Matrix Organisation

The wiki article will describe a matrix project organization. A matrix project organization is an organization developed in the 50’s and 60’s in the American aerospace industry. This was due to the demand for a convenient way of handling large scale and complex projects. Thus, the organization is formed around the project in a matrix organization. The Project Management Institute (PMI) defines a matrix organization as "any organizational structure in which the project manager shares responsibility with the functional managers for assigning priorities and for directing the work of persons assigned to the project". The organization structure causes the project personnel to have a “two-boss structure” because the project personnel will refer to their normal functional manager but also a project manager as defined by PMI. As indicated, a matrix project organization is a very different organization than a more traditional hierarchical organization.

Even though it is a complex organizational structure it can have more advantages than disadvantages if the company has the necessary resources to manage it. The complexity in a matrix organization results in increased sharing of information among colleagues, but the “two-boss structure” also cause reduced project agility because of the necessity that everyone needs to have the same information before deciding. To ensure a project's success there are certain pitfalls to be avoided. Because of its complexity within the organization, it is needed that the executive management is engaged in making the matrix organization work and encouraging the functional and project manager. In the last decades, there has not been significant research on how it is used and how to benefit from the matrix organization, but it will be discussed how it can be implemented and how to avoid certain pitfalls and it is described and discussed how it is used today in large corporations.

The structure of a Project Organization

A project organization can be structured primarily in three different ways. The project organization can either be structured as functional or project orientated or as a matrix organization.

A functional orientated organization is when the managers primarily are specialists and analytically oriented within their field of speciality. Also, the manager is a technical supervisor. A project oriented organization is more generalist in their management. They are often a facilitator with a general experience in managing diverse projects.

The advantage of a project oriented organization is the enhancement of technological development by allowing the different involved employees to focus on their field of expertise, which also enables pooling of resources among different projects. These technical capabilities are important for a company to continuously improve their development of products. However, a consequence of this type of organization is the difficulty in coordinating these specialized resources among different projects. This can cause late delivery of the project or an increase in the costs because additional technical personnel must be procured.

The strength and weakness of the functional orientated organization is the opposite of the project orientated organization. When the organization is project focused, it allocates the resources needed to complete the project and thereby ensuring a successfully delivered project. The consequences of this are the technical development is limited to the project, which causes the technical development to fall behind because the focus is on the individual projects.

Thus, the purpose of the matrix organization is to use enhance their different strengths and reduce their weakness by both having a functional and a project manager.

The creation of the Matrix Organization

Matrix organization structure

The background of the matrix organization was developed in the aerospace industry in the 60’s. The need occurred because the industry faced extremely complex projects in which both technical performance and coordination were very important.

This was not possible to achieve with the functional or the project management structure. This was how the matrix organization was created. The matrix organization works by splitting up the skills throughout the organization. The organization is designed so the people working on the project are both referring to the project manager and their functional manager.

This causes a “two-boss structure” which means that the people who are working on the project has two direct reporting relationships. The consequence of this “two-boss structure” will be discussed later in the article. To the right, a figure of the matrix organization is illustrated. The figure illustrates how the project personnel have two managers and the overall structure of a matrix organization.

The matrix organization is a complex project organization due to the multiple managers. This may seem like a needless expense to have these additional managers for companies who are already using a more traditional functional or project oriented organization. Indeed, it is an added expense initially but when the matrix organization is implemented it often results in better productivity with respect to the project delivery.

The added complexity in the organization means it is not necessarily applicable to all different kinds of companies. Because of the “two-boss structure” there must be a clear definition of the different responsibilities for each manager also how, what and who the project personnel refer to regarding their deliveries. Thus, the top management has to be involved and motivated to make the matrix organization work. Also, both the project and functional manager has to be involved and engaged. The importance of the different management engagement is necessary because of how the organization is structured. When adopting the matrix, the idea is that it should be easier to design the management around multiple tasks and still ensure a high sharing of information among the technical departments and handle complex projects and programs.

Challenges in a Matrix Organization

There are no best practice for matrix organization structures or implementation which fits all companies. How the organizations structural needs are, is different for each company which means that a matrix will not by defintion work. But there are some general advantages and disadvantages in integrating a matrix organization in the company, which are listed as bullet points and explained afterwards.

