fit within them gives project managers insights into managing projects more effectively and efficiently.

terms to know
Authority
The right to make decisions, issue orders, and allocate resources to achieve the desired outcomes.
Reliability
The degree to which a project team member can be depended on to ensure the success of the project with sound and consistent effort.
Responsibility
The obligation individuals have in their roles in a formal organization to 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.

2a. Functional

A functional organizational structure is hierarchical, grouping employees by specialized roles like marketing, finance, or operations. Each department is led by an expert functional manager. This setup promotes efficiency, specialization, and clear accountability. Employees have clear reporting lines and authority within a vertical structure. Departments are specialized, grouping employees based on their skills in areas like marketing, sales, finance, or engineering. Decisions are typically made at the top and passed down through the hierarchy. Each employee has specific responsibilities within their department, ensuring everyone knows what to do.

Note: The use of the project coordination component for organizational structures

As you will see from the images of the organizational structure types (i.e., functional, matrix, and project oriented) below, proper coordination helps ensure that tasks are completed well and meet the necessary standards based on the organization type. “Project coordination,” which is displayed by the dotted lines in each image, is intended to illustrate the continuous project management efforts by functional managers, project managers, and/or staff members. Those identified within this dotted line mean that they all share equal tasks to coordinate and manage communication with others on the team throughout the course of the project.


A hierarchical organizational chart starts with a ‘Chief Executive’ at the top, branching downward to three ‘Functional Manager’ boxes. Each functional manager supervises three ‘Staff’ members. Shaded staff boxes indicate individuals involved in project activities. A dashed bracket labeled ‘Project Coordination’ spans horizontally from the Chief Executive across the three functional units. A footnote explains that the shaded boxes represent staff engaged in project activities.
Functional Organizational Structure Example

term to know
Functional Organizational Structure
A type of organizational structure that is hierarchical, grouping employees by specialized roles like marketing, finance, or operations.

2b. Matrix

A matrix organizational structure organizes workers and resources across activities. It has pros and cons, helping decide if it’s right for a company. Every company organizes based on goals, setting rules for work and roles using the best tools.

In project management, a matrix structure is popular because it focuses on project results and management. Employees are organized by roles and products they work on simultaneously. Companies form teams to utilize strengths and cover weaknesses.

In a matrix structure, employees with similar skills are grouped and report to multiple managers. This setup, like a grid, involves a functional manager overseeing projects and a product manager ensuring strategy and product success. Large multinational companies use this structure to share skills and knowledge across departments to achieve goals.

The organizational chart starts with a ‘Chief Executive’ at the top, branching to three ‘Functional Manager’ boxes. Each functional manager oversees two or three ‘Staff’ members, some shaded to indicate involvement in project activities. On the left, a ‘Project Manager’ box is placed below a functional unit and included in a dashed bracket labeled ‘Project Coordination’, which extends across to highlight participating staff in all three units. A footnote explains that the shaded boxes represent staff engaged in project activities.
Matrix Organizational Structure Example

did you know
Nike, Starbucks, and Spotify function as matrix organizations?

term to know
Matrix Organizational Structure
A type of organizational structure that organizes workers and resources across activities.

2c. Projectized

In a projectized organizational structure, the company is organized around projects. Project managers have significant authority and control over resources dedicated to each project. Teams are created specifically for each project and disbanded when it finishes. This model is common in consulting, construction, and software development, where the focus is on completing projects. Key features include a strong project focus, with managers controlling resources, budgets, and decisions. Teams form for specific projects, but they face job insecurity after a project ends. Communication flows horizontally, with the project manager as the central contact. The organization has a flat hierarchy, with few layers between sponsors and the project manager. Resources are allocated to projects, with project managers deciding their use.

did you know
Because projectized organizations are more of a structure or framework rather than a specific popular company like a matrix organization, many consulting firms, event management companies, and aerospace contractors use it.

The chart depicts a projectized organizational structure with a ‘Chief Executive’ at the top. Below, three ‘Project Manager’ boxes branch out horizontally, each overseeing three ‘Staff’ members. All the staff boxes are shaded, indicating engagement in project activities. A dashed bracket labeled ‘Project Coordination’ surrounds the leftmost project team. A footnote explains that the shaded boxes represent staff involved in project activities.
Projectized Organizational Structure Example

A functional organizational structure groups employees by specialized roles, enhancing efficiency and accountability. The matrix structure combines role and product management, promoting collaboration and flexibility. In a projectized structure, companies focus entirely on projects, granting managers significant control but possibly causing job insecurity post project.

