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  • 1.4.1 What is a Project?
    Organizational Structures : Functional Organizations

    Functional Organizations

    One common type of organization is the functional organization. This is probably the oldest style of organization and is therefore known as the traditional approach to organizing businesses.

    Functional organizations are centered on specialties and grouped by function, hence the term functional organization. As an example, the organization might have a human resources department, finance department, marketing department, etc. The work in these departments is specialized and requires people who have the skill sets and experiences in these specialized functions to perform specific duties for the department.

    This type of organization is set up to be a hierarchy. Staff personnel report to managers who report to department heads who report to vice presidents who report to the CEO. In other words, each employee reports to only one manager; ultimately, one person at the top is in charge. Many companies today, as well as governmental agencies, are structured in a hierarchical fashion. In organizations like this, be aware of the chain of command. A stria chain of command may exist, and the corporate culture might dictate that you follow it.

    Each department or group in a functional organization is managed independently and has a limited span of contral. Marketing doesn't run the finance department or their projects, for example. The marketing department is concerned with their own functions and projects. If it were necessary for the marketing department to get input from the finance department on a project, the marketing team members would follow the chain of command. A marketing manager would speak to a manager in finance to get the needed information and then pass it back down to the project team.

    Human Resources in a Functional Organization
    Commonalities exist among the personnel assigned to the various departments in a functional organization. In theory, people with similar skills and experiences are easier to manage as a group. Instead of scattering them throughout the organization, it is more efficient to keep them functioning together. Work assignments are easily distributed to those who are best suited for the task when everyone with the same skill works together. Usually, the supervisors and managers of these workers are experienced in the area they supervise and are able to recommend training and career enrichment activities for their employees.

    The Downside of Functional Organizations
    Functional organizations have their disadvantages. One of the greatest disadvantages for the project manager is that they have little to no formal authority. This does not mean that project managers in functional organizations are doomed to failure. Many projects are undertaken and successfully completed within this type of organization. Good communication and interpersonal and influencing skills on the part of the project manager are required to bring about a successful project under this structure.
    In a functional organization, the vice president or senior department manager is usually the one responsible for projects. The title of project manager denotes authority, and in a functional structure, that authority rests with the VP.


  • Enduring organizational structure.
  • Clear career path with separation of functions, allowing specialty skills to flourish.
  • Employees have one superwiser with a clear chain of command.

  • Project manager has little to no formal authority.
  • Multiple projects compete for limited resources and priority.
  • Project team members are loyal to the functional manager.
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