Organizational Structure Type #1: Functional

Organization
Functional Organization is the most common type of organizational structures
in the industry. It is adopted by many multinational and big companies, in many
industries.

In Functional Organization, people are grouped by areas of specialization. For

instance, marketing professionals are grouped under marketing department,
human resources professionals are grouped under human resources
department, technical people are grouped under IT department etc. Depending
on their size, these groups are managed by managers, directors or vice
presidents.

In Functional Organization, the team members do both project work and

departmental or operational work at the same time. For instance, if a software
engineer from the IT department is also assigned to a project, he has to
complete his assignments in this project. On the other hand, if there are defects
or problems that need to be resolved, this should be under the responsibility of
the IT department, therefore he has to deal with these issues as well.

This is an example of the blueprint or organization chart of a Functional

Organization. Staff with the gray background are engaged in project activities
and staff with the white background are dedicated to departmental activities.
As you can see, staff from different departments work in a project in
Functional Organization. And they return to their departmental work when
their assignment in the project finishes. Project coordination is done over the
.functional managers of each department
As there are not any departments in this type of organizational structure,
so the resources are not associated with any department. They report to their
project managers only. And when the project is over, the project resources are
either assigned to a new project or need to find a new job.
This is an example of the blueprint or organizational structure of a Projectized
Organization. Staff with the gray background are engaged to project activities.
As you see, all the staff belongs to project activities, because there is no other
.alternative. Project coordination is done over each project

Organizational Structure Type #2: Matrix Organization

Matrix Organization attempts to get strengths of Projectized and Functional
Organizations. Projectized Organizations ensure the dedication of project
resources to the project. Therefore, projects have a higher probability of
success. On the other hand, Functional Organizations ensure sustainability of
the organization since the resources turn back to their departments once the
project is over. Therefore, Matrix Organization aims to get the benefits from
these two previous organizational structures.
In Matrix organizations, the team members report to their project manager
and also to their functional managers. Because their actual managers are their
functional manager. If they are assigned to a project, they will be reporting to
their project manager as well.

Let’s consider a software engineer. If he is not working on a project, he will be

reporting to his functional manager, for instance, software development line
manager. But once software development line manager assigns this software
engineer to a project, this engineer will start to report to the project manager
as well.

Organization
Definition: Organization refers to a collection of people, who are involved in pursuing
defined objectives. It can be understood as a social system which comprises all formal human
relationships. The organization encompasses division of work among employees and
alignment of tasks towards the ultimate goal of the company.
 It can also be referred as the second most important managerial function, that coordinates the
work of employees, procures resources and combines the two, in pursuance of company’s
goals.

Process of Organization
 Step 1: Determination and classification of firm’s activities.
 Step 2: Grouping of the activities into workable departments.
 Step 3: Assignment of authority and responsibility on the departmental executives for
undertaking the delegated tasks.
 Step 4: Developing relationship amidst superior and subordinate, within the unit or
department.
 Step 5: Framing policies for proper coordination between the superior and subordnate and
creating specific lines of supervision.
Organization is a goal oriented process, which aims at achieving them, through proper
planning and coordination between activities. It relies on the principle of division of work and
set up authority-responisbility relationship among the members of the organization.

Types of Organization Structure

1. Formal Organization Structure: The organization structure of jobs and positions, with
specified activities and relationships, is known as formal organization structure. It is created by
management, to attain the objectives of the company.

o Line Organization: Line organization is the oldest and simplest pattern of orgnization,
wherein the supervisor has outright supervision over the subordinate. The flow of authority is
from the top level executive to the person at the lowest level of the organization’s echelon.

o Functional Organization: As the name suggests, functional organization structure is

one in which the thorough task of managing and directicting the employees, is grouped as per the
functions or type of work involved.
 o Line and Staff Organization: This type of organization structure is an improvement
over the traditional line organization. In line and staff organization primary and supportive
activities are related to the line of supervision by appointing supervisor and specialist, who are
linked to line authority.

o Project Management Organization: Project Organization is not an independent

organization, like the organization structure discussed above. Instead it is a set up within an
organization, so as to accomplish a project or firm’s objectives. It is led by project manager, who is
responsible for project objectives.
o Matrix Organization: Matrix organization is the emerging structure of the
organization, which is a combination of functional organization and project organization. In such
an organization, the functional departments such as production, accounting, marketing, human
resource, etc. constitute a vertical chain of command, while project division consitute horizontal
line of authority.
 Informal Organization Structure: The relationship between the employees, that
relies on personal attitudes, prejudices and interests rather than procedures. It is system of personal
and social connection, whose creation is not needed by formal organization.

The organization structure is a basic idea, which depends on the activity authority relationship
in the company. It is designed in such a way to realise business objectives.