Advantages and Disadvantages of Various Organizational Types

Traditional (classical) Organization
In this form, a general manager
has all the functions required to deliver a product or service. The
activity groups are headed by department or divisional management.
Each department can maintain a high level of technical expertise and
focus.Advantages:Easier to budget and to control costs.
Greater
control of technical resources, since all are managed under the
general department or divisional management.
Policies and procedures
are consistent among the teams reporting to a common management
line.
Vertical communication channels are easily defined.
Reaction
times are minimal to address any issue..Disadvantages:No individual is
responsible for overall deliver of a project.
Coordination of
resources outside of vertical communications channels is
difficult.
Customer communications are channeled through upper
management.
Each functional group can make a play for power within the
hierarchy.
Projects tend to fall behind schedule due to the
complexities of coordination.Pure Product (projectized)
Organization
In this form, the product manager maintains authority
over the project. They can assign work, but also conduct reviews. With
everyone reporting up to one person, communication is strong, which
results in a very quick reaction time.Advantages:Complete authority of
resources and over the project.
All work is funneled through the
project manager.
Communication is strong with the single reporting
structure.
Better morale with more ownership of an individual's
work
More flexibility in making trade-offs with time and costs.
Upper
management gains more time for executive decision making instead of
dealing with the departmental or divisional
issues.Disadvantages:Possibility of inefficient use of resources when
multiple products are introduced by duplication of effort in resource
utilization.
Workload balance must be managed as projects are closed
out and started up.
Limited use of advanced technology in project
implementations due to a lack of strong functional groups to research
and implement.
No transfer of knowledge of lessons learned between
projects.Matrix Organization
This form attempts to merge the
advantages of the Traditional and Product Organization structures. The
project manager has complete project responsibility, while the
functional managers maintain technical excellence in their direct
organizations.Advantages:The PM maintains complete project control
through the resources' management.
Policies and procedures are set up
for each project so that they are meaningful to the project and not
more general.
Quick response to changes and resolution.
When a project
is complete, work in their own group continues as it was before the
project.
Conflicts are minimized and those that do surface are easily
remedied by working up the hierarchical
management.Disadvantages:Information flow moves in multiple
directions.
Resources need to report to functional management and to
project management.
Management goals can differ from project
goals.
Additional time and effort are required to develop the specific
project policies and procedures.
While response time can be quick,
reaction time can be slow.Strategic Business Unit (SBU)
In this form,
organization separate out business units into their own entities that
are responsible for their own promotion of the organizations core
businesses. These business units are customer-focused and some
resources can be shared across business units. Accounting, training
and HR services may be provided by the overall corporate
structure.Advantages:Customer-focused at the SBU level, leaving the
overall organization to focus on running the business
Each SBU can
manage its' own product and project managers.Disadvantages:With the
ability to share resources across SBUs, the line of management
(resource owners) is blurred and can cause confusion.
Conflict can
occur at the upper levels of management in the SBU, which will push
its' way down to the resources in the SBU.