Best Practices

Matrix Organizational Structure: Advantages & Disadvantages

Jonathan Friedman
October 26, 2020
Matrix Organizational Structure: Advantages & Disadvantages

The matrix organizational structure. You've likely been a part of one before, maybe knowingly or unknowingly. Whether you're an expert or a newbie, we at TrueNxus will share everything you need to know or want to know about matrix organizations in this article.


Below is everything we will cover. Feel free to skip ahead.

  1. What is a matrix organizational structure?
  2. Why do matrix organizations exist?
  3. Advantages of a matrix organizational structure
  4. Disadvantages of a matrix organizational structure
  5. Making matrix management work

What is a matrix organizational structure?

A matrix organizational structure is a management structure where you report to multiple supervisors or leaders. There are hard-lines where you report to your immediate supervisor, and there are dotted lines where you report to colleagues who are not within your primary team or functional area. In essence, with a matrix organizational structure, there are multiple layers of managerial accountability and responsibility. You will plan and execute projects made up of cross-functional teams, cross-business unit teams, or cross-product teams in matrix management.

Why matrix organizations exist?

Matrix organizations typically exist in more mature organizations in an effort to be lean and conserve resources. More often than not, matrix organizations develop when a company innovates organically and creates new products or services or through mergers and acquisitions of competing or complementary products and services. Whether organically or inorganically, they typically look to standardize specific processes as a company grows. In doing so, they can allocate one person across multiple geographies, divisions, business units, or products.

When a matrix organizational structure exist, project-based work becomes more prevalent, in addition to your day-to-day work. Project-based work is used by cross-functional teams to plan and execute strategic initiatives. As a result, project managers become more critical, as they become the leaders of driving change management.

Matrix Organizational Structure Balance of Power

Strong matrix organization

A strong matrix organization is an organization that empowers project managers to make decisions and drive change management. Additionally, they can request and receive resources from different support functions and business units or products.

Balanced matrix organization

A balanced matrix organization is an organization that assigns project managers to oversee change management. However, decision making is shared between the project manager and the different support functions and business units or products.

Weak matrix organization

A weak matrix organization is an organization that assigns project managers to coordinate cross-functional teams. However, the project manager has no decision making authority and are merely put in place to provide senior leadership transparency and visibility into progress.

Other types of organizational structures

Before an organization has the opportunity to become matrixed, it is structured divisionally and functionally.

Divisional organizational structure

Divisional organizational structure

A divisional organizational structure is self-contained and is often structured by a product or geography. For example, you allow the product or geography to be self-sufficient. There are several reasons why a company may create a divisional organizational structure. One may be due to regulatory reasons. Suppose the company has several products or services targeting industries regulated by different government agencies. In that case, it will be easier to respond to any new legal requirements if they are self-sufficient. Alternatively, if a company operates in several countries, each country may have different operating conditions (i.e., number of employees, legal entities). Lastly, if market demand shifts, it may be easier to divest from a division because there are not as many operational interconnections between other parts of the company.

Functional organizational structure

Functional organizational structure

A functional organizational structure is a way to organize resources that execute similar work. For example, an organization will likely group employees into specific functions: product, sales, marketing, engineering, finance, etc. By creating a functional organizational structure, people can specialize in particular domains. Such a design is typically the first type of organizational structure that any company forms.

Advantages of a matrix organizational structure

Matrix organizational structures have several advantages for both the organization and the employee. First and foremost, matrix organizations provide both efficiency and cost savings for the company. Matrix organizational structures require employees in support functions to specialize and support multiple business units, divisions, products, or geographies. The company no longer has to hire multiple employees to do the same work.

At the same time, employees have more job security because they support multiple stakeholders across the organization. Additionally, employees are provided with opportunities to learn new skills because they are required to support cross-functional projects, in addition to their day-to-day work.

Disadvantages of a matrix organizational structure

Matrix organizational structures offer several advantages; however, they typically pose many more challenges. Going back to a Harvard Business Review article in 1978, Stanley M. Davis and Paul R. Lawrence discuss the Problems of Matrix Organizations. In writing, the authors advise managers within matrix organizations to be familiar with nine ills: "tendencies toward anarchy, power struggles, severe groupitis, collapse during economic crunch, excessive overhead, sinking to lower levels, uncontrolled layering, navel-gazing, and decision strangulation."

