The Pros and Cons of Matrix Organizational Structure

Should you switch to a matrix organizational structure? Take a deep dive into the pros and cons

May 16, 2022
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The pros and cons of matrix organizational structure

An organization’s structure has a huge impact on how successful it’s likely to be.

Adopt a structure that’s well suited to your business’s needs and you’ll have a strong foundation to build on. Set your company up the wrong way to handle the challenges ahead, on the other hand, and you’ll be fighting an uphill battle from the word “go”.

For a lot of organizations – especially large ones operating in fast-paced industries – a matrix structure makes the most sense. But before you rip up your org chart and start again, read on for a deep dive into the pros and cons of a matrix organizational structure.

What is a matrix organizational structure?

A matrix structure is a combination of two or more different organizational structures. This makes it the most flexible and adaptable structure a business can adopt, which often makes it a better fit for the demands of modern knowledge work.

If your employees are often tasked with working across different projects and within different departments rather than having a fixed role that’s set in stone, a matrix organization might be right for your business.

What are the 4 types of organizational structures?

Let’s quickly define the other three corporate structures so we can dive in to some concrete examples of what the matrix structure looks like in practice:

Functional structure

Most businesses – especially small-to-medium ones – are organized by function. Their org chart is broken up into departments like marketing, operations, and accounting. Each of these departments has a Director or “Head of” who oversees everyone who operates within that function.

Project structure

Large organizations with dozens or even hundreds of product lines usually adopt a project structure. The Johnson & Johnson’s and Unilever’s of the world organize their employees by product, project, or subsidiary, each of which operates as its own company with its own president.

Flatarchy structure

A lot of start-ups abandon the traditional org chart altogether in favor of a flatarchy. In this structure, employees don’t take top-down commands from higher-ups. Instead, the chain of command is flattened, and each member of the team has autonomy to suggest new initiatives. This allows companies to be agile and implement new product features as fast as possible. 

Matrix structure

A business that adopts a matrix structure by combining functional, project, and flatarchy structures in whichever way makes most sense for their specific needs. 

For example, a large corporation might adopt a project structure, forming a subsidiary around each of the brands under its umbrella. Then it might organize its legacy brands in a functional hierarchy and use a flatarchy for its fledgling brands that have been created to establish a foothold in an emerging industry.

Or a medium-sized business might adopt a traditional, functional structure but create free-floating roles for project managers who have carte blanche to bring in skills from different departments as and when they’re needed.  

What are the characteristics of a matrix organization?

Employees of a matrix organization will often find themselves working within departments they would be an outsider from in a functional organization. For example, a member of the sales team might straddle both outgoing sales calls and incoming customer support on a specific project.

Staff will also often have multiple managers to report to. A member of the marketing team might report to the head of their functional department and the lead on a project they’ve been brought in to help promote. They might even be asked to lead a project which essentially puts them in charge of someone higher up the functional org chart than them.

Most of a matrix organization’s employees will have a permanent position as part of a traditional functional structure that’s supplemented by temporary roles on projects that only last for a fixed time.

An employee of a matrix organization can therefore expect to utilize a lot more of their skills and work with a lot more people than if they worked for a business with a functional, project, or flatarchy structure. And leaders should expect to navigate a more complex corporate structure – with all the hiccups that’s going to entail – for the reward of a more agile and innovative workforce.

What are examples of matrix organizational structures?

Some of the world’s most successful companies are matrix organizations.

Starbucks, for example, organizes its staff in a matrix structure that combines function (HR, finance, marketing), geography (Asia-Pacific, Americas, Europe), product (coffee, baked goods, merchandise) and teams (the staff of a specific location).

If you adopt a matrix structure your organization will be following in the footsteps of General Electric, Bechtel, Citibank, Dow Chemical, Shell Oil, Texas Instruments, and TRW to name a few.

How is matrix organization different from project structure?

Part of – or even most of – a matrix organization might be organized in a project structure. But matrix organizations combine a project structure with functional or flatarchy elements to create something unique. 

For example, a business might be organized into projects, but some of those projects have a functional structure and others a flatarchy. That would turn a project structure into a matrix organization. 

What are the benefits of a matrix structure?

A matrix structure comes with a lot of benefits, especially for large businesses in fast-paced industries that will quickly fall behind their competitors if they aren’t agile.

Here’s a closer look at the pros:
1. It encourages communication and collaboration between departments

A matrix organization’s project teams tend to be a melting pot of people from across the entire company. This encourages a lot more interdepartmental collaboration than in functional, project, or flatarchy companies, which often helps drive innovation.

