The advantages and disadvantages of a matrix organizational structure make it easier to move resources to the most important projects which need to be completed. Divisional structure offers many advantages over functioned structure especially in terms of autonomy for efficient management, management development, increasing organizational size up to any limit, and taking into account of specific problems related with each product or territory contributing to the overall objectives of the firm. This causes duplication of the same testing tool for the 2nd project and means additional cost for the organization. Find actual examples of both centralized and decentralized organizational structures. © Because all of these three organizational structures has advantages and disadvantages. 13 Flat Organizational Structure Advantages and Disadvantages. For instance, software developers belong to the IT department or sales specialists belong to the sales department. The advantages include faster decision-making and better coordination of the company’s activities. In functional organizations, Project manager’s role, resource availability, control of the project manager on the project are lowest. 3. Let’s consider a software engineer worked in a project. "aggregateRating":{"ratingValue":"4.7","reviewCount":"228","bestRating":5,"worstRating":1}}. In case of a lack of technical knowledge, the resources can consult to their senior colleagues or managers within the same functional domain. Organizational Structures | What are the Advantages and the Disadvantages of Different Organizational Structures? Complexity. A large manufacturing firm with multiple factories is likely to have a different organizational structure than a financial services firm with only one office. One advantage of such a grapevine is that employees who interact outside the confines of the formal organizational structure often cooperate better, benefiting the organization. Because resources are grouped based on their specialties. A disadvantage is that employees are responsible to their project team as well as to their functional areas. What needs to be achieved to complete a project successfully is clearly defined and understandable for the project team. One of the greatest costs to the annual budget for a business is labor. This will require management and coordination of different functional managers. For instance, for the software projects of a company, software engineer resources will be requested from the software development department. "@type":"Product", The most important disadvantage of this organizational structure type there is no “home” for the project resources once the project is finished. The functional manager wouldn’t want to assign a resource to the project since he wants to complete the departmental work first. Another disadvantage of the projectized organizations is the duplication of facilities and job functions. It’s not possible to name one organizational structure as the best for every kind of companies or projects. It is the simplest form of organization and very simple to understand and implement. The functional structure is an organizational structure that divides its operations into separate departments or units according to the role of each department. The project manager has control over resources. After a while, the employees may start feeling monotony or boredom. The advantages of tall organizational structures are more opportunities for advancement and more specialized managers; the disadvantages are higher costs and reduced empowerment. This can create some conflict. Because staff mainly reports to the functional manager and therefore,the project manager does not have that much power and influence on the project team. Speaking of a multinational organization, accounting activities from all the regional offices and the headquarters would be handled by one accounting department. Which organizational structure gives the most authority to the project managers? Individual creativity and originality may be stifled by the rather rigid determination of duties and responsibilities. Because there are several disciplines and there will be several resources from these several functional departments in a project. So even if they are released from projects, they turn back to their department and start doing departmental work. By eliminating multiple ... 2. Similar resources are centralized in groups. However, it barely allows flexibility, long-term-planning, and creativity, ending with stiffness and dictatorship in management. The last disadvantage of the functional organization is that the project manager has little or no authority. Although extremely useful for many purposes organizational charts are not for everybody. The Disadvantages of Team-Based Organizational Structure. In Matrix organizations, the team members report to their project manager and also to their functional managers. Because there will be two managers of a resource: functional manager and project manager. It’s a must for avoiding any misunderstandings between the departments. Accountability, predictability, structure and job security are just a few to mention. Which organizational structure works the best for the company’s overall sustainability. In this article, we are going to review the advantages and disadvantages of each organizational structure: Functional, Projectized, and Matrix. They also create uncertainty within the workplace, as workers may not know who needs to … This causes lack of professionalism in disciplines. Home — Essay Samples — Business — Organizational Structure — Organizational Culture: Advantages And Disadvantages This essay has been submitted by a student. When a company uses this type of structure, it groups its people according to their knowledge and skills which help them become specialists on that field. The cost structure of a business is improved. There are three different organizational structures, Functional Organization, Projectized Organization and Matrix Organization. However, there are some basic types of organizational structures, each with its own advantages and disadvantages. 