For this discussion, we are going to be exploring the various methods of company organization, including functional organization, matrix organization, and project-oriented organization. In business, every situation varies, from the product and services the company provides to the skill-level and number of employees; due to this, knowing how to properly organize the administrative and reporting structure is vital to success. A sophisticated and customized organizational structure is the framework for all activities in a company, from basic workflow to managing subordinates.

I am going to start by discussing functional organization, which often resembles a pyramid; in this structure, individual teams and departments are grouped based on their functionality.

For example, marketing employees will be grouped together and report to their marketing manager, who then reports to the CEO. In contrast, the finance department would be the same, reporting to a primary point-of-contact (finance manager), who then reports to the CEO. Each group/department’s size can vary greatly, and the relationships in each department are strengthened by working with peers of their own profession. By grouping departments together based on skills and knowledge, fixed roles and responsibilities are created and enforced, offering clear paths for career growth as well. The ability of each department to clearly understand who they report to is another excellent trait of functional organization.

Next, matrix organization is another possible structure; in this, employees are assigned both a function and a client, as well as offers enhanced communication as it flows across and up the organization’s structure.

In matrix organization, you will notice the grid pattern, dual-reporting relationships, and cross-functional design. In the example diagram I provided, you will see how while some of the structure is similar to functional organization, where the different department leads each report to the CEO, but there are now separate product managers who oversee each department (cross-directionally). In matrix organization, there is excellent utilization of resources, and by using teams, results can often be achieved faster. By using product managers to oversee each department, communication is also significantly increased.

Finally, we have project-oriented organization; in this structure, teams are grouped based on individual projects.

For example, a project for creating a web portal for new employee training would have members from several departments, such as web dev, IT, project managers, and possibly HR. By using project-oriented organization, teams have a high sense of identity and are focused on goals. Each project team will have line-responsibility for their specific project, as well as enjoy dedicated project resources, rather than shared resources within a department. In project-oriented organization, each team member’s normal day-to-day activities involve only the project they are working on, promoting excellent work ethic and better results.

Now that we have discusses functional, matrix, and project-oriented organization, the question still remains, “which is best?”

While each method of organization has its benefits and drawbacks, deciding which one works the best for your company really comes down to the specific situation. For example, a company that sells custom keyboards would require a different structure than say, a company that provides website development and marketing services. Furthermore, the financial status of the organization at hand can allow for sophisticated organization structures, if they can afford to support them (often, finding skilled managers can be difficult and costly). In fact, many organizations decide to implement a combination of organizational structures. If resources and manpower are abundant, teams that are grouped based on functional organization (grouped by department), may have its members taken out and assigned to a single project (similar to project-oriented organization); in this scenario, a few individuals from different projects may be assigned a project, once that project is finished, they would most likely rejoin each of their respective departments, continuing with the original functional organization structure.

While functional, matrix, and project-oriented organization can each provide a company with a proper method of managing employees, communicating, and handling day-to-day activities, deciding which one works best for the given situation is up to you. Due to the immense positive and negative aspects from choosing the right or wrong organization structure, the decision should be thoroughly researched and discussed with various managerial employees; this will also help decide if one organizational structure works best for a specific section of a business, department, or location.

I hope this information provides you with the knowledge to succeed in choosing the correct organizational structure for your business; as this is the backbone of a company, one must ensure that it is solid, yet can be adapted at will. Thank you for your time.