2. It puts the best people on the job

Matrix organizations can make sure the best people for the job are always on a project, regardless of what department they’re from or where they sit in the org chart. This allows them to make the most of the in-house talent at their disposal rather than looking to make new hires or bring in contractors from outside the business. 

3. It increases efficiency

By definition, a matrix organization is a business that has organized its employees in whatever way gets the most from their talents. If they get it right, this makes them more efficient, better at quickly adapting to the demands of the market, and more effective at achieving their goals than their competition.

4. It helps employees develop their skills and career

Rather than having a fixed set of tasks and responsibilities, a matrix organization’s employees will get to put a wide range of skills to use within their different roles. They might even get the chance to jump into a management role a lot sooner than they would in a functional or project structure if they’re asked to take the lead on a project.

This will help your staff fast-track their skills and career development – something your most promising employees are sure to thank you for.

5. It can improve employee engagement

Adopt a matrix structure and your employees will constantly be working on different projects with different people, forcing them into different ways of thinking. This isn’t just the recipe for lightning-fast skills development – it’s also key to employee engagement and job satisfaction. 

6. It lets employees try different things (without sacrificing job security)

Your staff would have to job hop to try something else out if they worked at a functional, project, or flatarchy organization. But through different projects that come and go during their tenure, employees of a matrix organization get to try their hand at a huge variety of tasks and take on a lot of responsibilities – all without sacrificing their job security by jumping ship.

What are the downsides of a matrix structure?

Every organizational structure comes with its downsides. Here’s a closer look at a matrix structure’s to help you decide if the pros would outway the cons within your organization:

1. It might be unclear for your employees what their priorities are 

Which should your employee’s prioritize: the responsibilities of their functional role or their project role? If they’re asked to do something by their project manager that contradicts something they’ve been asked to do in their “main job”, who should they listen to?

You need to be very careful to iron this out at the outset of every project to make sure you don’t end up with big issues. When you implement your matrix structure, be sure to use Team Retrospectives after projects wind down to quickly find out how you can improve your processes to catch issues like confusion over what your employees should make their priority. 

And during projects, it’s crucial you wrangle people across different departments with (a Company Announcements Flow can help here) and keep people on the same page (a Daily Standup workflow can help here).

2. It means managers need to give and take

If the managers in a matrix structure aren’t willing to compromise, the organization will grind to a halt. Functional and project teams need to share staff time, resources, and the higher-ups’ attention. If your managers don't communicate openly and honestly about all this and aren’t willing to give and take with each other, you’ll quickly run into serious headaches.

3. It can bloat your wage bill 

A matrix organization has more moving parts, which means it requires more middle managers to make work. This not only bloats your wage bill, but also adds extra layers of bureaucracy that can slow things down if you’re not careful. So, be sure to work out whether switching to a matrix structure will save more time and money with this in mind when it’s all said and done.

4. It can lead to burnout

It’s a lot harder to keep track of how much is on your employees’ plates when they’re working within several teams across multiple projects. This makes it easy to overwhelm them with too much work – a common trap matrix organizations fall into. And overworking your employees is going to lead to burnout, high staff churn, and low employee engagement. 

So, be sure management is extremely careful when assigning work if you adopt a matrix structure or you could run into serious trouble.

5. It’s difficult to measure employee performance

It’s also harder to quantify your employee’s performance when they’re performing different roles across different projects. This makes it difficult to pick out the people worth fast-tracing up the corporate ladder or the staff who need extra support. 

6. It might not suit every employee

A matrix organization’s employees are regularly asked to perform new tasks, work with new people, and adopt new ways of thinking. Some employees will love the chance to try their hand at a whole host of different things and work with people across the whole business. But it’s inevitably not going to be for everyone. 

Keep your eyes peeled for employees who don’t take well to the demands of working across different projects. If you can, try and just have these employees work within their function so you get the best from them. 

Is a matrix structure right for your organization?

A matrix organizational structure helps large companies operating in fast-paced industries share information, staff, and resources between departments as effectively as possible. It also sets the company up to quickly respond to any sudden changes in the market or to implement a new initiative that could set it apart from the competition. 

But it can also complicate the reporting process, bloat your wage bill, and add layers of bureaucracy that can slow things down if they’re not managed properly. It also makes it easy to overwork your employees and harder to measure their performance.

Ultimately, whether switching to a matrix organizational structure is right for you depends on whether you’ve outgrown your current company structure. A matrix structure is often the best approach for large corporations that have to handle multiple projects and product lines at once – something functional, project, and flatarchy structures all eventually struggle with. 

If you feel like your current structure is holding you back, it’s well worth running the numbers to see if switching to a matrix organizational structure could unlock a new level of efficiency within your organization. Just be sure to keep the structure’s downsides in mind for the best chances of avoiding them.

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