Understanding the Matrix Organization Structure
Sometimes, an organization’s structure needs to be multifocused in that both product and function or product and geography are emphasized at the same time. One way to achieve this through the matrix structure.
The matrix structure can be used when both technical expertise and product innovation and change are important for meeting organizational goals.
The matrix structure often is the answer when organizations find that the functional, divisional, and geographic structures combined with horizontal linkage mechanisms will not work.
The matrix is a strong form of horizontal linkage. The unique characteristic of the matrix organization is that both product divisions and functional structures (horizontal and vertical) are implemented simultaneously, as shown in Figure X-1.
The product managers and functional managers have equal authority within the organization, and employees report to both of them. Moreso, the product managers (horizontal) are given formal authority equal to that of the functional managers (vertical).
Conditions for the Matrix Structure
A dual hierarchy may seem an unusual way to design an organization, but the matrix is the correct structure when the following conditions are present:
- Condition #1
Pressure exists to share scarce resources across product lines. The organization is typically medium-sized and has a moderate number of product lines.
It feels pressure for the shared and flexible use of people and equipment across those products. For example, the organization is not large enough to assign engineers full-time to each product line, so engineers are assigned part-time to several products or projects.
- Condition #2
Environmental pressure exists for two or more critical outputs, such as for in-depth technical knowledge (functional structure) and frequent new products (divisional structure).
This dual pressure means a balance of power is needed between the functional and product sides of the organization, and a dual-authority structure is needed to maintain that balance.
- Condition #3
The environmental domainOpens in new window of the organization is both complex and uncertain. Frequent external changes and high interdependence between departments require a large amount of coordination and information processing in both vertical and horizontal directions.
Under these three conditions, the vertical and horizontal lines of authority must be given equal recognition. A dual-authority structure is thereby created so the balance of power between them is equal.
Referring again to Figure X-1, assume the matrix structure is for a clothing manufacturer. Product A is footwear, product B is outerwear, product C is sleepwear, and so on. Each product line serves a different market and customers. As a medium-sized organization, the company must effectively use people from manufacturing, design, and marketing to work on each product line.
There are not enough designers to warrant a separate design department for each product line, so the designers are shared across product lines. Moreover, by keeping the manufacturing, design, and marketing functions intact, employees can develop the in-depth expertise to serve all product lines efficiently.
The matrix formalizes horizontal teams with the traditional vertical hierarchy and tries to give equal balance to both. However, the matrix may shift one way or the other. Many companies have found a balanced matrix hard to implement and maintain because one side of the authority structure often dominates.
Consequently, two variations of matrix structure have evolved—the functional matrix and the product matrix.
- In a functional matrix, the functional bosses have a primary authority and the project or product managers simply coordinate product activities.
- In a product matrix, by contrast, the project or product managers have primary authority and functional managers simply assign technical personnel to projects and provide advisory expertise as needed.
For many organizations, one of these approaches works better than the balanced matrix with dual lines of authority. All kinds of organizations have experimented with the matrix, including hospitals, consulting firms, banks, insurance companies, government agencies, and many types of industrial firms.
Strengths and Weaknesses
The matrix structure is best when environmental change is high and when goals reflect a dual requirement, such as for both product and functional goals.
The dual-authority structure facilitates communication and coordination to cope with rapid environmental change and enables an equal balance between product and functional bosses.
The matrix facilitates discussion and adaptation to unexpected problems. It tends to work best in organizations of moderate size with a few product lines. The matrix is not needed for only a single product line, and too many product lines make it difficult to coordinate both directions at once.
Figure X-2 summarizes the strengths and weaknesses of the matrix structure based on what we know of organizations that use it.
One strength of the matrix is that it enables an organization to meet dual demands from customers in the environment. Resources (people, equipment) can be flexibly allocated across different products, and the organization can adapt to changing external requirements.
This structure also provides an opportunity for employees to acquire either functional or general management skills, depending on their interests.
One disadvantage of the matrix is that some employees experience dual authority, reporting to two bosses and sometimes juggling conflicting demands. This can be frustrating and confusing, especially if roles and responsibilities are not clearly defined by top managers.
Employees working in a matrix need excellent interpersonal and conflict-resolution skills, which may require special training in human relations.
The matrix also forces managers to spend a great deal of time in meetings. Many people working in matrix structures say they spend two days a week in meetings and only 50 percent of the content is relevant to them or their jobs.
If managers do not adapt to the information and power sharing required by the matrix, the system will not work. Managers must collaborate with one another rather than rely on vertical authority in decision making. The successful implementation of one matrix structure occurred at a steel company in Great Britain.
|Englander Steel as Real-Life Example|
|Then in the 1990s and 2000s, excess European steel capacity, an economic downturn, the emergence of the mini mill electric arc furnace, and completion from steelmakers in Germany and Japan forever changed the steel industry.|
Englander Steel employed 2,900 people, made 400,000 tons of steel a year (about one percent of Arcelor’s output), and was 180 years old. For 160 of those years, a functional structure worked fine. As the environment became more turbulent and competitive, however, Englander Steel managers realized they were not keeping up. fifty percent of Englander’s orders were behind schedule. Profits were eroded by labor, material, and energy cost increases. Market share declined.
In consultation with outside experts, the president of Englander Steel saw that the company had to walk to tightrope. It had to specialize in a few high-valued-added products tailored for separate markets, while maintaining economics of scale and sophisticated technology within functional departments. The dual-pressure led to an unusual solution for a steel company : a matrix structure.
Englander Steel had four product lines: open-die forgings, ring-mill products, wheels and axles, and sheet steel. A business manager was given responsibility for and authority over each line and each manager had the authority needed to meet their targets and to make their lines profitable. Functional vice presidents were responsible for technical decisions. Functional managers were expected to stay abreast of the latest techniques in their areas and to keep personnel trained in new technologies that could apply to product lines. With 20,000 recipes for specialty steels and several hundred new recipes ordered each month, functional personnel had to stay current. Two functional departments—field sales and industrial relations—were not included in the matrix because they worked independently. The design was a matrix structure with both product and functional relationships, as illustrated in Figure X-3.
This example illustrates the correct use of a matrix structure. The dual pressure to maintain economies of scale and to market four product lines gave equal emphasis to the functional and product hierarchies. Through continuous meetings for coordination, Englander Steel achieved both economies of scale and flexibility.
- Organization Structures Opens in new window
- Functional Structure Opens in new window
- Divisional Structure Opens in new window
- Matrix Structure Opens in new window
- Geographical Structure Opens in new window
- Virtual Network Structure and Outsourcing Opens in new window
- Holacracy Team Structure Opens in new window
- Adhocracy Opens in new window
- Research data for this work have been adapted from the manual:
- Organization Theory & Design By Richard L. Daft