Organizations vary in structure and function, and can be broadly classified into formal and informal types. Formal organizations include line, functional, line and staff, project, matrix, and committee structures. Business organizations also come in different forms, such as sole proprietorships, partnerships, corporations, and LLCs. If you’re taking project management courses to study for your PMP certification, you’ll need to learn many new things, and one of them is organization types as defined by the PMI.

Every organization should have a well-defined organizational structure in order to work efficiently and achieve its business objectives. Some say that without a defined organization type and structure that helps support its goals, that organization will not succeed. As a project manager, this will help you identify the stakeholders and other team.

Here is the list of different types of organisations that will help you understand which type of organization you’re working with:

  1. Functional Organization
  2. Matrix Organization
  3. Projectized Organization
  4. Composite Organization

Type of Organization

According to PMI, there are four basic types of organization: Functional, Matrix, Projectized, and Composite. In this article, we’ll take a closer look at each of these organization types.

1. Functional Organization

Project Management training for the PMP exam covers the functional organization, the most commonly used organization type. In a functional organization structure, the organization is grouped into departments where people with similar skills are kept together in forms of groups; e.g., sales department, marketing department, finance department, etc. This helps organizations enhance the efficiencies of each functional group.

All authority (i.e., budget allocation, resource allocation, decision-making, etc.) belongs to the functional manager in a functional organization. Resources in functional organizations report directly to the functional manager. The functional manager reserves the authority to release resources based on their subject matter expertise. When the project ends, the resources are returned to the functional manager again for routine work.

Project managers typically do not exist in this type of organization structure; if this position exists, the role of the project manager will be very limited. The project manager may have the title of a coordinator or an expediter.

Did You Know? 🕵️
According to PMI’s Earning Power Salary Survey, 'PMP-certified project managers earn 33% more on average than their non-certified peers.'

2. Matrix Organization

The matrix organization structure is a combination of two or more types of organizational structures, such as the projectized organization structure and the functional organization structure. This combination can help organizations improve efficiency, readiness, and market adaptation. This type of structure is most suitable for organizations operating in a dynamic environment; they often can respond faster to market or customer demand while decreasing the lead time to produce a new product.

The authority of a functional manager moves vertically downwards, and the authority of the project manager moves sideways. Since these authorities flow downward and sideways, this structure is called the matrix organization structure. In a matrix organization structure, employees may report to many managers, and some from one section may report to one boss while the rest report to a different boss.

When you receive project management training, you’ll learn more details about the three types of matrix organizations, and how the project manager’s power differs depending on the type. Below we provide a summary.

  • Strong Matrix

In a strong matrix structure, the project manager enjoys more power than the functional manager. For example, the project manager has a say in the allocation of resources.

  • Weak Matrix

In a weak matrix structure, a project manager works like a project coordinator or project expeditor. A project coordinator has some say in the allocation of resources, while a project expeditor serves only as a point of communication between the customer and team. Overall, in a weak matrix, the functional manager reigns supreme.

  • Balanced Matrix

In a balanced matrix, both have equal power. Resources working on a project can face communication difficulties due to the lack of clarity on whom to report.

3. Projectized Organization

A projectized organization is the ideal organization type for a project manager. Project managers are the real bosses here, with the freedom to apply your expertise and have a say in the proceedings. However, once a project is delivered, project managers become redundant. There is no job security in this type of organization.

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4. Composite Organization

A composite organization blends the functional, matrix, and projectized types of organizations. A composite is just two or more models that are adapted for a special project, for simplicity, or to keep power in check. Most modern businesses are of the composite type.

Examples to help describe composite organizations are below:

  • An organization may deliver one project in a Balanced Matrix way, while another is being performed in a Functional way. They also have yet another project that’s being done as Projectized.
  • A Functional organization needs a small building, and the organization has the capability to construct the building itself. This would become a Composite organization because the organization creates a separate project team to complete this task.

Choose the Right Program

Unlock your project management potential with Simplilearn's comprehensive training. Gain the skills and knowledge needed to lead successful projects, boost efficiency, and exceed goals. Choose the right project management course today and advance your career with confidence.

Program Name

PMP® Certification Training Course

PMP Plus

Professional Certificate Program in Project Management

GeoAll GEOsAll GEOsAll GEOs
UniversityPMISimplilearnVirginia Tech
Course Duration90 Days of Flexible Access to Online Classes

36 Months10 Weeks
Coding experience reqdNoNoNo
Skills you will learn8+ PM skills including Work Breakdown Structure, Gantt Charts, Resource Allocation, Leadership and more.6 courses including Project Management, Agile Scrum Master, Implementing a PMO, and More11+ Skills, including Project, Agile, and Lean Management, Cost Management, Leadership
Additional BenefitsExperiential learning through case studies
Global Teaching Assistance
35PDUs
Learn by working on real-world problems
24x7 Learning support from mentors
Secure 140+ PDUs for renewal
Cost$$$$$$$$$$
Explore ProgramExplore ProgramExplore Program

Conclusion

It’s always helpful for a project manager to know in advance what type of organization you are working in to understand your level of authority better. Skilled project managers typically prefer a projectized organization to others. Are you looking to take your project management career to the next level? Add the PMP certification to your resume with Simplilearn’s world-class online PMP course.

PMP® and PMBOK® are registered trademarks of the Project Management Institute, Inc.

Get Ahead in Your PMP® Journey - Free Resources for You

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Our Project Management Courses Duration And Fees

Project Management Courses typically range from a few weeks to several months, with fees varying based on program and institution.

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