The same nine challenges that were discussed in 1978 hold today. Then, as is now, the root cause of any challenge in a matrix organization is having more than one boss. Almost all challenges that arise in a matrix organization revolve around two key themes:

Decision-making authority

The first major disadvantage of matrix organizations is that when conflict arises, it is unclear who has the higher power to make a decision. In other words, who has the "trump card." For example, let's say that you are working on a  strategic initiative made up of a cross-functional team. You're working with five separate business units on developing a new product that will replace one product from each of the five business units. Product development is expected to cost $10 million. While all five business units will share the revenue equally, only one business unit's engineering team will develop the new product.

As a result, there is a conflict on how the expenses should be allocated amongst the five business units. Only one business unit will be responsible for product development. Each business unit wants the revenue, but not one business unit wants the cost. In order to resolve this conflict, you need to have one senior leader who can decide on cost-sharing for all five business units.

Prioritizing tasks

The second major con of matrix organizations is that when a scheduling conflict arises, there needs to be a mechanism, or a senior leader, who can prioritize the workload. For example, let's say you have three different supervisors, all of whom work in other groups. Each supervisor expects you to deliver three separate deliverables on the same day. However, you do not have enough capacity to deliver all three at the same time.

Instead of merely telling each supervisor that you cannot deliver the work, you provide them with two separate proposed timelines for when each body of work can be completed. However, each supervisor thinks their work is more important. In order to resolve this conflict, you need to have a senior leader involved that can decide on how your work should be prioritized.

While matrix organizations experience these challenges in good times, the challenges are particularly evident during bad times. However, no matter the timing, it is imperative that decision-making authority and the prioritization of work be clearly outlined. As you can imagine, there is a precise balancing act that needs to occur when working in matrix organizations because everyone believes their work is a priority.

Making matrix management work

Planning and executing projects in a matrix organizational structure is extremely difficult, but TrueNxus can help you. TrueNxus will be your single source of truth where you can instill project management best practices. With TrueNxus, you and your organization will be able to align cross-functional teams on leadership, goals, objectives, and communication. Not to mention, everyone will be aligned with real-time access to where things stand in cross-functional projects.

Below are several features on how TrueNxus can ensure matrix organizations work.

1. Project charter

Project charter illustration

Leverage OKR and create a project charter. You can ensure the successful execution of projects in a matrix organizational structure by documenting and aligning on the project's objectives, benefits, and risks from the very beginning.

2. Personalized views

Personalized views illustration

Every business function specializes in a specific domain and, as such, thinks about project management differently. To ensure the successful execution of cross-functional projects in matrix organizations, you need project management software that provides personalized views. These views need to be in sync as well.

TrueNxus provides you with the following views:

List

Project plan list

A list is a table that allows you to manage your project plan easily. Organize the work into groups such as workstreams, or any logical way to categorize tasks.

Timeline

Timeline, or Gantt-chart

Visualize the project as a Timeline, a Gantt chart like view that lets you understand how the entire project fits together. Make updates to the project plan through an interactive interface.

3. Automated project status reports

Project status report

We understand that each team member is busy balancing multiple priorities. Therefore, TrueNxus helps successfully execute projects in a matrix organizational structure by automatically analyzing the project health in real-time, giving senior leadership and the team the insights they need to make decisions and move the ball forward.

4. My Work

My Work view all of your work in one place

Another essential thing in projects being executed in matrix organizations is understanding what you're on the hook for delivering. With TrueNxus, you can view every task and every dependency that is important to you, across every cross-functional project, in one location, ensuring success.

5. Dependencies

Dependencies

Additionally, we know that you don't want to let your colleagues down or be let down. You can ensure the successful delivery of projects in a matrix organizational structure through collaboration and documenting task dependencies. By doing so, you can be accountable when others rely on you. You can understand dependent tasks, change implications, and adjust course as needed.

6. Automated notifications

Automated workflows - notifications

You can also successfully execute projects in matrix organizations by using project management software, where you get notified when changes occur. With TrueNxus's 20+ out-of-the-box automated notifications, you will have the transparency you need to stay in-the-know.

7. Comments

Cross-functional collaboration by comments

Lastly, the entire cross-functional team can ensure projects in a matrix organizational structure are successful by collaborating directly in the app. With TrueNxus, you and colleagues, and guests can communicate with one another directly in tasks.

TrueNxus has everything you and your company need to plan and execute projects in matrix organizations successfully.

See for yourself, and sign up for a free trial today (no credit card needed).