Functional Organizations vs. Projectized Organizations: Concept, Differences, Examples

Editorial Team

Functional Organizations vs. Projectized Organizations

Every organization needs to have a proper structure to enable it function well and operate smoothly. The type of structure it settles on defines and outlines the hierarchy of operations, which determines how tasks are divided, coordinated, and even directed.

It is essential to keep in mind that even though an organization’s structure should have some sense of permanency to achieve order and consistency, it is not static and can always be changed. The changes made could accommodate new numbers, the organization’s needs, or a change in the organization’s philosophy.

There are many types of organizational structures in the business world. However, this article aims to focus on only two. These are functional organizations and projectized organizations. We will also unveil how they are different from each other and look at a few examples for a better understanding of the same. Stick with us up to the end of this article to learn which one suits your organization better.

Functional Organizations

For functional organizations, the employees specialize in particular areas, meaning that the organization is divided into various departments.  The scope of authority in these organizations is also clearly defined and the organization is overseen by a president, assisted by a deputy president.

Each department also has a department head who manages the operations of the department. They also act as a link between the organization heads and the rest of the employees. This means that the positions structure of functional organizations is vertical.

A functional manager’s typical roles in an organization would be budgeting, decision-making, and allocating resources. This organizations would best suit businesses in the manufacturing sector because it ensures that the production is standard and assures consistency in the products.

It is easy to be held accountable using this form of structure since every employee’s roles, and responsibilities are clearly defined. Since one can quickly tell and point out the chain of command, it eliminates the need for double reporting making work easier. Also, since the organization is divided into departments, duplication of work is minimal since every person has a different role.

Projectized Organizations

Since projects are temporary to an organization and not ongoing daily activities that the employees have to undertake, projectized organizations are also temporary structures. A project manager heads this form of structure, which winds up upon the completion of the project.

However, in some instances, the structure maybe moved to form and oversee a new project, which calls for shuffling the team to ensure that it suits the new project in such cases.  As a manager, you may also need the assistance of a few specialized experts in the organization from the functional departments.

For projectized organizations, resources are allocated until the completion of the project. However, the project manager needs to ensure that the expenditure is per the allocated budget. He/she is also responsible for ensuring that every team member has been assigned clear tasks.

Projectized organizations would be best suited for unique and independent projects that an organization wants to undertake. For instance, if an organization seeks to develop a new software system, it may need a projectized organizational structure to help them achieve that objective.

In projectized organizations, it is easier for team members to reach each other and communicate since there is no set hierarchy. The team members also do not specialize in doing a particular task. On the contrary, they all work together to achieve a common set goal.

Key Differences


For organizations that have a functional structure, the career path for the employees is clear and visible. If one puts in the work, they can rise through the ranks and get higher in the hierarchy. On the other hand, for projectized organizations, the team members have no guarantee of a clear career growth path upon completing a project. They can only look forward to handling a new project.


Functional organizations require employees to specialize in one area and are most of the time divided into departments. However, for projectized organizations, the team members do not need to specialize since they all work towards a common objective and goal.


Functional organizations have a vertical chain of command whereby the departmental heads act as links between the subordinates and the organization heads. On the other hand, projectized organizations lack the hierarchy and are only headed by a project manager. This makes communication between the project team more straightforward and faster.


Because the routine is the same day in day out in a functional organization, the employees may quickly get bored and lose enthusiasm. On the other hand, working on different projects in projectized organizations does not form a routine that is exciting.

Examples of Functional Organizations

  • Manufacturing company
  • Finance
  • Supply and distributions
  • Customer service and relationship

Examples of Projectized Organizations

  • Film production company
  • Team building trainers
  • Advertisement agencies


Selecting the proper structure for your business organization is the first way to set it up for success. You must know which structure works for your organization depending on your operations. This is because the structure will determine the hierarchy of the organization.

Functional organizations are permanent in nature since the employees work long-term for an organization with a vertical hierarchy. This means that the chain of command is clear. Employees specialize in their area of expertise, where they are divided into departments headed by department managers. The department heads act as the link between the rest of the employees and the organization heads. On the other hand, projectized organizations are temporary, and there is no hierarchy. A project manager heads it, and communication is easy between the team members. There is also no specialization as the whole team works towards a common goal.

I hope this article has been insightful and has helped you understand the difference between functional organizations and projectized organizations. Although both are different, they play a crucial role in the success of any business organization. Depending on the operations of your organization, I hope you can settle on the right choice.