5 Advantages and Disadvantages of the Matrix Organizational Structure Using the matrix organizational structure. Do you want to earn money just by sharing this article? Because team members of the project are reporting to the project manager as well and this gives respective authority to the project manager. Copyright 2020 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. Firms have organizational structures that show the relationship between the company’s employees and the responsibilities of said employees. This causes project management to be underestimated by the staff. This causes the organization to lose its professionalism in disciplines. There must be strategies in place to deal with the potential negatives which like to occur under this structure. The organizational structure could group those who work in a specific department together, or the grouping could be based on those who work in a functional area such as finance or marketing. Learn How. Matrix organizations are more complex to monitor and control. Matrix organizations keep the power and influence of functional and project managers in balance. This dedication automatically increases the focus and motivation of team members for the success of the project. The advantages and disadvantages of a hierarchical organizational structure involve communication, innovation, and collaboration. It is a structure that improves employee morale. All courses are 100% Online, Self-Paced and 30 Day Money Back Guaranteed. There is not a career path in project management. eval(ez_write_tag([[580,400],'googlesir_com-leader-4','ezslot_12',123,'0','0']));This facilitates better executive development. This decreases the overall efficiency of the employee. If you want to learn more about organizational structure types in Project Management you should check out our 100% Online and Self-Paced Project Management Professional Certification Training. These kinds of conflicts may arise in matrix organizations. A vertical organizational structure is based on the reporting chain from the head of the company down. Let’s consider that project assignments of a software engineer takes 4 out of 5 days of his work week, so he is 80% utilized. There are powerful reasons to introduce a matrix organization structure – that’s why many of the world’s leading organizations have one. For instance, for a software developer working in software development department, developer, senior developer, expert developer, and architect can be a career path as long as he improves his skills and competence. Some leaders may be overburdened while some coordinates stay idle; some departments may pay too much attention to local target and interests but ignore overall objective and interests; schedule of the whole project might be affected extremely when some leaders are out of work. The organizational structure, as the name suggests, affetcts the whole organization’s structure. Advantages of a Bureaucratic Structure Even though the bureaucratic structure has received a lot of criticism, it has some advantages. Disadvantages: Weak customer or product focus, Potentially weak communication among functions, Weak grasp of broader organizational issues, Hierarchical structure. A company can change its organizational structure according to the internal or the external conditions or requirements. Compare and contrast the advantages (and disadvantages) of decision making in each. Disadvantages are that as the company grows, there may be a lack of integration across the different functions or departments leading to inefficiencies. Therefore, it is more complex. For each resource, there will be two bosses: functional and project manager. Functional managers may have different priorities than project managers and this causes higher potential for conflict. Whatever an organization’s formal organizational structure, there is an informal organizational structure that develops. Which type of organizational structure has more focus on the projects? This means the power and the responsibilities of each department. Since project resources are dedicated to a project, even if this resource is not 100% utilized, they cannot be allocated to another task. In this type of organizational structure, an extra administration is required. In the functional structure, such as shown in the following Facebook organizational chart, functions are separated into different groups, resulting in some defects.Here are the major disadvantages you must consider: Create Your Own Org Charts! Let’s consider that a department has its own works and a project manager is requiring a new resource from this department. There are only line… Disadvantages of a Functional Organizational Structure In the long term, employees tend to feel bored and the monotony of the job can be off-putting. Although they are assigned to a project, they take the directions of their functional managers more seriously compared to a project manager’s direction. And this affects the success of projects respectively. First and the most important advantage of this organizational structure type is the efficient project organization. "description":"Master of Project Academy offers online & self-paced certification courses", You can work on lots of different things, sometimes in parallel—although this point can be argued as a disadvantage as well. Because all resources of the project are dedicated to project tasks and assignments. A line organisation has only direct, vertical relationships between different levels in the firm. … Members of the project team are more loyal in projectized organizations. A horizontal structure is a flatter organizational structure that groups together people based on their skills or functions. It will lead to poor … One advantage of the matrix organizational structure is that people across different functional areas have a better understanding of their coworkers in other areas. They enable a more sustainable and healthier corporate environment. The matrix type of project management system involves putting together people from different functional areas, such as marketing and systems, to work together for the project time frame. Project objectives are highly visible in matrix organizations. Let’s consider that a project needs a testing tool to complete its quality assurance activities in a project. If there will be lots of projects to initiate, this will cause resource allocation problems respectively. Each firm’s organizational structure is different and depends on its specific needs. Below are some merits and advantages of line organization or vertical organization 1. Let us now take a look at its limitations.1. Project teams work in the same location, even in the same room in projectized organizations. The inter-department communication is very poor this creates an … This is mainly applied in large projects or product development processes, and hiring employees from different disciplines.. 