How Organizational Structure Affects Projects
A company with shared goals, strong leadership and hard-working employees can still fail
without organizational structure. While organization is necessary for success, the structure can
influence the project management process. A company’s organizational structure may dictate the
level of project management, who makes ultimate project decisions, the communication of
project goals and tasks and how the project manager works with his team.
Tight or Loose Project Management
When determining the process for project management, your company’s organizational structure
can set whether you will need a tight or loose structure. A looser structure offers a less rule-
bound process while a tighter process necessitates a rule-bound structure, where each step is
managed closely. A looser scenario is likely if the company is small, new or when the project
team has experience working together successfully. A tighter structure is preferred with new
team members, larger organizations and complex projects.
Stakeholder Influence
Project stakeholders typically include the company's most senior executives. Though clients may
dictate the need for a project, the collective stakeholders drive the project’s goals. When
discourse or disagreement about the project occurs, the project manager often presents issues to
the stakeholders to decide the direction and expected outcome of the project. In the end, the
project manager and team members, and even clients, may get overruled by the decision of the
project stakeholders.
Communications
Organizational structure can greatly impact communication necessary to complete projects
successfully. In a company with structure that fosters interdepartmental communication, frequent
dialogue between management and subordinates, projects have a great chance for success. In a
company where departments exist in vacuums and one does not know what the other is doing,
projects may not succeed. Good communication allows support for projects and less duplication
of efforts. If all areas work together to a common goal and agree on the mission and outcome on
the onset, projects will thrive.
Chain of Command Impact
With organizational structure comes a chain of command. The hierarchy of manager and
subordinate is nearly always a factor in project management. Though the project management
team member understands the role they play in completing project tasks, the project manager is
often bound by the chain of command in pulling in the best people for the project. Project
managers may feel limited in providing direction to lower-level team members because they
need to go through management first. If management is not supporting a project manager by
letting him perform as he sees fit the project may fail.
The Advantages of Centralized Organizational Structure
A centralized organizational structure is a setup in which most power and critical decision-
making responsibilities are concentrated with a few key leaders. A centralized organization often
houses its primary decision makers or executives in a central headquarters with offices and
meeting areas for leaders to discuss business.
Centralization Supports Focused Vision
Vision is a key trait of effective leadership and having a more centralized structure keeps all
levels of an organization focused on one vision or purpose. A company president or executive
team can establish and communicate its vision or strategy to employees and keep all levels
moving in the same direction. This prevents potential inconsistency in vision and helps
companies deliver a common message to customers and communities.
Fast Execution Becomes Possible
With fewer people involved in discussing and deciding on strategy and action, centralized
organizations typically react more quickly to a dynamic marketplace. Leaders can gather
information and efficiently discuss pros and cons of decisions in a small group. This makes the
communication and decision making process much more efficient than in decentralized
structures in which many local managers must participate in the process. Once decisions are
made, top managers send out directives to lower levels for implementation as directed.
Reduced Internal Conflict
When only one person or a small group at the top makes important decisions, companies
experience less conflict and dissent among lower to mid-level employees. If many employees
and levels in the organization get involved in decisions, more potential exists for disputes and
difference in implementation. With top managers taking the responsibility of making and
implementing critical decisions, they insulate other managers and leaders from the burden of
making risky or unfavorable decisions. This is especially important to lower level manager-
employee relationships.
Control and Accountability
When centralized leaders are in charge of all major decisions they retain more control over
company operations and development of its culture. Additionally, little question exists over who
is accountable for the results of those decisions. If the company gets a bad price in a supplier
negotiation, top managers know to turn to the head buyer to get a sense of what went wrong.
This accountability causes top managers to drive each other to peak performance.
Employees Have Well-Defined Roles
In organizations with strong centralized leadership, employees typically have well-defined job
descriptions and roles. When employees are aware of their duties, as well as the duties and
responsibilities of their coworkers, they are often more likely to be productive and feel more
confident in making decisions within their sphere of responsibility. Morale may also improve, as
workers may be less likely to resent each other for either overstepping boundaries, on the other
end of the spectrum, not working hard enough.
When workers have well-defined responsibilities, it can be easier for management and human
resources to determine whether there is a need for creating new roles or hiring more employees.
This can help keep costs down by avoiding redundant hires while also making it easier to recruit
qualified workers for necessary positions.