Advantages:

• Efficient use of resources

• Great information sharing

• Increased job satisfaction

• Increased productivity and innovation

• Increased technological development among projects and portfolios

Disadvantages:

• High demand of resources

• Difficult to follow and monitor progress of projects

• Possibility of non-constructive conflicts

• Increased overhead

• Biased allocation of resources from the functional manager

Advantages

One of the advantages of the matrix organization is the efficient use of resources. Because of the vertical direction between the project management, it is possible to share the different competencies among different projects. If some resources are limited, it is also easier to determine the priorities between projects, thus the matrix organization limits the costs. Not only is it easy to share the resources among different projects but it also results in a less restricted information flow among projects. Because of the vertical and horizontal information flow, it enables to limit the information to each manager to be the most necessary for each manager. E.g., the functional manager can focus on the technicalities of the project whereas the project manager can focus on the milestones or schedule. When having these focused groups of project personnel and specified information flow, it enhances the technological development because the experts are kept together. When a project is ended or terminated the expert groups can start working on another project together. Thus, the different information and know-how gathered in other projects is not lost and increased productivity and innovation can be achieved.

When doing projects often there has to be involved some kind of risk management and also the managers have to be able to react to uncertainties quickly. Especially in large scale projects where there is a high complexity which can cause severe delays. As defined earlier the lateral communication allows information sharing between technical departments and increases productivity, but another advantage is the ability to react quickly to uncertainties. The increased contact among the different departments causes them to interact more often which means faster decision making is possible and thereby making the organization more robust in means of uncertainties and risks.

Concerning each employee and their job satisfaction, it is argued that the motivation and commitment increase due to their higher influence in each project and their opportunity to work on different projects with the same team. In a study, 40 engineering managers was asked to do a survey regarding what implications it had for them to work in a matrix organization. The survey reported that “The matrix is more motivating and satisfying than traditional structures by allowing more creativity, fostering a direct relationship with clients, improving teamwork, improving decision making, and increasing communication and responsibilities.” So in general, a matrix organization has a positive influence on the employee's work, a positive impact on their encouragement and creates a more innovative team which benefits the company long term also.

Even though there are a lot of positive effects of implementing the matrix organization, some of the effects are also difficult to achieve and can only be achieved if the matrix is implemented correct and thoughtful. Some reported problems and weaknesses are strongly related to the “two-boss structure”. The “two-boss structure” will be described and discussed underneath and also the consequences of having to bosses.

Types of Matrix Organizations and the "two-boss structure"

As it can be seen in the first figure and as earlier described, the project personnel has two managers whom each has their different responsibilities. As described earlier in the article the organization can either have a project or a functional orientation. But when a matrix organization is used, it is possible to have a balance between these two orientations. This is due to the “two-boss structure” where the project manager and functional manager each have their focus on the project. The balance in between which focus is of highest importance is determined by the top management. The difference between the organizations is who of the managers has the most authority over the project personnel. This means that three different matrix structures are possible which are listed underneath:

• Functional matrix is a matrix where the functional manager has the most authority and has the primary responsibility for the project deliveries. The project managers will primarily focus on the coordination and planning of the project.

• Balanced matrix is where the functional and project manager share the responsibility for the project and its deliveries.

• Project matrix is when the project manager has the highest power and the responsibility to complete the project. The functional manager will primarily focus on allocating resources for the project.

It is apparent that these responsibilities and the authority for the project manager and functional manager can overlap each other. This can cause problems between the managers but also for the project personnel. Among the project and functional managers, their different responsibilities must be stated clearly to each other. It should set the framework for who is responsible for different tasks in the project. Also, both managers must change their way of thinking to make the matrix work. The functional manager must focus on the operational thinking and technicalities in the project whereas the project manager must contain its focus on their ability to negotiate and motivate to ensure the schedule is complied with. As this changes the traditional way of managing projects, the top management must support and trust the functional and project managers in the implementation of the matrix organization to gain the benefits.

Since the different responsibilities are now split between two managers, the project personnel will also be affected in terms of their job satisfaction. The “two-boss structure” is known to affect the employee’s job satisfaction, not only positive as described earlier but is considered as one of the primary challenges in a matrix organization.

The manager's influence on job satisfaction and daily work is different for each manager. It is considered that the project manager has the highest influence regarding the personnel’s motivation. The project manager's influence is highly related to the priority of the project and the power of the project manager. The more the personnel are working on a project, the higher tendency does the personnel have to value the project manager's influence on their job motivation but also their hygiene factors. Whereas the functional manager has the highest influence on their overall hygiene at work they are also influencing the motivational factors.

Disadvantages

As discussed earlier, it can be seen that the project and functional managers' work overlaps each other. The challenges caused by the “two-boss structure” can cause the project personnel to have increased stress and anxiety because they have two managers whom they refer to. If the project personnel references and also the managers' responsibilities are not clear it can create conflicts among the managers and the project personnel. The information flow can as earlier discussed be an advantage by using the matrix, but the information flow may be too complex. This can result in slow decision making because, if the personnel and managers have to ensure everyone included is involved in the decisions and is okay with the decision first, they cannot respond quickly to uncertainties. Thus, it is important to state that this is only happening if the matrix is not working, and the project manager does not have the power to make the needed decisions.

