Matrix Is the Ladder to Success

Multi-dimensional organizational design (Matrix) is the best way to restructure a business. Pro or con?

Pro: Look at the Track Record

Many companies are discovering they have no choice but to learn how to effectively execute a matrix organization. These companies operate with multiple business units in multiple countries. They distribute through multiple channels to different customer segments. In addition to the normal business functions, there are champions for each of these organizational dimensions. And very often these champions speak with equally strong voices.

If you are a company spending 4% or more on R&D, you will need a strong global business unit head to achieve the global scale and integration to profit from the R&D. If you are doing business in Brazil, China, and India, you are going to need strong government relationships and a strong country manager. When you need both strong businesses and strong countries, that’s when you need a matrix.

But does a matrix work? Yes, it does at the high performers like Procter & Gamble (PG), IBM (IBM), Nokia (NOK), Cisco (CSCO), and Schlumberger (SLB). These companies have moved beyond the usual debates about dotted lines. They have robust spreadsheet planning processes in which debates are resolved and joint goals are established. Collaborating teams create the plans.

The collaborators are rewarded while the old-school command and controllers leave. At Cisco, 20% of the management group left, and at P&G, it was 50%. These departures were positive changes, representing a victory of collaborators over the command and controllers. Management defines roles and responsibilities and holds people accountable. Managers rotate between units and prevent silos.

Most important, the successful companies have strong leadership teams that resolve disputes and create a one-company culture. Maybe there’s a matrix in your future.

Con: Matrix Impedes Progress

If you want to slow down your enterprise, all you have to do is introduce a matrix organization.

Leadership is the key driver to the success of a company. To ensure that leadership is more effective, you need organizational clarity, i.e., short decision paths, a smaller number of committees, and above all, an unequivocal allocation of responsibilities.

Matrix organizations feature exactly the opposite characteristics, which results in a high degree of complexity, unclear decision paths, unproductive agreement processes, and most worrisome, nontransparent responsibilities. Conflicts of competence are pre-programmed, and it is not clear who is responsible for successes and failures.

Matrix organizations blur responsibilities. Executives need to make decisions and accept responsibility. Matrix organizations, however, often suffer from fear of making mistakes in the face of the growing size of an organization.

In the past, companies such as ABB (ABB) and Unilever (UN) have shown that matrix organizations can do more bad than good. It was the matrix that nearly ruined ABB, and Unilever has been oscillating between different organizational designs since 1996.

An organization must serve the customer first. Having a matrix, you are not doing the customer a favor because decision processes are slowed. What kind of customer wants to talk to a sales representative who has no authority to decide on major aspects of the business relationship?

The last thing a company needs is an organization mainly driven by occupation with itself. Nearly all supposed advantages of a matrix organization can also be achieved by an intelligent line organization.

Opinions and conclusions expressed in the BusinessWeek Debate Room do not necessarily reflect the views of BusinessWeek, BusinessWeek.com, or The McGraw-Hill Companies.

Reader Comments

Adrian C. Ott

I agree with Guido's assessment.

Having worked with many large organizations, both as an employee and consultant, matrix organizations result in what I call an "everybody and nobody syndrome" where no one is ultimately held accountable for results.

This stifles decision-making and creates disempowerment as everyone is horse-trading for resources instead of focusing on the customer. Although some level of cross-functional coordination is inevitable especially at larger companies - it is management's job to keep decision-making and responsiblity lines as clear and simple as possible.

Adrian Ott
Exponential Edge Inc.

Dave Gardner

I've been involved in a lot of matrix management situations, both from the perspective of a senior manager and as a consultant.

It is hard to serve more than one master and that is essentially what matrix management involves. Employees are prone to serve the person who writes their review and gives them a raise; not terribly surprising.

Matrix management seems to work reasonably well for short-term projects, e.g., 3-6 months. After that, both managers feel as they are in a tug-of-war for the same resource.

Cisco has a demonstrated bias for the matrix management approach in the last couple of years. For those of us who have worked with Cisco, it is often referred to as the world's largest start-up meaning there isn't a lot of structure--people are expected to produce outcomes the most efficient way possible even if it means a lot of reinvention of processes and approaches.

John Chambers believes that the "command and control" approach slows things down and I think there is little doubt that that is true. Cisco is now a $40 billion, global company thinking about what it is going to be like at the $80 billion level.

Big pharma--a command and control environment if there ever was one--is constantly acquiring start-ups with promising new drug substances. These mega-corporations don't seem to be able to create the entrepreneurial agility and sense of urgency found in their smaller counterparts.

