Matrix management is a technique of managing an organization (or, more

commonly, part of an organization) through a series of dual-reporting relationships

instead of a more traditional linear management structure. In contrast to most
other organizational structures, which arrange managers and employees by
function or product, matrix management combines functional and product
departments in a dual authority system. In its simplest form, a matrix configuration
may be known as a cross-functional work team, which brings together individuals
who report to different parts of the company in order to complete a particular
project or task. The term "matrix" is derived from the representative diagram of a
matrix management system, which resembles a rectangular array or grid of
functions and product/project groups.
The practice is most associated with highly collaborative and complex projects, such
as building aircraft, but is also widely used in many product/project management
situations. Even when a company does not label its structure a matrix system or
represent it as such on an organization chart, there may be an implicit matrix
structure any time employees are grouped into work teams (this does not normally
include committees, task forces, and the like) that are headed by someone other
than their primary supervisor.
NEW ORGANIZATIONAL MODELS
In the late 1800s and early 1900s, during the U.S. industrial revolution, a need
emerged for more formalized structures in large business organizations. The earliest
models emphasized efficiency of process through managerial control. Described as
"mechanistic," those systems were characterized by extensive rules and
procedures, centralized authority, and an acute division of labor. They sought to
create organizations that mimicked machines, and usually departmentalized
workers by function, such as finance and production. Important theories during that
era included German sociologist Max Weber's (1881-1961) ideal bureaucracy, which
was based on absolute authority, logic, and order.
During the 1920s and 1930s, new ideas about the structure and nature of
organizations began to surface. Inspired by the work of thinkers
and behaviorists such as Harvard researcher Elton Mayo, who conducted the
famed Hawthorne Experiments, theories about management structure began to
incorporate a more humanistic view. Those theoretical organizational structures
were classified as "organic," and recognized the importance of human behavior and
cultural influences in organizations. While the mechanistic school of thought
stressed efficiency and production through control, organic models emphasized
flexibility and adaptability through employee empowerment. From a structural
standpoint, mechanistic organizations tended to be vertical or hierarchical with
decisions flowing down through several channels. Organic models, on the other
hand, were comparatively flat, or horizontal, and had few managerial levels or
centralized controls.
Many proponents of organic organizational theory believed it was the solution to
the drawbacks of mechanistic organizations. Indeed, mechanistic organizations
often stifled human creativity and motivation and were generally insensitive to
external influences, such as shifting markets or consumer needs. In contrast,
companies that used organic management structures tended to be more responsive
and creative. However, many organizations that adopted the organic approach also
discovered that, among other drawbacks, it sometimes lacked efficiency and
personal accountability and failed to make the most productive use of some
workers' expertise.
As an alternative to basic organic structures, many companies during the mid-1900s
embraced a model that minimized the faults and maximized the benefits of
different organic management structures, as discussed below. Possibly the first
application of what would later be referred to as the "matrix" structure was
employed in 1947 by General Chemicals in its engineering department. In the early
1960s a more formalized matrix method called "unit management" was
implemented by a large number of U.S. hospitals. Not until 1965, however, was
matrix management formally recognized.
The first organization to design and implement a formal matrix structure was the
National Aeronautics and Space Administration (NASA). NASA developed a matrix
management system for its space program because it needed to simultaneously
emphasize several different functions and projects, none of which could be stressed
at the expense of another. It found that traditional management structures were
too bureaucratic, hierarchical, slow-moving, and inflexible. Likewise, basic organic
structures were too departmentalized (i.e. myopic), thus failing to productively use
the far-reaching expertise NASA had at its disposal. NASA's matrix solution
overcame those problems by synthesizing projects, such as designing a rocket
booster, with organizational functions, such as staffing and finance.
Despite doubts about its effectiveness in many applications, matrix management
gained broad acceptance in the corporate world during the 1970s, eventually
achieving fad status. Its popularity continued during the 1980s as a result of