Each structure serves different organizational needs. Review the table to get an overview of the aspects of each structure type and how they relate specifically to project management.

Structure Type General Characteristics Impact on Project Management
Functional
  • There is a clear authority hierarchy.
  • Employees are grouped by specialization (e.g., marketing or finance),
  • Functional managers lead departments.
  • Projects are split among departments.
  • Functional managers have decision-making power.
  • Resources are allocated by department needs.
  • Vertical communication occurs within departments.
  • Employees focus on departmental duties and may join multiple projects.
  • Career paths are based on skills and roles.
  • There is strong departmental control.
  • Project managers have limited authority; functional managers decide.
  • There is slower coordination due to departmental communication.
  • Resource availability is inconsistent; departmental work is prioritized.
  • Project work is often lower priority than departmental tasks.
  • Cross-department collaboration can cause delays.
  • Project managers act as facilitators, not leaders.
  • Multiple approval layers slow decision-making.
  • There are no dedicated project teams, leading to reduced focus and accountability.
  • Strong functional expertise benefits technical quality.
  • Career advancement is based on departmental performance.
Projectized
  • Project managers have full authority.
  • Teams are organized by projects, not departments.
  • Employees are assigned full-time to one project.
  • Functional managers are minimally involved.
  • Resources are dedicated to the project.
  • Direct communication occurs within the project team.
  • The project manager controls the budget, schedule, and resources.
  • There is a strong team identity around the project.
  • Decisions are faster with centralized project manager authority.
  • There is clear accountability under one leader.
  • There is strong team cohesion; members focus on one project.
  • Project goals are prioritized over departmental goals.
  • Resource alignment to project needs is easier.
  • There is improved team communication through collaboration.
  • Management of scope, time, and cost is flexible.
  • There are higher costs from role duplication across projects.
  • Team members face post-project uncertainty.
  • This is ideal for large, complex, or one-time projects.
Matrix
  • It combines functional and projectized elements.
  • Dual reporting to functional and project managers occurs.
  • Resources and team members are shared across projects.
  • There is efficient use of skills and expertise.
  • Horizontal and vertical communication needs strong coordination.
  • There is better resource flexibility and utilization.
  • Team members work on multiple projects while keeping functional roles.
  • It has faster decision-making than purely functional structures, but requires negotiation.
  • Project managers have moderate authority; there is potential for conflicts.
  • Communication and collaboration are critical; dual reporting increases complexity.
  • It balances technical expertise and project focus.
  • It is ideal for organizations with multiple projects and shared resources.

term to know
Projectized Organizational Structure
A type of organizational structure where the structure is organized around projects.

3. Project Management Office (PMO)

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; these offices are usually called the project management office or PMO (Monteiro et al., 2024).

did you know
The first PMO was established in the 1930s, with the U.S. Air Corps developing a Project Office function to monitor aircraft development.

A project management office (PMO) is a team or department within an organization that supports project management. It can be the main hub for project managers or just a resource for them. Its goals include aligning projects with organizational objectives; providing templates, training, and mentorship; and staying updated on project management trends. PMOs also store project reports and lessons learned. PMOs can change or be disbanded if they don’t improve project success. If you work in or with a PMO, use its resources wisely and focus on helping project managers succeed without creating unnecessary barriers.

It’s important to see how PMOs work in different industries to understand their flexibility and how they help organizations succeed. PMOs can be supportive, controlling, or directive, each with different levels of control over projects. Let’s learn about these types!

term to know
Project Management Office (PMO)
A team or department within an organization that supports project management.

3a. Supportive

A supportive PMO serves as a helpful guide and resource for project teams. Its main role is to act as a consultant, providing useful tools, templates, and best practices to help projects run smoothly. This type of PMO does not have much control over how projects are carried out; instead, it focuses on giving support and advice. Supportive PMOs are best suited for organizations that are new to project management or those that want to improve their current processes.

term to know
Supportive PMO
A type of PMO office that serves as a helpful guide and resource for project teams.

3b. Controlling

A controlling PMO has a more hands-on role than a supportive PMO does. It is responsible for enforcing project management standards and ensuring that everyone follows established processes and rules. This type of PMO has a moderate level of control over projects, which means it makes sure that project teams stick to the guidelines and frameworks that have been set up. Controlling PMOs work best in organizations that have reached a moderate level of project management maturity or those that need to make sure their processes are consistent across different projects.

term to know
Controlling PMO
A type of PMO office that has a more hands-on role, as it is responsible for enforcing project management standards and ensuring that everyone follows established processes and rules.