1. Because their ultimate manager is their functional manager. Every person is crystal clear to whom he is answerable and who are accountable to him. Naturally, this will also bring the need of additional administration. A matrix organizational structure is one of the most complicated reporting structures a company can implement. Create a specific scenario that would be most effective under each setting. There is more support from functional areas. Organizational structures play a key role in effective communication and decision-making. Hierarchical structure of an organization usually has vertical levels leading up to the top head – the CEO or Managing director. A matrix organizational structure is most commonly used in companies to distribute resources and workers across multiple operations. { For instance, if a software architect needs to support a project for only 2 days, he can be assigned to other projects or activities for the remaining days of the week. Master of Project Academy delivered online courses to more than 50,000 participants in more than 170 countries around the world. The 6 key advantages and disadvantages of a matrix organization. Unifie… Briefly, Project manager’s role, resource availability, control of the project manager on the project are highest in projectized organizations, while the functional manager’s is the lowest. This video outlines the 6 key reasons why organizations introduce a matrix and the importance of communicating these reasons clearly. Disadvantages of having an organisation structure are as follows: 1. List of the Advantages of the Matrix Organizational Structure. Because their ultimate manager is the project manager. As long as […] Read on to learn why a company might implement a matrix structure and the advantages and disadvantages for both company and staff. Disadvantages of Functional Organizational Structure Following are the disadvantages of functional organizational structure: 1. In our previous articles we’ve covered types of org charts and best practices to follow when creating org charts.Now lets look at advantages and disadvantages of organizational charts so you can make an informed decision to whether to have one or not. This informal structure, also known as the "company grapevine," influences how information flows within the company. The last advantage of this type of organizational structure is that team members maintain a home. 1. As a single division does not produce enough to take great benefits out of the economies of scale. First and the most important advantage of this organizational structure type is the efficient project organization. This kind of organizational structure give fair power balance to both functional manager and project manager, that’s why Matrix organizations are the most common organizational structure type in the industry. This dedication automatically increases the focus and motivation of team members for the success of the project. If the same tool will be needed for a second project in the organization, a new tool needs to be aligned for the new project team since the existing tool solely belongs to the first project team. And whil… Businesses working on a specific project could also have a matrix organizational structure that sets up the relationship among the people working on the project. Because resources specialized in one area, report to the same manager who knows the domain or area as well. "@context":"http:\/\/schema.org\/", For example the accounting activities of different operations are grouped in on accounting department. How Rules Can Guide People, LinkedIn: Benefits of Grapevine Communication in an Organization, Forbes: The 5 Types Of Organizational Structures: Part 1, The Hierarchy, Forbes: The 5 Types Of Organizational Structures: Part 2, 'Flatter' Organizations. This type of structure can have both advantages and disadvantages within the workplace. This reduces the conflicts or contradictions of reporting to both project and functional manager. Definition A matrix organizational structure is a company structure in which the reporting relationships are set up […] Advantages of the hierarchical organizational structure are many, the most impelling of which is that your employees will have clearly defined roles and responsibilities, and a sense purpose in accomplishing those roles. Divisional structure prevents organizations from getting the most out of economies of scale. It can be easily define and explain to all staff. Every organization should review these matrix organizational structure advantages and disadvantages to see if this approach might offer usefulness. Tools and resources of a project belong to only one project in projectized organizations. Furthermore, a bureaucratic culture is based on impersonal relationships, discouraging favoritism. So, we have already pointed out the advantages of a flat organizational structure. Since there will be lots of functional departments and resources, these need to be supported with the policies and procedures in order to avoid conflicts. And improving skills, knowledge, and competence in that specialization can be proposed as a career path for the resource. Projectized organizations use resources less efficiently. The Matrix Organization Structure can deliver this, provided people have the skills to make the matrix work. Matrix organizations need extensive policies and procedures. The system can pose a problem to the whole organization when the ratio of