economic changes in the United States, which included slowing domestic market
growth and increasing foreign competition. Those changes forced many companies
to seek the benefits offered by the matrix model.
MATRIX BASICS
FUNCTIONAL ORGANIZATION.
Most organizational structures departmentalize the work force and other resources
by one of two methods: by products or by functions. Functional organizations are
segmented by key functions. For example, activities related to production,
marketing, and finance might be grouped into three respective divisions. Within
each division, moreover, activities would be departmentalized into
subdepartments. The marketing division, for example, might encompass sales,
advertising, and promotion departments.
The chief advantage of functionally structured organizations is that they usually
achieve a fairly efficient specialization of labor and are relatively easy for employees
to comprehend. In addition, functional structures reduce duplication of work
because responsibilities are clearly defined on a company-wide basis. However,
functional division often causes departments to become short-sighted and
provincial, leading to incompatible work styles and poor communication.
DIVISIONAL ORGANIZATION.
Companies that employ a product or divisional structure, by contrast, break the
organization down into semiautonomous units and profit centers based on
activities, or "projects," such as products, customers, or geography. Regardless of
the project used to segment the company, each unit operates as a separate
business. For example, a company might be broken down into southern, western,
and eastern divisions. Or, it might create separate divisions for consumer, industrial,
and institutional products. Again, within each product unit are subdivisions.
One benefit of product or project departmentalization is that it facilitates expansion
(because the company can easily add a new division to focus on a new profit
opportunity without having to significantly alter existing systems). In addition,
accountability is increased because divisional performance can be measured more
easily. Furthermore, divisional structures permit decentralized decision making,
which allows managers with specific expertise to make key decisions in their area.
The potential drawbacks to divisional structures include duplication of efforts in
different departments and a lack of horizontal communication. In addition,
divisional organizations, like functionally structured companies, may have trouble
keeping all departments focused on an overall company goal.
MATRIX ORGANIZATION.
Matrix management structures combine functional and product
departmentalization. They simultaneously organize part of a company along
product or project lines and part of it around functional lines to get the advantages
of both. For example, a diagram of a matrix model might show divisions, such as
different product groups, along the top of a table (See Figure 1). Along the left side
of the same table would be different functional departments, such as finance,
marketing, and production. Within the matrix, each of the product groups would
intersect with each of the functional groups, signifying a direct relationship
between product teams and administrative divisions. In other words, each team of
people assigned to manage a product group might have an individual(s) who also
belonged to each of the functional departments, and vice-versa.
Theoretically, managers of project groups and managers of functional groups have
roughly equal authority within the company. As indicated by the matrix, many
employees report to at least two managers. For instance, a member of the
accounting department might be assigned to work with the consumer products
division, and would report to managers of both departments. Generally, however,
managers of functional areas and divisions report to a single authority, such as a
president or vice president.
Although all matrix structures entail some form of dual authority and
multidisciplinary grouping, there are several variations. For example, Kenneth
Knight identified three basic matrix management models: coordination, overlay,
and secondment. Each of the models can be implemented in various forms that
differ in attributes related to decision-making roles, relationships with outside
suppliers and buyers, and other factors. Organizations choose different models
based on such factors as competitive environments, industries, education and
maturity level of the workforce, and existing corporate culture.
In the coordination model, staff members remains part of their original
departments (or the departments they would most likely belong to under a
functional or product structure). Procedures are instituted to ensure cross-
departmental cooperation and interaction towards the achievement of extra-
departmental goals. In the overlay model, staff members officially become
members of two groups, each of which has a separate manager. This model
represents the undiluted matrix form described above. In the third version, the
secondment model, individuals move from functional departments into project
groups and back again, but may effectively belong to one or the other at different
times.

