Advantages and Disadvantages of Various Types of Organizations
Traditional (classical) organization
In this way, a general manager has all the functions required to deliver a product or service. Activity groups are headed by department or division management. Each department can maintain a high level of technical expertise and focus.
advantages:
Easier to budget and control costs.
Greater control of technical resources, since they are all managed under the general or departmental direction.
Policies and procedures are consistent across teams reporting to a common line of management.
Vertical communication channels are easily defined.
Reaction times are minimal to address any issue.
Disadvantages:
No individual is responsible for the overall delivery of a project.
Coordination of resources outside of vertical communication channels is difficult.
Communications with customers are channeled through senior management.
Each functional group can make a power play within the hierarchy.
Projects tend to be delayed due to the complexities of coordination.
Pure product (projected) Organization
In this way, the product manager maintains authority over the project. They can assign work, but also do reviews. With everyone reporting to one person, communication is strong, resulting in a very quick reaction time.
advantages:
Complete authority over the resources and over the project.
All work is channeled through the project manager.
Communication is strong with the unique reporting structure.
Better morale with more ownership of an individual’s work
More flexibility to make trade-offs with time and costs.
Senior management buys more time for executive decision making instead of dealing with departmental or divisional problems.
Disadvantages:
Possibility of inefficient use of resources when multiple products are introduced due to duplication of efforts in the use of resources.
Workload balancing needs to be managed as projects are closed and started.
Limited use of advanced technology in project implementation due to lack of strong functional groups to research and implement.
There is no knowledge transfer 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 responsibility for the project, while functional managers maintain technical excellence in their direct organizations.
advantages:
The PM maintains complete control of the project through resource management.
Policies and procedures are established 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 your own group continues as before the project.
Conflicts are minimized and those that arise are easily remedied by working on hierarchical management.
Disadvantages:
Information flows in multiple directions.
Resources should report to functional management and project management.
Management objectives may differ from project objectives.
Additional time and effort is required to develop project-specific policies and procedures.
While response time may be fast, reaction time may be slow.
Strategic Business Unit (SBU)
In this way, the organization separates the business units into their own entities that are responsible for their own promotion of the organization’s core businesses. These business units are customer focused and some resources may be shared between business units. Accounting, training and human resources services may be provided by the overall corporate structure.
advantages:
Customer-focused at the SBU level, leaving the broader organization to focus on running the business
Each SBU can manage its own product and project managers.
Disadvantages:
With the ability to share resources between SBUs, the line of management (resource owners) is blurred and can cause confusion.
Conflict can occur at higher levels of management in the SBU, which will push its way into the resources of the SBU.