The way your small business is organized will affect the way you and your employees meet your company objectives. Whether you have a handful of employees or a few hundred, it’s important to carefully plan how your company should be structured. One option for organizing your business is called the project organizational structure, or project-based organizational structure.


A project organizational structure groups people together based on the project on which they are working.

The Need for Project Organizational Structure in Small Business

Some companies are project-focused, where groups of people work on specific initiatives together for a set amount of time. In these cases, a project organization might be beneficial to the company. The project team consists of people who are dedicated to working on that specified initiative until completion regardless of which department they are in or their regular function.

For example, in a construction company, a group of employees may be working on a residential housing project together. The team can be made up of employees from different departments, such as project management, architecture, design, engineering and construction, but they are all working on the project together as part of the same team.

They will be managed by a project supervisor for the duration of the project. In some cases, they may also still report to their departmental manager in addition to the project supervisor.

Benefits and Disadvantages of the Project Organizational Structure

One of the key benefits of the project organizational structure is that it makes it easy for the team to communicate and stay up to date on day-to-day tasks since they are in the same organizational group and have the same manager. Another key advantage is that the team has a strong sense of identity since they are all focused on achieving the same goal and the successful completion of the project.

From a management perspective, the project organizational structure enables the company to better manage resources for the project since the supervision is centralized to one group. There are less chances of duplication of tasks and resources. The project manager can also schedule her team more efficiently since she knows ahead of time who is responsible for completing the project and doesn’t have to compete with other company tasks.

The project structure meaning also includes some disadvantages of which businesses need to be aware when deciding how to structure the company. First, the project structure can be expensive since the business needs to dedicate resources to a specific initiative. Since the employees in the project structure only work on one project at a time, this can limit the amount of projects the company can take on. Once a project is complete, the employees may be in a position to lose their jobs if the company does not have another project for them to take on.

Other Organizational Structures to Consider

There are a number of different organizational structures that can be effective for small businesses. These include:

  • Traditional or pyramid: The business leader is at the top of the hierarchy, followed by a small number of managers. The majority of the workforce is at the bottom of the hierarchy.

  • Functional: The people in a functional model are grouped by their main task. For example, all marketing employees are in one department, overseen by a marketing manager.

  • Product: In large businesses, each product line has its own functional organization. For example, the shoes product has a marketing, sales and production department, and the hats product has its own marketing, sales and production department.

  • Matrix: Two or more structures are combined in this model, where employees report to more than one manager for the duration of a specific project or initiative in addition to their functional manager.

  • Flat: Unlike traditional models, these structures have no hierarchies. All employees are seen as equal, and they self-manage themselves.

  • Flatarchies: A combination of the pyramid hierarchy and the flat structure, this organization is dynamic in nature. The company may have an existing structure that they can change based on an initiative so employees can work in an equal setting.

  • Halocratic: This model focuses on distributed decision making, where groups of people work in their areas of expertise together.