Business Development and organizational structure

The organizational structure of product development is a scheme by which individual specialists (executors) are connected in working groups. 

These connections between performers may be formal or informal and include, among others, the following types of connections:

 Relationships of accountability: Relationships of accountability originate in the classical terms of boss and subordinate. 

They are formal connections and are most often presented in the form of an organizational chart.

Financial arrangements: Executors are linked through a portion of the general funding, such as a special budget line or working capital.

 Co-location: Connections are formed between performers who are located in the same office or building, on the same floor or on the same territory.

 These informal connections arise from natural encounters and contacts while working.

Regardless of their organizational ties, specific performers can be classified according to two characteristics: the functions they perform and according to the projects they work on.

 Function (in the organizational sense) is a field of activity that usually requires special education and training. Marketing, design, and manufacturing are classic functions in product development organizational structures.

 It is also possible to divide these functions into more detail, which includes, for example, marketing research, marketing planning, strength analysis, technical design, industrial design, process development, and production management.

 Regardless of the functions performed, specialists apply their knowledge and experience in specific projects. The project here is understood as a set of actions (activities) as part of the process of developing a particular product; such actions include, for example, identification of customer requests, development of the product concept, etc.

Note that these two classes should overlap: specialists performing several different functions will work on the same project. In addition, although a team of specialists performs one function, it can simultaneously participate in more than one project. Two classical organizational structures arise when organizational ties are combined around a single function or a single project.

 In functional organizational structures, organizational connections that support a particular function are mainly used. Project organizational structures rely primarily on organizational relationships that support the same project.

For example, a strictly functional organizational structure could include a group of marketing professionals involved in training and expertise. These professionals could report to a single supervisor who would evaluate the work and set the appropriate amount of pay. The group could have its budget and be housed in one part of the building. This marketing team could be involved in several projects, but there could be loose organizational connections with other members of each project team. These could be similarly organized groups related to design and production.

A strictly projected organizational structure could be formed from teams of specialists for different functions, but each group would participate in the development of one particular product (or product line). Each of these teams could report to an experienced project manager who could take in information on any of the functions. Performance evaluation could be carried out by the project manager, and team members could be accommodated as compactly as possible, working in the same office or one part of the building. 

New project commercial enterprises are an example of the most pronounced organizational structures of the project type: each performer, regardless of function, is associated with only one project. Here, the president or CEO of a company can be seen as a project manager. A company will focus all its resources on one project if that project is large and important to it.

The matrix organizational structure is a hybrid combination of structures of functional and organizational types. In the matrix structure, the performers are interconnected according to both functional and project schemes.

 As a rule, each performer has two managers – a functional manager and a project manager. In reality, each of these managers seeks to have the greatest authority. 

For this reason, they cannot, for example, independently manage the budget or independently evaluate the work of subordinates. 

In addition, functional and organizational structures cannot physically be easily placed together. As a result, both functional and organizational structure tends to dominate.

The two existing options for the matrix structure are called the rigid design matrix structure and the lightweight design matrix structure.

 A rigid project matrix structure involves the use of strict project relationships. A "hard" project manager fully manages the budget, evaluates the work of team members and makes most decisions on the allocation of resources. Despite this, each project participant is also a member of the functional organizational structure, and functional managers retain little authority and control.

A lightweight design matrix structure involves weakened design links and relatively strict functional relationships. In this scheme, the project manager is mostly the coordinator and administrator. An "easy" project manager adjusts plans, organizes meetings and facilitates coordination of work, but has no real power and control over the project.

 Functional managers are responsible for the budget, staffing and work plan, and assess the quality of their implementation.

In the context of reviewing the project organizational structures, the development team is the totality of all the performers involved in the project, regardless of the structure of the divisions in the development company. In a functional organizational structure, a team consists of performers who are distributed within a functional group and do not have organizational ties with other project participants.

 For this reason, the concept of a team makes much more sense to us within the framework of project and matrix organizational structures than within the framework of a functional organizational structure.

Different types of organizational structures

The right choice of organizational structure type depends on which organizational factors are most critical to the success of a given project. Functional structures tend to generate specialization and the desire of specialists to deepen knowledge in functional areas of activity. Project organizational structures seek to enable rapid and effective coordination of various activities. Matrix structures, being hybrid, have the potential for each of these characteristics. 

The following questions help to facilitate the choice of organizational structure:

How important is cross-functional integration?: Functional organizational structures may have difficulty coordinating project tasks that are being addressed in different functional areas. 

Project organizational structures allow for clear cross-functional integration, as organizational ties between team members cross the boundaries of functional areas.

How critical is the presence of high functional qualifications for the success of the project?: When expert knowledge in a particular subject area should be applied in the development of several products, it is necessary to use mainly functional connections. 

For example, for some aircraft manufacturers, the calculation of the dynamics of the flow of gases is so important that specialists in calculating the dynamics of gases are combined into a separate group to provide the company with the highest possible quality of solving this problem.

Can performers for each of the functions be fully loaded for most of the project?: For example, a project may require only a fraction of the total working time available to developers. 

To use the staff efficiently, the company can organize working hours on a functional basis, to simultaneously meet the needs of several projects.

 How important is the speed of product development?: Project organizational structures allow you to quickly resolve emerging conflicts and effectively coordinate the work of specialists in different areas. 

Relatively little time is spent on the transfer of information, the appointment of responsible persons and the performance of coordination functions. For these reasons, designing organizational structures is usually faster than functional ones to cope with the development of innovative products. For example, personal computer manufacturers almost always organize the development team as a project organizational structure.

 This allows developers to take into account the specifics of the rapidly moving forward computer market and create new products in the shortest possible period.