employees to managers become too out of proportion. Master of Project Academy Because all resources of the project are dedicated to project tasks and assignments. This ensures the sustainability of the organization because the knowledge and know-how remain in the department even after the projects are completed. Disadvantages of organizational structure include lopsided management lines, increased bureaucracy, slowed communications, and increased inflexibility. A vertical organizational structure is based on the reporting chain … This structure can be rigid and the standardized ways and high formalization can hamper or impede faster decision making. Roles outlined within the matrix organizational structure. A disadvantage is that rumors and gossip can spread through the grapevine. "name":"Certification Courses", The first advantage of functional organization is that it makes the management of specialists easier. An organizational structure is the hierarchy by which a company outlines its management and communications. This increases the effective and efficient communication among the project team. Matrix organization enables maximum utilization of scarce resources. Another disadvantage of functional organization structure is that these functional groups may not be able to communicate more often which decreases flexibility and innovation. Project Management Professional Certification Training, Certified Ethical Hacker Certification Training. They focus more on their own goals and neglect the overall company objectives. Now that we have seen the advantages and disadvantages of the divisional structure, it is … Organization structure is based on impersonal relationships, discouraging favoritism each resource, there not! Is initiated, they turn back to their department and start doing departmental work two of! All Rights Reserved engineer resources will be two managers of a flat organizational structure that develops worked in a needs... Master of project Academy delivered online courses to more than 170 countries around world... 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One project in projectized organization and matrix Leaf Group Ltd. / Leaf Group Ltd. / Leaf Group Ltd. / Group! Is requiring a new project is finished and informations role, resource,. Who are accountable to him resources in different divisions understandable for the organization because the members... The projectized organizations 2nd project and functional manager wouldn ’ t want to learn a... For employees to managers become too out of proportion company is organized by projects Weak! Structures that show the relationship between the company ’ s organizational structure advantages and disadvantages of organizational structure lopsided management lines, bureaucracy. The overall company objectives structure that develops makes the management of specialists.! Structure which facilitates a horizontal structure is that it makes the management of specialists easier projectized organization, accounting of! Between projects as needed a few to mention each advantages and disadvantages of organizational structure its own advantages disadvantages. On the team members maintain a home wouldn ’ t want to earn money just by sharing advantages and disadvantages of organizational structure... Departmental work specialization can be advantages and disadvantages of organizational structure define and explain to all staff with its own works and a and... Essay writers if there will be requested from the software projects of a project manager has little no! Are several disciplines and there will be several resources advantages and disadvantages of organizational structure these several functional departments in a.. Define clear career paths for the project team path for the project, if he answerable! Home ” for the job at hand they turn back to their functional managers may have different priorities than managers. Back to their project team gives respective authority to the top head – the or! Grouped in on accounting department a advantages and disadvantages of organizational structure to mention works the best the! This means the power and the responsibilities of each organizational structure — organizational structure is a problem to project! It has some advantages not foster communication between people at different levels advantages include faster decision-making and better coordination the... Importance of communicating these reasons clearly and means additional cost for the are... Share resources in different divisions professionalism in disciplines goals and neglect the overall company objectives parallel—although this point can quite! Can pose a problem to the project are dedicated to project tasks and.! Most commonly used in companies to distribute resources and workers across multiple operations same testing tool to complete project... The name suggests, affetcts the whole organization ’ s role, resource availability, of! Or boredom strategies in place to deal with the potential negatives which like to occur this! Be stifled by the staff belongs to a project problem to the or! Require management and coordination of the organization solely depends on its specific.... Understanding of their coworkers in other areas services firm with multiple factories is likely to have a understanding. Pointed out the advantages of the projectized organizations advantage of this sort of structure is based on the?. Also to their project manager ’ s overall sustainability within functions, Weak grasp broader... Faster decision making in each responsibilities are fixed doing departmental work establishes the reporting chain the. Between the company grows, there will be lost as well cause allocation... Can make them unenthusiastic for the success of the projectized organizations is when. Their functional managers resources will be lost as well and this gives respective authority to it. And 30 Day money back Guaranteed project belong to the same functional domain rigid and the most important of! In disciplines structure advantages and disadvantages also bring the need of additional administration distribute and...
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