When managers have to ensure the schedule is complied with, they have to monitor the progress of the projects. In a matrix organization, it can be complex monitoring and controlling the progress. But in recent years more computer programs have been developed to be able to monitor and control the progress of projects. In large organizations with multiple ongoing projects the allocation of resources, the prioritization can be a problem. The functional manager tends to prioritize their department and the project manager will prioritize the project they are managing. Also, the goals of the project can become a conflict for the managers. e.g., the functional manager maybe wants higher technical development within the project at expense of the budget and schedule. This can cause an excessive workload on the executive manager because they have to make the final decisions. As a measure to avoid this, some large companies have hired “super project managers” to handle these conflicts and relief the workload from the executive managers. This has proven to be effective in reducing conflicts in the organization.

In general, conflict is unavoidable in a matrix organization, but it must be kept constructive. In the worst case, if the managers cannot cooperate the organization can become anarchy where people make their own decisions, and as a result, this will result in an increased bureaucracy, low innovation and flexibility. But this is rarely seen because this is easily avoided by having an explicit framework of what the different managers' responsibilities are. At first sight, another disadvantage is the added costs by doubling up on the number of managers. This will surely increase the overhead cost at the start but when the organization is fully functioning with the new matrix organization structure, it is often shown that the productivity will increase. This will also enable the company to have a more lean approach to their project management and thereby reduce the overhead costs again and gain the other advantages as defined earlier in the section.

How it can be applied

When a company are interested in a matrix organization and think it is relevant for them, where should they start, and is the matrix organization applicable for all kinds of organizations? As the article has discussed it is a complex organizational structure that causes the organization to have a certain size and resources to get a matrix organization to work. As quoted by Robert C. Ford and W. Alan Randolph:

“Just as the stable salt mine would have little use for the matrix organization, the dynamic engineering services consulting could not survive without it”

The company must have more than one product or service which is vulnerable to change in the external environment or other changes, so they need to make fast adjustments or changes to their product/service. Furthermore, the company must have a need for complex information sharing among different projects which is one of the main benefits of using the matrix organization. As this initial increase the overhead by hiring additional managers, it requires the company to have the resources needed to implement and make the organization work.

When the company wants to implement the matrix organization, different difficulties can be expected because of the significant change. Some of these difficulties can be eliminated or reduced by ensuring a good change management process. The “two-boss structure” is as earlier discussed one of the major problems in a matrix organization, and especially at the start of the implementation, it can cause problems. Some employees will most likely have problems with the dual authority and will need to get used to the new way of sharing information and be negatively influenced by the ambiguity. A way to meet these conflicts could be to train the management and employees in human relations to train their way of communication, working in teams and getting along with changes.

Another problem in the introduction is the confusion between the project and functional manager's power balance. The functional manager who leads the team and the project manager who oversees the project can have conflicts because of the overlapping responsibilities. These conflicts can become non-constructive as earlier discussed. A way of avoiding this is to describe the different manager's responsibilities and roles. This could be that the project manager is in charge of what should be done, when and why will the task be done, whereas the functional manager would be in charge of how the task will be done, who and where will the task be done. This can be set up in a responsibility chart. But this will be discussed in the next section, and also how it is done today.

It can be determined that there are no certain measures to know whether the matrix organization will fit a company. The matrix organization have to be driven by the executive managers and involve the different managers where all are certain that the company is ready for the increased complexity to gain the advantages of the information sharing and increased productivity, while still having an increased technological development in the company.

Matrix organizations today

These days, the matrix organization is used in large organizations in a variety of ways in both projects, programs, portfolios but also as whole organizations. But the research of the best practice is very limited over the last decades. How the matrix organizations are used in companies today are not very different compared to how they were used in the 70’s when it was developed. However, one thing is discovered to have changed, especially among multinational corporations (MNC). The issue with the shared authority with the balanced decision model is seeming to be changing to what is referred to as “rule-based” decision making.

A rule-based decision making is similar to what has been explained as a possible way of overcoming the disadvantages of the “two-boss” structure. It is to clear and concisely define the responsibilities of each manager. In a rule-based model of decision making the managers also have the responsibility to make the decisions and are not only responsible for the progress. This means that the firms are formalizing the rules and standards within their areas, so it is possible for the managers to make the decisions. This significantly lowers the overlapping of the responsibilities and leads to fewer discussions and faster decision making. This however does not mean the managers does not share information. They are still sharing information among different departments and taking inputs from each other. The rules are just a measure to give the managers the necessary power to make decisions within their field of responsibility without having to discuss it with the other departments. Thus, this way does not limit the overhead or reduce personnel cost, but it makes the projects more efficient and also limits the employees' stress which can be because of the higher responsibility but also the limited uncertainties.

