Matrix Structure

Understanding Matrix Organizational Structure

Matrix organizational structure is designed in an effort to give equal emphasis and attention to product and function, or product and geography.

Whereas functional,Opens in new window divisional,Opens in new window and geographic structures arrange activities along a specific, single dimension of the organization’s operations (function, product, geographic region, or customer base); a matrix structure typically gives equal priority to two dimensions in that both product and function or product and geography are implemented simultaneously.

The matrix structure may be deployed as a remedy when it is assessed that functional, divisional and geographical structures combined with horizontal linkage mechanisms are not working effectively.

How the Structure Works

The matrix structure permits a dual hierarchy. It creates, for example, both product divisions and functional divisions, with the product managers (horizontal hierarchy) and functional managers (vertical hierarchy) having equal authority within the organization, and employees report to both of them in a balanced fashion (See figure below). In addition, matrix organizational structures permit a sharing of resources and offer more information-processing capacity.

A matrix structure begins with a basic form of structure, usually functional, and then has a second type of structure superimposed upon it. A common form of matrix structure is a functional structure with a product, geographic, or customer structure attached to it.

The managers of the superimposed structure normally are called project managers, especially if the matrix structure is intended to be temporary. When the matrix is intended to be permanent, the project managers may be product managers or geographical managers.

Possible matrix organizational structure of Pfizer Corporation
Matrix Structure: Possible Matrix Organizational Structure of Pfizer Corporation

Referring to the figure above—for purpose of illustration—the reporting relationship of a matrix organizational structure (using in verbatim the explanation by Julian Gasper, et al. in Introduction to Business), “involves employees reporting to multiple managers in team project situations.

Pfizer, for example, might establish a project team to further develop its product Viagra. The team might have a research scientist, a sales representative or detailer, an engineer, and an accountant.

The project team is then assigned a project manager. In this situation the scientist, sales representative, engineer, and so on, on the project team essentially have two bosses, two reporting relationships. They have as managers both the project manager for the Viagra team and their regular manager, who may be the company chief scientist, the head of company sales, or some other manager” (see diagram above).

Illustration in the figure above assumes that Pfizer establishes three different teams to work on further developing three of its most important pharmaceutical drugs, Viagra, Zoloft (for the treatment of depression), and Celebrex (for the treatment of arthritis). Each project team has a project manager and is made up of a scientist, a sales representative, an engineer, and an accountant.

These individuals all report to their given team project managers and to the regular heads of their functional areas. For example, scientist A reports both to his or her regular boss, the company’s vice president, research/chief scientist, and to the head of Project A, the company’s Viagra project. The resulting diagram of relationships, the figure shows, is a matrix.

Two Variations of Matrix Structure

With the continuous growth of organizations and as a result of projects becoming larger and technologically complex, it has become necessary for organizations to add a horizontal dimension to the traditional functional structure in order to improve co-ordination and functional integration among individuals and groups. The matrix structure can facilitate this integration whereby the normal vertical hierarchy is overlaid by some form of horizontal authority.

The matrix structure organizes horizontal teams along with the traditional vertical hierarchy and aims to give equality to both in a balanced fashion. However, the matrix may shift one way or the other.

Many companies have found it difficult to implement and maintain a balanced matrix because one side of the authority structure often dominates. This in effect, has given rise to two variations of matrix structure—the functional matrix and the product matrix.

  1. Functional Matrix
    In a functional matrix, the functional bosses have primary authority and the project or product managers simply coordinate product activities.
  2. Product Matrix
    In a product matrix, by contrast, the project or product 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.

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The matrix structure is ideal 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. However, 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.

Strengths and Weaknesses

One potential advantage of the matrix structure is that it helps an organization to meet dual demands from customers in the environment. Resources such as people and 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 functional or general management skills, depending on their interests.

One potential disadvantage of the matrix structure 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.

The table below summarizes the strengths and weaknesses of the matrix structure based on feedbacks from organizations that use it.

Summary of Strengths & Weaknesses
  • Achieves coordination necessary to meet dual demands from customers
  • Flexible sharing of human resources across products
  • Suited to complex decisions and frequent changes in unstable environment
  • Provides opportunity for both functional and product skill development
  • Best in medium-sized organizations with multiple products
  • Causes participants to experience
    dual authority, which can be
    frustrating and confusing
  • Means participants need good interpersonal skills and extensive training
  • Is time consuming; involves frequent meetings and conflict resolution sessions
  • Will not work unless participants understand it and adopt collegial
    rather than vertical types relationships
  • Requires great effort to maintain power balance.

All kinds of organizations have experimented with the matrix, including hospitals, consulting firms, banks, insurance companies, government agencies, and many types of industrial firms. This structure has been used successfully by global organizations such as Procter & Gamble, IBM, Unilever, and Dow Chemical, which fine-tuned the matrix to suit their own particular goals and culture.