matrix-organizational-structure

Matrix Organizational Structure In A Nutshell

A matrix organizational structure generally describes a business with multiple managerial accountability and responsibility. The main types of matrix structures comprise the strong matrix (authority lies with a project manager who has a senior role within the company), balanced matrix (it equally distributes power to both the project and functional manager), and weak matrix (where power lies with the functional manager completely).

Structure TypeType of StructureStructure DetailsAdvantagesDrawbacks
Functional StructureBureaucraticOrganized by functions or departments (e.g., marketing, finance, and production). Advantages include specialization and efficiency within functions, but it may hinder cross-functional collaboration.– Specialization and efficiency within functions. – Clear lines of authority.– Limited cross-functional collaboration. – May hinder innovation and adaptability.
Divisional StructureDivisionalOrganized by divisions or business units, each with its own resources and functions. It allows for autonomy but may result in duplication of resources.– Autonomy for divisions. – Tailored approach to diverse markets.– Potential duplication of resources. – May hinder coordination between divisions.
Matrix StructureDual ReportingCombines elements of functional and divisional structures. Employees report to both functional and project or product managers. Offers flexibility but can lead to complex reporting relationships.– Flexibility to work on multiple projects or products. – Efficient resource utilization.– Complex reporting relationships. – Potential for conflicts and role ambiguity.
Network StructureCollaborativeCollaborative and flexible, emphasizing partnerships and alliances with external organizations. Accesses external resources and expertise but can be complex to manage relationships.– Access to external resources and expertise. – Efficient knowledge sharing.– Complex management of external relationships. – Dependency on external partners.
Hybrid StructureCombinationCombines different organizational structures to meet specific needs. Offers flexibility and efficiency but can be complex to manage.– Flexibility to adapt to different areas of the organization.– Complexity in managing different structural components. – Conflicts between elements.
Holacracy StructureSelf-ManagementDecentralized and focused on self-management. Replaces traditional hierarchies with self-managed teams or circles. Enhances employee empowerment and autonomy but requires a cultural shift.– Enhanced employee empowerment and autonomy. – Faster decision-making at the team level.– Cultural shift and commitment to self-management principles required. – Role ambiguity possible. – Not suitable for all organizations.
Team-Based StructureCollaborativeEmphasizes self-managed teams responsible for specific tasks or projects. Enhances teamwork and collaboration but requires skilled team leadership.– Enhanced collaboration and teamwork. – Empowerment of team members.– Requires skilled team leadership. – Potential for team conflicts. – May not suit all organizational functions.
Circular StructureCircularityOrganized around circular, self-managing teams known as “circles.” Promotes empowerment and adaptability at the circle level but requires a shift in organizational culture.– Empowerment of circle members. – Flexibility and adaptability at the circle level. – Enhanced communication and collaboration.– Requires a shift in organizational culture and mindset. – Potential challenges in managing inter-circle relationships. – May not fit all contexts.
Flat StructureReduced HierarchyReduces the number of hierarchical levels. Enhances communication and decision-making speed but may lack clear career advancement paths.– Enhanced communication and decision-making speed.– May lack clear career advancement paths. – Potential for limited hierarchy-related specialization.
Tall StructureMultiple Hierarchy LevelsHas multiple hierarchical levels. Provides clear career paths but can result in slow decision-making and communication.– Provides clear career paths. – Specialization and expertise at different levels.– May result in slow decision-making and communication. – Potential for bureaucracy.
Centralized StructureConcentrated AuthorityConcentrates decision-making authority at the top of the hierarchy. Ensures consistency and control but may hinder adaptability.– Ensures consistency and control. – Clear lines of authority.– May hinder adaptability and innovation. – Potential for bureaucracy.
Decentralized StructureDistributed AuthorityDistributes decision-making authority across the organization. Enhances adaptability and innovation but requires strong communication and coordination.– Enhances adaptability and innovation. – Empowers employees at various levels.– Requires strong communication and coordination. – Potential for confusion without clear guidelines.
Virtual or Networked StructureTechnology-DrivenEmploys technology to connect employees across locations. Reduces the need for physical offices but may challenge traditional management practices.– Reduces the need for physical offices. – Enables remote work and collaboration.– May challenge traditional management practices. – Requires effective use of technology.
Boundaryless StructureElimination of BoundariesEliminates traditional boundaries within and outside the organization. Promotes innovation and collaboration but requires a culture of trust and transparency.– Promotes innovation and collaboration. – Encourages a culture of trust and transparency.– Requires a significant cultural shift. – May face resistance to boundary elimination.
Lean StructureStreamlined and EfficientEmphasizes efficiency and cost reduction by eliminating unnecessary layers and processes. Increases efficiency but may strain resources.– Increases efficiency and cost-effectiveness. – Streamlines processes.– May strain resources in the pursuit of efficiency. – Potential for overemphasis on cost reduction at the expense of other factors.
Mechanistic StructureRigid HierarchyCharacterized by a rigid hierarchy and strict control. Ensures clear lines of authority but may hinder adaptability.– Ensures clear lines of authority. – Efficient decision-making within established processes.– May hinder adaptability and innovation. – Potential for bureaucracy and slow decision-making.
Organic StructureFlexible and DecentralizedFlexible and adaptable, with decentralized decision-making. Encourages innovation but may lead to ambiguity in roles and responsibilities.– Encourages innovation and adaptability. – Empowers employees to make decisions.– May lead to ambiguity in roles and responsibilities. – Requires strong communication and coordination.
M-Form (Multidivisional) StructureDivisional and AutonomousDivides the organization into semi-autonomous divisions or subsidiaries, each with its own leadership. Suitable for complex organizations but may require effective corporate-level coordination.– Provides autonomy to divisions or subsidiaries. – Tailored approach to diverse markets. – Specialization within divisions.– Requires effective corporate-level coordination. – May lead to variations in strategies and practices across divisions.