Rule-based decision making is not a theoretical way of doing projects in a matrix organization. This was something that the writers W. G. Egelhoff and J. Wolf of the book "Understanding Matrix Structures and Their Alternatives" discovered when doing interviews with different MNC’s. They discovered that a lot of the corporations were doing this rule-based decision making because of experience and not because they have learned it. The writers could see that this was a way a lot of the MNC’s fulfilled the advantages of the matrix organization. But because the corporations were not clearly understanding their way of handling the projects they wanted a more robust way of setting these rules and standards to the project and functional managers.

This establishes a ground for future research to investigate the advantages and disadvantages of the rule-based decision making, but also some standards or guidance of how it is possible to implement this to an already existing matrix organization, as the research with. matrix organizations is very limited as described earlier.

Annotated Biblography

Jay R. Galbraith, Matrix organization designs How to combine functional and project forms, Business Horizons, Volume 14, Issue 1, 1971, Pages 29-40 This article is one of the first within the field of matrix organizations and widely acknowledged article, discussing how a matrix organization combines functional and project orientated organizations. It is written by a faculty member from the School of Management at M.I.T. Because it is an article from 1971 it is primarily used to set the frame and describe how a matrix organization is formed. Also, it describes thorough the difference between project and functional orientated organizations as what are the differences both about a project and also from an organizational point of view.

Stuckenbruck, L. C., The Matrix Organization. Project Management Quarterly, PMI, Volume 10, Issue 3, 1979, Pages 21–33 The article is used at PMI when a broad description of a matrix organization is needed. The article gives a very good and broad perspective of the development of the matrix organization, the advantages and disadvantages but also gives a theoretical approach on how it is possible to have a well-functioning matrix organization. It is a chapter from a book on how to do project management from 1979 but it is still used as a reference in many other recent articles. It is used because it explains very well how the "two-boss structure" is difficult to manage.

Ford R. C. , Randolph W. A., Cross-Functional Structures: A Review and Integration of Matrix Organization and Project Management, Journal of Management, Volume 18, Issue 2, 1992, Pages 267-294 The article review and summarize 20 years of litterateur of matrix organizations to discuss its advantages and disadvantages. Furthermore, the article discusses different applications and theories which should be examined in future scientific articles, because of its growing use in the industry but very limited knowledge regarding the use of a matrix organization. The article is used because it describes very well the different consequences of using a matrix organization and states clearly what kind of research is needed to further discuss other kinds of pitfalls and possibilities by using a matrix organization which is still not clear today.

Steven C. Dunn, Motivation by Project and Functional Managers in Matrix Organizations, Engineering Management Journal, Volume 13, Issue 2, 2001, Pages 3-10 The article is based on a survey of different managers and project personnel working in matrix organizations. This addresses the project manager and functional managers' influence on the project personnel’s job satisfaction and hygiene factors. This is one of the few empirical research projects which discuss the influence of a matrix organization even though the organization type has been used for more than 30 years. It concludes how the project and functional managers shares the role of employee’s well-being. It is an important subject when discussing the advantages and disadvantages of a matrix organization because of the challenges that a company faces when implementing a matrix organization regarding the increased overhead and complex information sharing.

John A Kuprenas, Implementation and performance of a matrix organization structure, International Journal of Project Management, Volume 21, Issue 1, 2003, Pages 51-62 The case study is one of the more recent articles discussing the implementation and performance of a matrix organization. The article address the implementation of a matrix organization in the City of Los Angeles, Bureau of Engineering. It discusses the expected difficulties and performance of the implementation, and how they tried to avoid complications but also unpredicted complications. It is relevant for this article because it discusses how it was implemented and the difficulties in the implementation. The paper is made so project managers can identify some of the difficulties but also the solutions to these difficulties.

W. G. Egelhoff and J. Wolf, Understanding Matrix Structures and Their Alternatives, London: Springer Nature, Edition 1, 2017 The most recent reference is this book. It has been primarily chapter 2 and 6 which are used in the article. The book is used to explain the purpose of the matrix organization, why and how it is used it MNC’s and how it is different from the initial matrix organization. The Book states that it is one of the few newer pieces of literature about the use of matrix organizations and what should be investigated in the future because of the missing research about its missing understanding of how they are used nowadays.