7.2.3 Organizational Structure

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The structure of an Implementing Agency often constraints the availability of or terms under which the resources become available to the project. There are different types of organizational structures:

Functional organization: The functional organization, shown in Figure 7-2 is a structure in where authority rests with the functional heads; the structure is sectioned by departmental groups. Staff members are divided to groups (e.g. financial, planning, public relations, engineering, legal etc) according to their specialized knowledge. Some of these groups can be further subdivided into smaller functional groups. For example, the Engineering Department may be further subdivided into Mechanical Engineering and Electrical Engineering Units.

Figure 7-2: Functional Organization


The main advantage of this organizational structure is that each functional group has complete control over its segment of the project, enforcing in this way the application of standards across projects.

The disadvantages of the functional organization are that of speed, flexibility and communication when attempting cross–functional projects. Since in a functional organization the work is divided between the departments, any query or request must be passed among department heads for approval, causing in this way delays. In addition, the responsibility of managing the project is shared among the functional managers (head of the departments) and this may cause lack of ultimate responsibility for project management.

This type of organizational structure is generally considered the least effective for implementing and managing projects.

Projectized organization: The projectized organization, shown in Figure 7-3, is a structure where the focus is on teams with cross functional expertise. Most of the organization’s resources are involved in project work; team’s mission is to complete the project. All team members working for a specific project have one clear superior, the Project Manager and they all refer to him/ her.


Figure 7-3: Projectized Organization


The main advantages of the projectized organization are speed and flexibility. Since the experts are concentrated within the team and fully committed to the project, it is easier to react to changing requirements and complete the project on time. Responsibility for the success of the project is clearly identified and lies on the Project Manager.   

The main disadvantage of the projectized structure is the high resource costs, since the organization often has to hire extra staff with certain expertise in order to implement different projects simultaneously. In addition this type of structure burdens the administrative overhead since there may be periods where not all project teams are occupied.

Matrix organization: This structure is a blend of functional and projectized organizations. In the matrix structure (Figure 7-4), the personnel engaged in the project activities belongs to one or more functional units (departments). For project related issues the project team members (staff) report to the Project Manager, who is responsible for the timely completion of the project activities. For business related issues the project team members report to the corresponding functional managers. Once the implementation of the project or part of their work has been completed, they are returned to the control of the functional manager for reassignment. The person who is assigned to play the role of Project Manager for a specific project is not necessarily one of the functional managers, but it can be a single staff member possessing the appropriate skills and competencies.

The Project Manager in the matrix structure cooperates with the functional manager to establish the resource requirements and plan their utilization on the project as well as to make the necessary revisions during the project’s implementation progress.


Figure 7-4: Matrix Organization


The main advantage of the matrix organization is that it retains the benefits of both functional and projectized structures. It also facilitates the effective resource allocation to different projects.

For these reasons, the matrix structure is considered as the most effective structure for implementing and managing projects and therefore is widely used. 

The main disadvantage of the matrix structure is the potential for conflict between the Project Manager and the functional manager regarding the resource assignment, since the functional manager has to staff multiple projects with the same experts.


© 2007 Republic of Cyprus, Treasury of the Republic, Public Procurement Directorate
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