Understanding a matrix organizational structure

There are no set guidelines for a matrix organizational structure. This is because the matrix structure is simply a combination of two or more structure types to give each more balance.

As a result, a business can create a matrix structure according to its particular needs and the industry it operates in.

Nevertheless, most organizations using this structure incorporates two chains of command.

One manages functional activities while the other is tasked with managing projects, products, or clients. It’s important to note that these roles are fluid and the balance of power between each manager is not organizationally defined.

Rather than one project manager overseeing every aspect of a project, employees report to two or more managers. This arrangement is often useful when skills need to be shared across departments to complete a task.

Three types of matrix structures

The matrix organizational structure can be divided into three types:

Strong matrix

Where authority lies with a project manager who has a senior role within the company.

With control over resources and distribution of tasks, the project manager may have more power than the functional manager.

Balanced matrix

As the name suggests, the balanced matrix equally distributes power to both the project and functional manager.

Employees report to the project manager who in turn reports to the functional manager to ensure accountability.

Weak matrix

Where power lies with the functional manager completely. In this scenario, the project manager has a role better defined as a project coordinator or expeditor.

They act as a facilitator between the customer and the project team and can only institute minor project management directives.

Advantages and disadvantages of the matrix organizational structure

Advantages

  • Enhanced communication – with none of the communication barriers seen in a purely hierarchical structure, communication between departments is fluid and collaborative. Large and diverse companies featuring many functional units can collectively work toward a shared goal.
  • Employment development – employees working under a matrix structure are exposed to new methods and ways of thinking. This helps them push the boundaries of their comfort zones to further personal and organizational objectives.

Disadvantages

  • Lack of effectiveness. Large companies may suffer from organizational bloating, where a surplus of managerial and administrative roles combined with more points of communication may decrease productivity. The decision to combine various organizational structures may instead dilute the benefits each structure brings in isolation.
  • Disharmony. Cross-functional working under a matrix structure does not always succeed. Teams can lose their best talent to other teams or departments indefinitely, causing further productivity losses and a decrease in morale. In some cases, employees returning to their teams after an unsuccessful stint elsewhere may have trouble re-integrating.

Key Highlights

  • Matrix Organizational Structure Defined:
    • Involves multiple managerial accountability and responsibility.
    • Combines two or more structure types to create balance based on the organization’s needs and industry.
    • Features two chains of command: functional managers and project managers.
  • Three Types of Matrix Structures:
    • Strong Matrix: Authority lies with a project manager with a senior role, controlling resources and tasks more than the functional manager.
    • Balanced Matrix: Power is equally distributed between project and functional managers. Employees report to the project manager, who reports to the functional manager.
    • Weak Matrix: Functional manager holds complete power, and the project manager acts as a coordinator or expeditor between the customer and project team.
  • Advantages of Matrix Structures:
    • Enhanced Communication: Fluid and collaborative communication between departments.
    • Employee Development: Exposure to new methods and thinking, pushing personal and organizational boundaries.
  • Disadvantages of Matrix Structures:
    • Lack of Effectiveness: Organizational bloating and decreased productivity due to excessive managerial roles and communication points.
    • Disharmony: Cross-functional work might lead to talent loss, productivity decline, and challenges in re-integration after unsuccessful assignments.
  • Tailored Approach:
    • Matrix structures can be adapted based on the organization’s specific requirements, making it a versatile option.
  • Communication and Collaboration:
    • Matrix structures promote communication fluidity and collaboration across diverse departments.
  • Employee Growth and Adaptation:
    • Exposure to different roles and perspectives encourages personal and organizational growth.
  • Complexity and Challenges:
    • The complexity of matrix structures can lead to issues such as organizational bloat and disharmony.

