Meaning/Definition of Project Organizational Structure, Types of Organizational Structure

14/12/2021 0 By indiafreenotes

A project organisation is one, in which a project structure is created as a separate unit or division within a permanent functional structure; drawing specialists and workers from various functional departments who work under the overall leadership, control and co-ordination of a project manager to complete projects of a technical and costly nature.

Under a project organisation, a team of specialists and workers is drawn from various functional areas, out of the permanent functional structure of the organisation to work on a project. The project manager may taker assistance from outside sources also.

The project team functions under the overall control and leadership of the project manager. During the continuance of the project, functional managers renounce their authority over subordinates (comprised in the project team) in favour of the project manager.

Conditions requiring the creation of a project organisation are as follows:

(i) Project completion requires huge cost.

(ii) Project is of a technical nature, requiring utmost precision and accuracy e.g. ship-building, designing and launching of satellites, aircraft manufacture etc.

(iii) Time factor is a critical factor; requiring project-completion within a limited prescribed time. Any delays in completion of project within time may tell upon the reputation of the organisation.

Types of Organizational Structure

Organic or Simple Organization

This type of organizational structure is the simplest. Businesses composed of only one person are also included in this category.

In this type of organization also freelancers are included. Of course, the role of the project manager is partly covered by the owner or the professional, who personally manage the workflows.

Functional or Centralized Organization

This type of organizational structure is the most commonly used.

In a functional organizational structure, the organization is divided into various departments where people with similar skills gather together.

It is the classic configuration in which the staff is structured in areas and departments such as the sales department, marketing department, finance department, etc.

This structure is functional as it improves the efficiency of each working group.

Multi-divisional Organization

In an organization of this kind, you can have many functional divisions with a small centralization.

Most of the time these divisions are independent of each other.

Here, an organization is structured in various divisions in which people, with different skills, are held together according to a similar product, service or geographic location.

ach division has the resources necessary in order to work and can carry out the task autonomously.

Matrix Organization

A matrix organizational structure is a hybrid between the functional organization and the project-oriented organization.

In a matrix organization, there can be two main structures: vertical and horizontal.

Here, an employee can be part of a functional group, but can also work on a project.

In turn, a matrix organization can be of three types:

  • A strong matrix
  • A weak matrix
  • A balanced matrix

Stronger organizations are closer to a project oriented organization and here the project manager has most of the authority and has a full-time team.

On the other hand, weak matrix organizations are closer to a functional structure. in this case, the project manager has low authority, no budget control, and often runs a part-time project team.

Instead, balanced matrix organizations unifies the properties of both previous types. Here, the project manager has a medium-low authority and a part-time team, while the budget is managed both directly by him and by the functional manager.

Project oriented (composite or hybrid) Organization

An organization of this type considers every job as a project. Here, the project manager has full authority to complete the project successfully, has a full-time role, budget control, and a full-time team available.

A team-based organization is another name for a project-oriented organization.

Virtual Organization

This structure is also known as virtual society. Here, the central organization is connected to external companies (such as vendors, customers, associates) with a network connection that allows to achieve business growth and profitability. This structure allows the organization to work as a unit.

In a virtual structure, the organization maintains its core business, while the rest of the processes are outsourced. Sometimes, this type of organization is also known as an empty organization.

Here, the project manager has a low-moderate authority and mixed power over the budget. The project team can be full or part-time depending on the situation.


In a hybrid organization, a combination of the above-mentioned structure types can be used.

Responsibility, authority, and other factors are also mixed depending on the structure.


The PMO is also a mixed type of organizational structure, but here the project manager has the highest authority, controls the budget, and has a team completely at his disposal.