3c. Directive

A directive PMO takes the most active role among the three types. It directly assigns project managers and closely oversees the execution and delivery of projects. This PMO has a high degree of control because it gets involved in the day-to-day management of projects. Organizations with a high level of project management maturity benefit the most from a directive PMO, especially if they require strong coordination and oversight across several projects at once.

learn more
To learn more about PMOs from a Project Management Institute perspective, check out this interesting article: Which PMO Is Right for Your Organization (2025).

The best PMO model is selected based on size, industry, and existing project management maturity. We can review some scenarios so that you are aware of the differences.

PMO Types and Scenarios
PMO Type Scenario
Supportive PMO Imagine a company that just started getting into project management. It doesn’t have much experience.

It sets up a supportive PMO for support. The PMO acts like a coach, providing the team with templates for planning projects and sharing best practices on how to manage time and resources.

For instance, if a team is working on launching a new product, the supportive PMO might offer a template for creating a project timeline and some tips on how to run effective team meetings. However, the team still makes its own decisions on how to use these tools and advice, allowing them the freedom to manage the project as they see fit.
Controlling PMO In another company, project management is a bit more established, but it wants to ensure consistency across all of its departments.

It sets up a controlling PMO to enforce standards and processes.

For example, if the company is planning to upgrade its IT infrastructure, the controlling PMO would ensure that all IT project teams follow the same project management guidelines and use approved software tools. The PMO checks in regularly to make sure teams are sticking to the rules, providing a moderate level of oversight to maintain quality and consistency.
Directive PMO A large corporation with a high level of project management maturity might use a directive PMO.

This PMO takes charge by assigning specific project managers to lead projects and gets involved in day-to-day activities.

For example, if the corporation is planning a major expansion into a new international market, the directive PMO would assign a project manager and closely monitor the project’s progress. The PMO would ensure that all parts of the project, from budget management to team coordination, are handled efficiently. This high level of control helps the company achieve its goals with precision and coordination.

big idea
PMOs are established to improve project success and reduce failures by aligning projects with organizational goals. They vary in structure from supportive PMOs providing guidance to controlling PMOs enforcing standards and directive PMOs managing projects directly. Their effectiveness can determine their longevity within an organization.

term to know
Directive PMO
A type of PMO that plays the most active role among the three types because it directly assigns project managers and closely oversees the execution and delivery of projects.

summary
In this lesson, you explored how organizational projects are determined, along with three main organizational structure types: functional, matrix, and projectized. You also learned about the project management office (PMO) roles—supportive, controlling, and directive—that guide project management practices. You gained insights into how these structures function and their advantages and challenges. In addition, overall, you learned that organizational structure significantly impacts project management by defining reporting lines, resource allocation, and authority.

Source: THIS CONTENT HAS BEEN ADAPTED FROM PRESSBOOKS "NSCC PROJECT MANAGEMENT” BY ADRIENNE WATT. ACCESS FOR FREE AT https://pressbooks.atlanticoer-relatlantique.ca/projectmanagement/ LICENSE: CREATIVE COMMONS ATTRIBUTION 4.0 INTERNATIONAL

REFERENCES

Monteiro, A., Varajão, J., & Santos, V. (2024). Project management office typologies, types, and functions: A systematic analysis of the literature and directions for research. Project Management Journal.

Terms to Know
Accountability

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

Authority

The right to make decisions, issue orders, and allocate resources to achieve the desired outcomes.

Controlling PMO

A type of PMO office that has a more hands-on role, as it is responsible for enforcing project management standards and ensuring that everyone follows established processes and rules.

Directive PMO

A type of PMO that plays the most active role among the three types because it directly assigns project managers and closely oversees the execution and delivery of projects.

Functional Organizational Structure

A type of organizational structure that is hierarchical, grouping employees by specialized roles like marketing, finance, or operations.

Matrix Organizational Structure

A type of organizational structure that organizes workers and resources across activities.

Project Management Office (PMO)

A team or department within an organization that supports project management.

Projectized Organizational Structure

A type of organizational structure where the structure is organized around projects.

Reliability

The degree to which a project team member can be depended on to ensure the success of the project with sound and consistent effort.

Responsibility

The obligation individuals have in their roles in a formal organization to effectively perform assignments or to work on the success of the project with or without guidance or authorization.

Supportive PMO

A type of PMO office that serves as a helpful guide and resource for project teams.

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