Matrix Organization Structure

Matrix organization is a newly evolving organization structure which has received considerable attention in the developed as well as developing countries. This organization is formed to complete various types of project of specific and unique nature. This is also known as project management structure. It requires diverse technical and administrative experts to adjust efficiently with the dynamic and rapidly changing environment of the business.

The matrix organizational structure superimposes a divisional structure over a functional structure in order to combine the efficiency of the functional approach with the flexibility and responsiveness to change of the divisional approach. Each employee in a matrix unit reports to two bosses – a functional manager and a product or project manager. This means that there are dual lines of authority in the matrix organization.
Matrix Organization Structure
As seen in figure, there is a vertical chain of command for the functions of production, finance, marketing and research and development. There is a lateral chain of command for the three projects. An engineer who is assigned to work in project A will report to both project manager A and the production manager of production department.

A matrix structure is the most complex of all designs because it depends upon both vertical and horizontal flows of authority and communication (hence the term matrix). In contrast, functional and divisional structures depend primarily on vertical flows of authority and communication. A matrix structure can result in higher overhead because of more management positions. Other characteristics of a matrix structure that contribute to overall complexity include dual lines of budget authority (a violation of the unity command principle), dual sources of reward and punishment, shared authority, dual reporting channels, and a need for an extensive and effective communication system. Despite its complexity, the matrix structure is widely used in many industries, including construction, healthcare, research and defense.

Usefulness of Matrix Organization Structure

A matrix structure is useful when the following conditions exist:

  • When there is an external pressure for a dual focus, a matrix structure will be useful. The external pressure in the organization requires focusing organization’s efforts on responding to multiple external factors as well as on internal operations at the same time.
  • When there is pressure for a high information-processing capacity.
  • When there is pressure for sharing resources.

Advantages of Matrix Organization Structure

Some advantages of a matrix structure are as follows:

  1. Environmental Adaptation: Matrix organization has been designed to cope with the complexities of multi-product, multinational organizations. This structure is able to adapt to changes in the environment. Responses to environmental changes are quickly made in this structure.
  2. Sharing Resources: This structure facilitates the proper sharing and utilization of highly specialized staff, equipment and resources. Each project or product unit can share the specialized resource with other units, rather than duplicating it to provide independent service for each.
  3. Professional Identification: The matrix organization provides the professional identification of specialists and professionals based on their specialization and efficiency. Talented specialists can be utilized more efficiently under this structure.
  4. Flexibility: Matrix structure fosters flexibility throughout eh organization. Various skills can be brought together in this type of organization.
  5. Effective Control: The main responsibility of the project manager is to maintain coordination among interrelated factors of a particular project. He has to communicate both with the horizontal and vertical authorities so that the project work can be run smoothly. Similarly, functional managers are responsible for providing technical and administrative guidance to projects. This leads to a better and more effective control over regular operation.
  6. Strategic Thinking: This structure encourages delegation of authority to project managers. They are responsible for regular operation of the project. They have the authority to take decisions related to the day-to-day operation of projects. This provides sufficient time to the top management to strategic thinking such as to make strategic planning and policies rather than operational activities. The initiation and creativity of the top level management are necessary for further development of organizational activities.

Disadvantages of Matrix Organization Structure

Matrix structure has several disadvantages. They are as follows:

  1. Lack of Unity of Command: In matrix structure, subordinates have to follow instructions from more than one superior. Generally, they receive orders from functional managers as well as from project managers. In some cases, subordinates may receive instructions from both the superiors at a time. This structure violates the principle of unity of command.
  2. Costly: This structure increases administrative cost. In this structure, specialists from the project as well as functional authorities involve in project works. It increases paperwork and other information costs. Besides, it is essential to pay lump-sum remuneration to functional and project specialists. Hence, this structure is costly to implement and maintain.
  3. Power Struggle: One of the main problems with the matrix structure is that the project manager and functional manager may not agree on priorities or resource allocations, leading to conflict and power struggle.
  4. Difficulties: Matrix structure requires a high level of interpersonal relations and skill. It is essential to involve both functional and project specialists. Besides, it is essential to maintain a balance among these authorities to bring about uniformity in the organizational performance. In practical field, it is more difficult to maintain a balance among these authorities, especially if they have no positive attitude towards each other.
  5. Slowness in Decisions: Functional and project specialists can shift responsibility for decision making. This delays decisions. Likewise, all decisions may become group decisions, leading to gross inefficiency.

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