Types of Organizational Structures

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Organizational Structures

Siloed Organizational Structures

Functional

functional-organizational-structure
In a functional organizational structure, groups and teams are organized based on function. Therefore, this organization follows a top-down structure, where most decision flows from top management to bottom. Thus, the bottom of the organization mostly follows the strategy detailed by the top of the organization.

Divisional

divisional-organizational-structure

Open Organizational Structures

Matrix

matrix-organizational-structure

Flat

flat-organizational-structure
In a flat organizational structure, there is little to no middle management between employees and executives. Therefore it reduces the space between employees and executives to enable an effective communication flow within the organization, thus being faster and leaner.

Connected Business Frameworks

Portfolio Management

project-portfolio-matrix
Project portfolio management (PPM) is a systematic approach to selecting and managing a collection of projects aligned with organizational objectives. That is a business process of managing multiple projects which can be identified, prioritized, and managed within the organization. PPM helps organizations optimize their investments by allocating resources efficiently across all initiatives.

Kotter’s 8-Step Change Model

kotters-8-step-change-model
Harvard Business School professor Dr. John Kotter has been a thought-leader on organizational change, and he developed Kotter’s 8-step change model, which helps business managers deal with organizational change. Kotter created the 8-step model to drive organizational transformation.

Nadler-Tushman Congruence Model

nadler-tushman-congruence-model
The Nadler-Tushman Congruence Model was created by David Nadler and Michael Tushman at Columbia University. The Nadler-Tushman Congruence Model is a diagnostic tool that identifies problem areas within a company. In the context of business, congruence occurs when the goals of different people or interest groups coincide.

McKinsey’s Seven Degrees of Freedom

mckinseys-seven-degrees
McKinsey’s Seven Degrees of Freedom for Growth is a strategy tool. Developed by partners at McKinsey and Company, the tool helps businesses understand which opportunities will contribute to expansion, and therefore it helps to prioritize those initiatives.

Mintzberg’s 5Ps

5ps-of-strategy
Mintzberg’s 5Ps of Strategy is a strategy development model that examines five different perspectives (plan, ploy, pattern, position, perspective) to develop a successful business strategy. A sixth perspective has been developed over the years, called Practice, which was created to help businesses execute their strategies.

COSO Framework

coso-framework
The COSO framework is a means of designing, implementing, and evaluating control within an organization. The COSO framework’s five components are control environment, risk assessment, control activities, information and communication, and monitoring activities. As a fraud risk management tool, businesses can design, implement, and evaluate internal control procedures.

TOWS Matrix

tows-matrix
The TOWS Matrix is an acronym for Threats, Opportunities, Weaknesses, and Strengths. The matrix is a variation on the SWOT Analysis, and it seeks to address criticisms of the SWOT Analysis regarding its inability to show relationships between the various categories.

Lewin’s Change Management

lewins-change-management-model
Lewin’s change management model helps businesses manage the uncertainty and resistance associated with change. Kurt Lewin, one of the first academics to focus his research on group dynamics, developed a three-stage model. He proposed that the behavior of individuals happened as a function of group behavior.

Organizational Structure Case Studies

OpenAI Organizational Structure

openai-organizational-structure
OpenAI is an artificial intelligence research laboratory that transitioned into a for-profit organization in 2019. The corporate structure is organized around two entities: OpenAI, Inc., which is a single-member Delaware LLC controlled by OpenAI non-profit, And OpenAI LP, which is a capped, for-profit organization. The OpenAI LP is governed by the board of OpenAI, Inc (the foundation), which acts as a General Partner. At the same time, Limited Partners comprise employees of the LP, some of the board members, and other investors like Reid Hoffman’s charitable foundation, Khosla Ventures, and Microsoft, the leading investor in the LP.

Airbnb Organizational Structure

airbnb-organizational-structure
Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.

Amazon Organizational Structure

amazon-organizational-structure
The Amazon organizational structure is predominantly hierarchical with elements of function-based structure and geographic divisions. While Amazon started as a lean, flat organization in its early years, it transitioned into a hierarchical organization with its jobs and functions clearly defined as it scaled.

