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Matrix Organizational Structure: Advantages, Disadvantages & Examples

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Taught by

Carol Woods

Carol has taught college Finance, Accounting, Management and Business courses and has a MBA in Finance.

A matrix organizational structure is one of the most complicated reporting structures a company can implement. Read on to learn why a company might implement a matrix structure, and the advantages and disadvantages for both company and staff.

What Is a Matrix Organizational Structure?

Matrix organizational structure

A matrix organizational structure is a company structure in which the reporting relationships are set up as a grid, or matrix, rather than in the traditional hierarchy. In other words, employees have dual reporting relationships - generally to both a functional manager and a product manager.

Examples of Matrix Organizational Structures

In the 1970s, Philips, a Dutch multinational electronics company, set up matrix management with its managers reporting to both a geographical manager and a product division manager. Many other large corporations, including Caterpillar Tractor, Hughes Aircraft, and Texas Instruments, also set up reporting along both functional and project lines around that time.

Advantages

In a matrix organization, instead of choosing between lining up staff along functional, geographic or product lines, management has both. Staffers report to a functional manager who can help with skills and help prioritize and review work, and to a product line manager who sets direction on product offerings by the company. This structure has some advantages:

  • Resources can be used efficiently, since experts and equipment can be shared across projects.
  • Products and projects are formally coordinated across functional departments.
  • Information flows both across and up through the organization.
  • Employees are in contact with many people, which helps with sharing of information and can speed the decision process.
  • Staffers have to work autonomously and do some self-management between their competing bosses; this can enhance motivation and decision making in employees who enjoy it.

Disadvantages

The matrix structure is generally considered the toughest organizational form to work in, due to the conflicting pulls on resources. The overlaps can lead to turf battles, and difficulty in determining accountability. The major disadvantages of a matrix structure are:

  • Staffers have to make their own decisions about work prioritization when their two managers have given them competing priorities.
  • It can be difficult to determine who is responsible for operating financial results, and the dual reporting relationships make cost accounting difficult.
  • The additional layer of overhead caused by the second set of managers increases costs.
  • The frequent changes in reporting relationships as product priorities change and staffers are assigned to new products can be difficult for staff. These changes can disrupt working relationships, and lead to start-up losses as working relationships are redefined.
  • The overlapping reporting relationships can lead to power struggles for resources. There may also be delayed reaction time when responding to market changes due to the number of people who have to be involved in the decision.

Summary

The matrix organizational structure arose from companies looking for a way to meet their needs in terms both of functional support and product focus. In this structure, most team members have two bosses - one a functional or geographic manager, and the other a product or business line manager. There are advantages in terms of efficient use of resources across products and communication moving in multiple directions across the organization, but a potential big disadvantage is that employees have to manage competing priorities from two different chains of command.

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