We’ve gone to great lengths to clearly explain the concept of matrix organizational structures in this blog post. You’ll learn about what they are, their pros and cons, and when they should and shouldn’t be used.
Let’s dive right in!
Matrix Organizational Structures: A Definition
The organizational structure of a company is the way in which hierarchy is defined. When built properly, every employee will know exactly what their individual job is and who they should report to.
Matrix organizational structures are a hybrid type of company hierarchy. To fully understand them, we must first explain the two different approaches they bring together.
Functional Organizational Structures
A functional organizational structure is the most common. You’ve most likely worked at a company that uses this system. Basically, the entire business is divided into smaller sections, each responsible for a specific function.
For example, a company might have different departments for IT, marketing, human resources, etc. The people working in each of these departments report to one manager, who then reports on the whole of the department to a senior executive.
Projectized Organizational Structures
In a projectized organizational structure, a company isn’t divided into different departments. Rather, the majority of an organization’s resources are allocated towards specific projects, and the entire staff works towards completing them. In this structure, a project manager, not a department director, leads the way.
For instance, a local construction company might use a projectized structure. Businesses such as these don’t typically have specific departments for marketing or IT. Rather, they allocate all of their resources to complete one of the projects it’s undertaken, such as remodeling a house or building a backyard shed.
Often times, in projectized organizational structures, the foreman is the project manager and has authority to make budgetary and staffing decisions.
Matrix Organizational Structures
Matrix organizational structures are so named because reporting relationships resemble a grid (or matrix) rather than the typical hierarchy. This structure can be thought of as a combination of the functional and projectized approaches we just mentioned.
Employees at these companies are generally divided into different departments but often work with other teams to complete specific projects.
Meaning team members report to more than one boss: the head of their department, and the project manager charged with overseeing a specific initiative.
Matrix structures can be tough to comprehend if you haven’t experienced them for yourself. We’ll give you another example to illustrate the concept:
Carol works in the marketing department for ABC Software. Typically, she's charged with writing promotional copy for the company's website and reports to the organization's marketing director. But whenever ABC Software decides to release a new product (like last summer), company leaders pool the top talent from each department in order to ensure the launch is a success. During these times, Carol reports to two bosses; the marketing director and the manager of the new project.
The Pros of Matrix Organizational Structures
Like anything, matrix organizational structures have pros and cons. Let’s dive into the pros first and discover why a company would consider taking this approach.
1. Improved Communication
Communication between departments is a breeze. Mostly because departmental “walls” are torn down and employees move freely between units, sharing valuable knowledge along the way. The ease of communication often leads to more collaboration, which typically results in better, stronger organizations.
2. Resource Sharing
Every company is (hopefully!) full of amazingly talented people. But the argument can be made that those talents are being wasted — or at least not used to their full potential — when kept siloed inside a single department. Matrix organizational structures remove these silos and let company talent benefit whichever department or initiative is in need.
3. Employee Development
Finally, matrix organizational structures help foster employee development. They’ll be exposed to multiple project types and ways of thinking. They’ll gain valuable experience by working outside their traditional boundaries and grow their professional skill sets. Not only does this make employees much more valuable to their organizations, it will also increase their job satisfaction.
The Cons of Matrix Organizational Structures
Matrix organizational structures have their downsides as well. This section will explore what they are and why they need to be understood before implementing this approach.
1. Reporting Confusion
While matrix organizational structures open the lines of communication, they can also make reporting more confusing. When employees have two bosses to report to, details can easily become jumbled. Additionally, the question of who’s really in charge becomes less clear and sparks may fly between department and project managers if their purposes conflict.
Measures can be taken to prevent these issues. For example, employee reports can be given to all relevant management personnel at the same time, and authority can be granted to specific managers over others. But there is still the possibility of these problems arising.
2. Heavy Workloads
It’s possible, in matrix organizational structures, for employees to experience extremely heavy workloads. This can lead to low job satisfaction, burnout, and higher levels of employee churn. This happens because team members are often tasked with extra duties in addition to their regular workload.
Management needs to be extremely careful when assigning work. You want your best people on every important project, but they can only do so much. Matrix organizational structures make it easy to overload staff members, which, in the end, isn’t in anyone’s best interest.
3. Additional Expenses
Finally, matrix organizational structures often represent an additional and sometimes significant expense. In order to retain more managers — the department heads, plus the project managers — company payroll balloons, which obviously has an impact on the business’ bottom line.
Furthermore, an organization may find that it’s forced to keep and pay talent it doesn’t use consistently. If it doesn’t, it risks losing sought-after skill sets to a competitor.
The best project managers in the world are only valuable (in a business sense) to an organization when they’re working on projects. If a company doesn’t have enough projects to keep the PM busy… Well you can see how money is quickly wasted. But the alternative isn’t desirable either.
The Final Verdict
So what’s the final verdict on matrix organizational structures?
Are they beneficial to companies, or do they simply provide more hurdles to overcome?
The answer to that question really comes down to your industry, unique company, and personnel.
When to Use
Matrix organizational structures were designed to help companies complete large, complicated projects. The kind that requires them to efficiently process immense volumes of information and deploy specialized knowledge on a short timetable. A functional structure isn’t always suited to these purposes.
When deciding whether a matrix structure is right for your organization or not, first identify your motives for changing.
Are your current processes falling short?
Are you expecting to experience rapid growth in the near future?
What are your reasons for wanting to adopt the matrix?
Then take a look at your company, the kind of projects you regularly work on, and your team.
Does your current slate of projects warrant a matrix organizational structure?
Do you currently have the personnel to pull one off or will you need to hire more employees?
These are all important things to consider and your answers will indicate whether a matrix structure is right for your business or not. In general, We recommend matrix organizational structures for large companies working on projects with many moving parts.
When to Avoid
Now that we know when to use matrix organizational structures, when not to use them is pretty easy to define.
How big is your company?
How complex are your projects?
Matrix structures aren’t well suited to small organizations or those with straightforward projects. You’ll likely end up wasting resources if you adopt this structure.
Again, we recommend you identify your motives for wanting to change organizational structures.
Are your current processes falling short?
Do you foresee significant changes in the future you want to prepare for?
Keep in mind that the structures mentioned in this post aren’t the only ones out there. While a matrix organizational structure might not be right for your company — at least for now — there are others to consider. Generally, small companies aren’t a good fit for matrix structures.
Matrix organizational structures can greatly benefit the companies using them. They can also harm a business when not implemented or monitored properly.
It’s important that you weigh the pros and cons of this type of structure and make sure that it’s optimal for your unique business.
Matrix organizational structures help companies communicate better, share resources between departments, and efficiently develop employees.
But they can also add confusion to the reporting process, create heavy workloads for employees, and cost more money.
Whether your company adopts a matrix structure depends on its size and complexity. Large business that regularly complete intricate, information heavy projects are prime candidates for a matrix. If this doesn’t describe your business, we recommend a different structure.