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Organizational structure refers to the way a company or organization is arranged or structured. This structure also tells you how job tasks are divided and coordinated and how all the different members of the organization relate to one another.

  • In other words, the organizational structure gives you a sense of who reports to who. 
  • An organization’s structure is most commonly mapped out using a reporting chart or “org chart,” which is short for “organizational chart.” Reporting charts show the relationship between people and groups within the organization, and detail who each person or group reports to. 

Organizational structure refers to how the company is organized, who does what, and who reports to whom. Understanding this structure can help you figure out where you fit in!

Types of organizational structures

1. Classic organizational structures

  • The Classic grouping includes what is usually called “functional” or “top-down” structures. The Classic grouping follows a typical chain of command where the Chief Executive Officer, also known as CEO, and other executives are at the top, followed by directors or managers, then their direct reports and so on.
  • Each of these directors or managers typically oversee teams within their function of the organization, like marketing, sales, or human resources. You can see this type of structure in effect by looking at a branch of the military.
  • Follows a traditional, top-down system of reporting
  • It is a top-down hierarchy system, where a Chief Executive Officer (CEO) has direct authority over several department managers. The department manager has direct authority over several other sections of employees. This system requires communication both up and down the ladder. In a Classic structure, authority comes from the top and filters to the bottom. Frequent reporting of project status updates may be required to pass up through management levels to keep higher leaders informed. 
  • Classic organizations are also referred to as functional organizations because the organization is divided into departments based on function. Each department is led by a functional manager, and employees are grouped according to the functions of their role. 
  • In the Classic organizational structure, the project builds from already existing departments to form teams. 

2. Matrix organizational structures

  • You might think of a Matrix structure as a grid where you still have people above you, but you also have people in adjacent departments who expect to hear updates on your work progress. These people may not be your direct bosses, but you are responsible for communicating with them, since they may inform changes to your work. 
  • It has direct higher-ups to report to and stakeholders from other departments or programs.
  • The employees have two or more managers.
  • In Matrix structures, you still have people above you, but you also have people in adjacent departments with whom you will need to communicate on your work progress. Functional areas tend to cross paths more frequently, and depending on the nature of the work, the responsible manager for each area has the most authority.

In both Classic and Matrix organizations, project managers must clearly define roles and responsibilities in order to work effectively. However, within most Matrix organizations, some project managers or department leads may have the same level of authority as the functional managers and operate more directly.

An organization’s structure provides the framework for accountability and communication. As the project manager, it’s vital that you understand who you’re reporting to on each project, and just as importantly, who the members of your team report to. Knowing the organizational structure also tells you how and where to get the resources you’ll need so you can get the project done efficiently. 

  • One way organizational structure can impact the way you manage a project is by the amount of authority given to the project manager. Authority has to do with your ability to make decisions for the project that impact the organization.
  • Another way organizational structures can impact project management is through resource availability. Managing a project is a lot easier when you know how to access the people, equipment, and budget that you need.

As a project manager working in a Classic structure, you may depend on the managers in your organization to approve resources. In other words, the amount of people working on your project or the budget that you have allocated to your project is decided by the leaders of your department or function.

  • In a Classic structure, you may have to go through a chain of approvals and advocate for more resources if you need them. For example, if you need a budget increase, you would report this to your manager. Then your manager might escalate this up to their management chain to get approval. 

The main difference with a Matrix structure is that employees often have two or more managers or leaders they’ll need to work with and update. Your team members will have their functional manager and you, the project manager. If members are working on multiple projects, they may have even more managers. This can affect your authority as a project manager, as you will need to cooperate with more than one leader in the organization. You may need to share resources and negotiate priorities. The key is to make sure you know who your stakeholders are and who controls what since the chain of command isn’t always as clearly defined as in the Classic structure. 

  • Because there isn’t always a clear chain of command in a Matrix structure, you need to make sure you have identified and communicated with anyone you might need to report to and get approval from well before the project begins. Once this is established though, your project within a Matrix structure should be able to run efficiently.

Matrix structures emphasize a strong project focus from the team and the organization. You, as the project manager, generally have more autonomy to make decisions and gather resources as needed.

An organization’s structure impacts the amount of authority given to the project manager. Authority has to do with the project manager’s ability to make decisions for the project that impact the organization. Organizational structure can impact project management through resource availability. Managing a project is a lot easier when the project manager knows how to access the people, equipment, and budget the project needs.