KJ SOMAIYA COLLEGE OF ARTS & COMMERCE

SANKET SANJAY PAWAR TYBMS/B Roll No -134

Subject : PROJECT WORK

Assignment 1 : TYPES OF ORGANIZATIONAL STRUCTURE

1. Functional organization Structure :

A functional structure divides the organization into departments based
on their function. Each is headed by a functional manager and
employees are grouped as per their role. Functional managers have
experience in the roles they supervise. This ensures that employees are
using their skills effectively. It helps organizations in achieving their
business objectives. Employees are classified according to their
function in this structure. The organizational chart for a functional
structure shows the role hierarchy: for example, president, vice
president, finance department, sales department, customer service,
administration, etc.

Advantages of functional Organization structure :

The following are a few benefits of the functional organizational structure:

 Employees are grouped by their knowledge and skills, allowing them to

achieve high performance.
 Their roles and responsibilities are fixed, facilitating easy accountability
for the work.
 The hierarchy is clear. This reduces the number of communication
channels.
 Communication is frictionless within the department.
 Work is not duplicated as all departments have defined responsibilities.
 Employees feel secure; they perform well without fear.
 Because of job security, employees tend to be loyal to the organization.
 Employees have a clear career growth path.
 Cooperation is excellent within the departments.
 Disadvantages of the Functional Organizational Structure

The following are a few disadvantages of the functional organizational

structure:

 Employees may feel bored because of repetitive work. This monotony

causes loss of enthusiasm.
 Conflicts may arise if the performance appraisal system is not properly
managed. A highly skilled employee costs more.
 The departments have a self-centered mentality. Functional managers
pay more attention to their own departments and ignore others’
interests.
 Communication is weak among the departments. This causes poor
inter-department coordination, affecting flexibility and innovation. 
 There is a lack of teamwork among different departments.
 Employees may have little concern about events outside their group.
 The functional structure is rigid and adapting to changes difficult and
slow.
 Decision making is slow due to the bureaucratic hierarchy.
 Functional managers can make decisions without consulting team
members. This is not good for the organization.
 Personal bias may affect employee morale. For example, an employee
may feel demoralized when a low-performing employee is promoted.
 When the organization becomes larger, functional areas can become
challenging to manage. Each department may start behaving like a
small company with its facilities.
 Functional departments may be distracted by departmental goals,
rather than organizational goals.
 Employees do not learn any new skills and their roles don’t change
often.
Matrix Organization Structure :- the matrix organization is a combination of the
projectized and the functional structures.
In a matrix structure, the authority of a functional manager flows downwards,
and the influence of the project manager flows horizontally. Hence, it is called
a matrix organizational structure.
Employees may report many managers in a matrix organizational structure.

Advantages of a Matrix Organizational Structure

The following are a few advantages of a matrix organizational structure:

 Highly skilled and capable resources can be shared. This allows open
communication and knowledge sharing within the organization.
 The matrix structure is dynamic. It allows employees to communicate
across the boundaries and creates a pleasant, cooperative, work
environment that helps to integrate the organization.
 Employees can enhance their skills and knowledge by taking part in
different projects. The matrix structure provides a good environment to
learn and grow.
 Employees are skilled in functional departments. Project teams can get
these highly skilled employees whenever their services are needed.
 Because of job security, employees will be faithful and perform well,
meaning the efficiency of a matrix organization is higher.
 Resource usage is optimal. You can get access to experts easily from
your organization, and you can share equipment between projects.
Negotiation is better in matrix organizations.

Disadvantages of a Matrix Organizational Structure

The following are a few disadvantages of a matrix organizational structure:

  Employees may have to report to two managers which adds confusion
and may cause conflict. This happens in a balanced matrix organization
where both bosses have equal authority.
 A conflict may arise between the project manager and the functional
manager regarding authority.
 Employees may be confused about their roles and responsibilities.
Work priorities can cause conflict among employees if they are not well
defined. This happens when employees are assigned a task different
from what they were doing.
 There can be competition for scarce resources. This may cause
hostility and could impair the work.
 It is generally perceived that matrix organizations have more managers
than required, which increases overhead costs.
 The workload tends to be high in a matrix organization. Employees have
to do their regular work along with the additional project-related work.
This can exhaust them. Employees may ignore their regular
responsibilities if they are overtaxed.
 A matrix structure is expensive to maintain. Organizations have to
spend more to keep resources because all resources are not busy at all
times and some are needed only for a short duration.

