That’s the end of the New Year holidays 🙂

Happy New Year 2014 everyone. Let him be successful in all relationships!!!

As promised, today we will compare the main types of organizational structures.

So, what are the main types of organizational structures in companies?

1) Functional structure is a fairly common type of enterprise structure. This is a hierarchical structure in which divisions are formed based on the key functions of the organization. Functional structure

The main functions (the so-called value creation chain) most often include:

1) Production;

2) Outbound logistics;

3) Inbound logistics;

4) Marketing and sales

5) Service

Additional functions include:

1) Procurement

2) R&D

3) HR (Human Resources Management)

4) Management systems.

However, the key functions depend on the company’s field of activity. Here it is important to say the following: In functional organizations, everything is aimed at the effective performance of their functions. From the point of view of project management. Most often, one of the functional managers is appointed as the project coordinator and through other functional managers, he coordinates the work on the project.

The advantages of the functional structure include:

Low administrative costs, no duplication of functions;
Ease of coordination in functional areas;
Effective solution of standard professional tasks;
Centralized control of the most important decisions by the company’s management;
Specialization and competence, development of subject skills of personnel in functional areas.
Disadvantages include:

— excessive fragmentation of strategically important processes is possible;

Problems of interfunctional coordination;
Slowing down the reaction to changes in the external environment;
— overloading of management with solving operational issues to the detriment of strategic management tasks;

— Absence of managers with a systematic approach to solving organizational problems.

2) Divisional structure of the company – companies in which the division (separate unit) is given a significant degree of autonomy in work. Depending on the characteristics, there are client, product, regional divisional structures.

Divisional structure

The advantages of the divisional structure include:

Corporate management is freed from operational functions and can focus on strategies;
use of divisional advantages of market specialization, efficiency in dynamic external environment;
Organizational flexibility;
— Management experience at the divisional level is a good school for training top-level managers.

Disadvantages include:

A gap between strategic and operational management is possible;
— The problem of coordinating the interests of the corporation and its divisions;

The problem of coordination of functional actions at the corporate level and in divisions, a decrease in the quality of performed functional tasks;
Cost growth due to duplication of functional departments at the corporate and divisional levels and suboptimal size of units.
3) Project structure – This is the structure of organizations that are mainly engaged in project activities. These include design bureaus, construction organizations, etc. In fact, key personnel are allocated to the project 100% and report to the project manager.

Project structure

As a variety, there may be separate departments (Human Resources Department, Information Department, etc.) that perform service functions for all projects)

The advantages include:

— The members of the project team and its leader concentrate on the implementation of one single project and are not distracted by other tasks.

— The introduction of the position of project manager provides ideal opportunities for cross-functional coordination

Integration of various activities of the company in order to obtain high-quality results for a certain project;
— A comprehensive approach to project implementation and problem solving;

Concentration of all efforts on solving one task – project implementation;
Great flexibility
— Strengthening the personal responsibility of a specific manager both for the project in general and for its elements.

Disadvantages include:

a long period of “tuning” the team to work, which includes periods of team formation, adaptation of its members to each other, and normalization of relationships within the team;
— Cases are not excluded when normal working relations between members of the project team do not develop due to the lack of the necessary managerial experience and abilities of the project manager;

— After the completion of the project or the refusal of the organization from the project, there is a problem with the employment of the released specialists;

Duplication of functional services existing in the organization.
4) Matrix organizational structure is a mixed type of structure in which several types of structures are superimposed on each other. (Project to functional, regional to product, client to regional, etc.) Moreover, an important aspect of the matrix structure is the subordination of employees to two managers of the same hierarchical level.

There are three types of matrix structures:

Weak ka matrix;
Balanced matrix;
A strong matrix.
The figures below show the key differences between these matrix types. In a strong matrix, there is a separate unit that is responsible for project management (project office) and reports to the head of the company. In a weak matrix, there are separate project coordinators who manage projects and are responsible for coordination between all divisions.

The advantages of the matrix structure include:

The possibility of implementing two strategic directions of the company’s development at once;
supports innovative activity (interdisciplinary approach to solving non-standard tasks);
— flexibility of the structure, which allows redistributing functional specialists between projects, avoiding duplication of functional services;

— Good coordination of the activities of functional specialists due to the introduction of the position of the project manager.

Disadvantages:

Undermining the principle of unity of leadership, struggle for power and tendency to anarchy, conflict structure;
Psychological problems of personnel associated with the uncertainty and variability of the structure;
The growth of the management apparatus (each specialist has two bosses);
— Extension of decision-making terms due to the need for numerous approvals.

If we compare the structures from the point of view of project management, we get the following table:

Project management structures

Which structure is better?

I think you know the answer to this question. It is very simple:

— The one that ensures the most effective achievement of the company’s goals.

Since each structure has its advantages and disadvantages, depending on the tasks and comparison of advantages and disadvantages, the best structure is chosen in each case.

That’s all for today.

Good luck with your choice and successful projects!!!