Apple Organizational Structure

apple-organizational-structure
Apple has a traditional hierarchical structure with product-based grouping and some collaboration between divisions.

Coca-Cola Organizational Structure

coca-cola-organizational-structure
The Coca-Cola Company has a somewhat complex matrix organizational structure with geographic divisions, product divisions, business-type units, and functional groups.

Costco Organizational Structure

costco-organizational-structure
Costco has a matrix organizational structure, which can simply be defined as any structure that combines two or more different types. In this case, a predominant functional structure exists with a more secondary divisional structure. Costco’s geographic divisions reflect its strong presence in the United States combined with its expanding global presence. There are six divisions in the country alone to reflect its standing as the source of most company revenue. Compared to competitor Walmart, for example, Costco takes more a decentralized approach to management, decision-making, and autonomy. This allows the company’s stores and divisions to more flexibly respond to local market conditions.

Dell Organizational Structure

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Dell has a functional organizational structure with some degree of decentralization. This means functional departments share information, contribute ideas to the success of the organization and have some degree of decision-making power.

eBay Organizational Structure

ebay-organizational-structure
eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.

Facebook Organizational Structure

facebook-organizational-structure
Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams are based on the main corporate functions (like HR, product management, investor relations, and so on).

Goldman Sachs’ Organizational Structure

goldman-sacks-organizational-structures
Goldman Sachs has a hierarchical structure with a clear chain of command and defined career advancement process. The structure is also underpinned by business-type divisions and function-based groups.

Google Organizational Structure

google-organizational-structure
Google (Alphabet) has a cross-functional (team-based) organizational structure known as a matrix structure with some degree of flatness. Over the years, as the company scaled and it became a tech giant, its organizational structure is morphing more into a centralized organization.

IBM Organizational Structure

ibm-organizational-structure
IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.

McDonald’s Organizational Structure

mcdonald-organizational-structure
McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.

McKinsey Organizational Structure

mckinsey-organizational-structure
McKinsey & Company has a decentralized organizational structure with mostly self-managing offices, committees, and employees. There are also functional groups and geographic divisions with proprietary names.

Microsoft Organizational Structure

microsoft-organizational-structure
Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time it also became more hierarchical, however still keeping its hybrid approach between functions, engineering groups, and management.

Nestlé Organizational Structure

nestle-organizational-structure
Nestlé has a geographical divisional structure with operations segmented into five key regions. For many years, Swiss multinational food and drink company Nestlé had a complex and decentralized matrix organizational structure where its numerous brands and subsidiaries were free to operate autonomously.

Nike Organizational Structure

nike-organizational-structure
Nike has a matrix organizational structure incorporating geographic divisions. Nike’s matrix structure is also present at the regional and sub-regional levels. Managerial responsibility is segmented according to business unit (apparel, footwear, and equipment) and function (human resources, finance, marketing, sales, and operations).

Patagonia Organizational Structure

patagonia-organizational-structure
Patagonia has a particular organizational structure, where its founder, Chouinard, disposed of the company’s ownership in the hands of two non-profits. The Patagonia Purpose Trust, holding 100% of the voting stocks, is in charge of defining the company’s strategic direction. And the Holdfast Collective, a non-profit, holds 100% of non-voting stocks, aiming to re-invest the brand’s dividends into environmental causes.

Samsung Organizational Structure

samsung-organizational-structure (1)
Samsung has a product-type divisional organizational structure where products determine how resources and business operations are categorized. The main resources around which Samsung’s corporate structure is organized are consumer electronics, IT, and device solutions. In addition, Samsung leadership functions are organized around a few career levels grades, based on experience (assistant, professional, senior professional, and principal professional).

Sony Organizational Structure

sony-organizational-structure
Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.

Starbucks Organizational Structure

starbucks-organizational-structure
Starbucks follows a matrix organizational structure with a combination of vertical and horizontal structures. It is characterized by multiple, overlapping chains of command and divisions.

Tesla Organizational Structure

tesla-organizational-structure
Tesla is characterized by a functional organizational structure with aspects of a hierarchical structure. Tesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.

Toyota Organizational Structure

toyota-organizational-structure
Toyota has a divisional organizational structure where business operations are centered around the market, product, and geographic groups. Therefore, Toyota organizes its corporate structure around global hierarchies (most strategic decisions come from Japan’s headquarter), product-based divisions (where the organization is broken down, based on each product line), and geographical divisions (according to the geographical areas under management).

Walmart Organizational Structure

walmart-organizational-structure
Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.

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