Project Organization structure :- In project organizations, all activities are

managed through the projects. Here, organizations encourage employees to
share their lessons learned. At the same time, they allow others to learn and
benefit from a shared corporate knowledge base.Project managers are in
charge and they have complete authority over resources. All team members
report to them. Project organizations have no functional manager; if they do,
their role will be minimal. Moreover, they won’t have any authority. The project
organization structure is the opposite of the functional structure.
Advantages of a Project Organizational Structure :-

These are a few advantages of a project organizational structure:

 Team members are loyal to the project goal.

 Team members report directly to project managers; the line of authority
is clear. This reduces conflict and decision making is faster and more
flexible.
 A single reporting system helps shorten communication lines, creating
effective communication within the team.
 Communication is fast because of a single authority. This helps solve
stakeholders’ concerns quickly. 
 Being the only authority, project managers can make quick decisions
and complete the project faster.
 Communication and cooperation tend to be better because there is a
sense of urgency when completing milestones. Hence, new members
learn fast.
 Team members become more versatile and flexible due to working on
different projects.

Disadvantages of a Project Organizational Structure :-

These are a few disadvantages of a project organizational structure:

 Absolute authority can make project manager arrogant. Lack of power

is an issue in a functional organizational structure, while absolute
authority can be an issue in a project organization.
 Projects always have deadlines and tight schedules, which can make
the work environment stressful.
  Poor communication can cause resource duplication if there are
multiple projects.
 There is a sense of insecurity among the team members. They know
they may lose their jobs once the project is finished. They tend to be
less loyal to the organization.
 The cost of employees and equipment can be higher because they are
being hired for a shorter period. Moreover, this cost can become much
higher if the project is delayed.
 The employees may not be highly skilled in a particular area because
they work on so many different projects. This may affect the quality of
the deliverable.

4. Composite Organization Structure :- Composite organization structure

simply put, is basically a combination of all three organization structures. ... Within

an organization there could be certain projects that are being managed following the

Balanced Matrix Organization Structure while others could be following

Project Organization Structure.

Advantages Of Composite Organizational Structure :-

 Financial Controls
Financial controls evaluate to what extent the company's operations are
meeting the goals of its financial plans. Reliable cost information is only
available at the lowest levels of a typical company, where the actual costs are
generated and captured. Filtering this information back up though the
traditional organizational structure generally results in loss of detail. Since the
information is designed to evaluate the performance of the operational unit,
running it back up through the unit itself is usually not effective. Good financial
controls access lower level financial information directly through a second
functional path available only in companies that have a composite
organizational structure

Quality Assurance
Another example of functionality that requires a composite organizational structure is
quality assurance. The rules for implementing quality assurance programs specify
that the quality assurance manager must report directly to upper management. To
perform his quality assurance evaluations and implement quality control functions, the
quality assurance manager must also have direct access to operating units and
customer service. A composite organizational structure allows this direct access to
the highest and lowest organizational levels of the company at the same time.

Data Security

More recently, data security has become a priority for many companies, and most are
choosing to implement increased data security through a functional addition to their
composite organizational structure. Data security specialists, either in-house or
external experts, are given direct access to departments to ensure that sensitive
financial and personal information is not accessible from outside the company. Such
direct access bypasses traditional organizational bottlenecks such as budget and
manpower concerns and ensures the execution of the particular function as planned
by top management.

5. Modular Organizational Structure :- Modular structures differ from hollow

organizations in that components of a product are outsourced. Modular structures may

keep a core part of the product in-house and outsource noncore portions of the product.
Networks are added or subtracted as needs change. For a modular structure to be an
option, the product must be able to be broken into chunks. For example, computer
manufacturer Dell buys parts from various suppliers and assembles them at one central
location. Suppliers at one end and customers at the other become part of the
organization; the organization shares information and innovations with all.
Customization of products and services results from flexibility, creativity, teamwork and
responsiveness. Business decisions are made at corporate, divisional, project and
individual team member levels.
Advantages Of Modular Organizational Structure :-
Advantages include the following:

 Minimizing the specialization and specialists needed.

 Minimizing overhead.

 Enabling the company to outsource parts supply and coordinate the assembly of quality
products.

Disadvantages include concerns about the actions of suppliers outside the control of the
core management company. Risk occurs if the partner organization removes itself form
the quality check on the end product or if the outsourced organization uses a second
outsourced organization. Examples of supplier concerns include the following:

 Suppliers, or subcontractors, must have access to—and safeguard—most, if not all, of

the core company's data and trade secrets.

 Suppliers could suddenly raise prices on or cease production of key parts.

 Knowing where one organization ends and another begins may become difficult.