Figure 1
Matrix Organizational Structure

TEMPORARY VERSUS PERMANENT.
As these examples and models suggest, matrix structures are more likely than other
structures to exist on a temporary or ad hoc basis. Indeed, some scholars group
matrix structures under a broader category of organizational forms called
"adhocracies," or temporary work configurations, created to deal with a particular
problem or project. Large-scale use of adhocracies dates to U.S. military practices
during World War II, when the war effort required flexible teams of experts to be
convened on short notice and delegated certain tasks, often without a great deal of
micromanagement by military brass. Once the objectives were reached, the team
would be disbanded and the members reassigned to other duties. A similar
rationale and process exist in the business world, and thus many formal matrix
structures fall into the ad hoc category.
Permanent matrix structures are centered on more enduring aspects of business
operations, such as product lines or processes. A common practice is to have a
product or brand manager who is responsible for overseeing the development and
production of an ongoing product, but staff who work on the product may also
contribute to other products from time to time. This permanent set-up creates
accountability, coordination, and perhaps most of all, continuity for the product as
a whole, while enabling staff, who generally have a direct supervisor who is not a
product manager, to be flexibly assigned where they are needed most.
ADVANTAGES, DISADVANTAGES, AND
APPLICATIONS
ADVANTAGES.
The cardinal advantage of a matrix structure is that it facilitates rapid response to
change in two or more environments. For instance, a telecommunications company
might be extremely concerned about both unforeseen geographic opportunities
and limited capital. By departmentalizing its company with the financial function on
one axis and the geographic areas on the other, it might benefit from having each
of its geographic units intertwined with its finance department. For example,
suppose that an opportunity to purchase the cellular telephone rights for a specific
area arose. The matrix structure would allow the company to quickly determine if it
had the capital necessary to purchase the license and develop the area, or if it
should take advantage of an opportunity in another region.
Matrix structures are flatter and more responsive than other types of structures
because they permit more efficient exchanges of information. Because people from
different departments are cooperating so closely, they are eager to share data that
will help them achieve common goals. In effect, the entire organization becomes an
information web; data is channeled both vertically and horizontally as people
exchange technical knowledge, marketing data, product ideas, financial information
to make decisions.
In addition to speed and flexibility, matrix organization may result in a more
efficient use of resources than other organic structures. This occurs because highly
specialized employees and equipment are shared by departments. For example, if
the expertise of a computer programmer is needed in another department, he or
she can move to that department to solve its problems, rather than languishing on
tasks of low priority as might happen in a nonmatrix setting.
Other benefits of matrix management include improved motivation and more adept
managers. Improved motivation results from decision-making within groups
becoming more democratic and participatory because each member brings
specialized knowledge to the tableand since employees have a direct impact on
day-to-day decisions, they are more likely to experience higher levels of motivation
and commitment to the goals of the departments to which they belong. More
adept management is the result of top decision makers becoming more involved in,
and thus better informed about, the day-to-day operations of the company. This
involvement can also lead to improved long-term planning.
DISADVANTAGES.
Despite their many theoretical advantages, matrix management structures have
been criticized as having a number of weaknesses. For instance, they are typically
expensive to maintain, partly because of more complex reporting requirements. In
addition, many workers become disturbed by the lack of a chain of command and a
seeming inability to perceive who is in charge. Indeed, among the most common
criticisms of matrix management is that it results in role ambiguity and conflict. For
instance, a functional manager may tell a subordinate one thing, and then a
product/project boss will tell him or her something different. As a result, companies
that change from a comparatively bureaucratic structure to matrix management
often experience high turnover and worker dissatisfaction.
Supporting critics' derision of matrix management are several examples of
companies that have implemented and later abandoned matrix structures. For
example, one study showed that between 1961 and 1978 about one-quarter of all
teaching hospitals in the United States moved to unit or matrix management
structures. By the late 1970s, though, nearly one-third of those hospitals had
rejected the concept, citing reasons such as high costs, excessive turnover, and
interpersonal conflict. Although the hospital study suggested that matrix
management was better suited to larger organizations, General Motors Corp.'s
experience indicated otherwise. After a seven-year test of a matrix structure, GM
jettisoned matrix management in the 1980s in favor of a more traditional, product
oriented organizational structure. It cited managers' lack of control over incentives
as a primary shortcoming of the matrix system.
Although matrix management was often viewed during the 1970s as a cure-all for
organizational design, the perceived breadth of its potential for application has
gradually diminished. In general, matrix structures are assumed to be most
appropriate for larger corporations that operate in unique or fast-paced
environments; a coal-mining company, for example, might be less likely to benefit
from a matrix structure than would a pharmaceutical company. Matrix
management also works best for organizations that are managed and staffed
mostly by professionals or semi-professionals, e.g., engineers and scientists. Matrix
management further requires a workforce that has a diverse set of skills and
employees that have strong interpersonal abilities. Finally, matrix management is
usually more effective when a project manager, who is technically working under
the authority of a product and a functional boss, is given the authority to make
critical decisions.
Because of their limitations, matrix management structures frequently are
integrated into an organization as one facet of a larger plan. For example, a
research team organized to develop a new product might be placed in a division of
the company that is set up as a matrix. After the initial stages of the project are
completed, the ongoing management of the product might be moved to a division
of the company that reflects a more conventional functional or product/project
structure. Indeed, as evidenced by NASA's successes in the 1960s, matrix
management is particularly effective in accomplishing "crash" and high-tech
projects, such as those related to medical, energy research, aerospace, defense,
and competitive threats.
MATRIX STRUCTURE IN
INTERNATIONAL SETTINGS
A special and popular application of matrix management is in the overseas
operations of an international firm. This is sometimes known as a three dimensional
matrix when management intersects along product/market, function, and country
lines. Under such an arrangement there is typically a worldwide product manager, a
local or worldwide functional manager, and a country specific manager; however,
many variations of the international matrix exist. The product manager is generally
concerned with product-specific issues that cut across regional or national
boundaries. Depending on the type of task and the company's preference, the
functional manager may focus on international issues (e.g., worldwide finance) or
local concerns (e.g., domestic finance). Finally, the country manager is concerned
with all the implicationsboth product and functionof producing and/or
marketing the goods or services in a particular locale.
As with other uses of the matrix structure, the international format is not without
its weaknesses. A particular concern is the role of ambiguity across international
lines, and especially when it pits managers of different nationalities against one
another. If the system is not handled carefully and the potential for cultural bias
recognized by top management, it could lead to favoritism of some international
managers while disenfranchising others, thereby defeating the purpose of a matrix
structure. In addition, international matrix structures may be unacceptably
inefficient and costly to maintain.


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