Project-Based Organizational Structure

A project is an organizational effort with a specific objective that needs resources, and must meet time, cost and quality requirements. A variety of businesses in construction, entertainment, aerospace and other fields use projects to organize their work. In a functional structure, work is organized in departments based on specialties such as marketing and finance. However, in a project-based organization, most of the business functions are organized in projects. Small-business managers may consider adopting a project-based structure to improve effectiveness.

Companies often set up projects to exploit new business opportunities. A project involves the development of a specific product targeted at select customers. Usually the customer offers crucial feedback in the development of the product; an example is the construction of a new production plant or designing an advertising campaign. The project-based organizational structure is not suitable for mass production.

In a project-based organizational structure, there is a general manager or CEO; also, there may be functional departments such as operations and finance, but projects are the main units of conducting activities. Project teams conduct almost all operations of the company. Functional managers make sure that projects have access to employees with the right functional expertise. Project managers have a lot of autonomy and are responsible for delivering results. They select team members, allocate tasks and oversee performance.

In a project-based organizational structure, employees are assigned to projects and report to the project manager. The project manager conducts performance appraisals and prepares career development plans for project team members. This improves employee loyalty to project goals. Moreover, because the project manager has direct control and authority over project operations, flexibility and response time to changing circumstances improve.

Without devising procedures to share knowledge between projects, learning in the company suffers. Projects need their own resources and expertise; as a result, duplication of resources is another problem with project-based organization. Additionally, when personnel keep moving from one project to another, professional growth and career continuity of employees suffer. Managers should strive to clarify the contribution of the project to the overall mission of the company to avoid ambiguity for employees.