Given our current economy, my sense is that matrix management will only grow in popularity, particularly in the U.S. as business tries to get more out of the same resources.

Dave Gardner

Helen T. Cooke

I believe the collaborative team focus (and therefore matrixed organizations) is here to stay. I do agree that the matrix organizations can create blurriness, which may not serve the clients. I agree wholeheartedly with Guido's final comment: 'Nearly all supposed advantages of a matrix organization can also be achieved by an intelligent line organization.'

Markus Bleher

As Helen I agree with Guido´s final comment. There´s not much left to say. Matrix organizations may work. But in my opinion that´s not the question. The question is if the benefits outbalance the disadvantages? Maybe in a few cases but generally not.

Norbert Haas

I can follow completely Guido`s view. In matrix organizations you find often a lot of problems to attribute success or failures to the right responsibility. In case of success you will find a lot of owners; otherwise in matrix organizations it`s difficult to find somebody who stand up straight for the results.

In a lot of projects in the past, our project leader had the responsibility and the authority. In matrix organizations, you find often only the responsibility and not the authority.

Scott Simmonds

Matrix leads to many questions of who, what, and where.

Direct clear lines of communication and responsibility is key--always.

Sue Thompson

It probably goes without saying that one model does not fit all, and those companies that have successfully orchestrated matrix management have some foundational reason for it: very talented, mature top management that keeps an eye on execution, for instance. This is just not so of all organizations and so what Guido notes--"Leadership is the key driver to the success of a company"--is key. Jay also notes as much in his last sentence.

Management can be brilliant but not mature, stable but not terribly talented, etc. Whether or not a company has successfully transitioned to matrix management really has little to do with the model. We tend to jump on ideas without assessing the strength of the people who will be putting them into action. Anything can work, but as Markus commented, the benefits have to outweigh the struggles.

Andrew Miller

There are examples to support both sides of the argument, so to Guido's point, there needs to be a focus on intelligent structuring of the organization. Accountability and responsibility need to be understood by everyone in the organization, regardless of the type of structure, and the culture needs to be one focused on the customer.

That being said, a matrix organization tends to provide less clarity and less focus on value-added activities, while requiring more time spent on duplicate work.

Andrew Miller
ACM Consulting Inc.

Dirk Schroeder

Guido's view is right. Since 30 years I have been following successfully this path as an employee of salesmen who like to fight for their customers knowing all about the ongoing business and products. Only the invoice is written by the accountant. May be I have to change this tomorrow. I like the line, because the market likes it. But I ask you not to tell to my competitor.

(Only in special cases I prefer a "linix" combination of line and matrix. For one: a bundle of similar or same products are purchased by a specialist.)

Stu Winby

Most organizations today are learning how to use internal and external networks more effectively. They must given the pressures on speed, flexibility, agility, quality, customer focus, and so on. Jay is right that leaders need to learn how to manage and lead the matrix organization, which is a type of network, so they work. I have seen effective matrix management where responsibilities were not blurred, accountability was clear,and teamwork drove outstanding results. I have also seen the opposite. Good design and leadership are required for a matrix capability to work, and more than ever this skill is needed in today's business environment.

Kevan Hall

Matrix management does introduce challenges, but realistically what is the alternative?

If you have global customers or functions where you need to share resources and capabilities across the business you need to find a way to make the matrix work.

At the other extreme traditional silo organizations do not work well for complex businesses

Success does not come from a focus on structure but from developing the skills and capabilities of the people working there – and in a complex matrix the rules do change.

Check out the blog www.lifeinamatrix.com or the book Speed Lead – faster, simpler ways to manage people, projects and teams in complex companies.

jjw

After 14 years as an engineer, working at 4 different Fortune 100s and 3 small businesses, I must say that you people sure can come up with a bunch of worthless crap. I and many 'in the trenches' employees have wasted many, many hours over the years on training and execution of your crazy 're-structuring' methods. All of them have been nothing but worthless.

Dr. Guido Quelle

@jjw: You must be very frustrated having wasted so much time working with the wrong people. Too bad.

Dan Greenberg

To summarize a few comments:
One needs to look at the benefits and costs of matrix management relative to other forms...and perhaps a key element is time. In the short term, matrices can spawn high-performance teams and the benefits outweigh the costs. Over the longer term, however, my observation is that matrix management leads to broader and deeper bureaucratic sclerosis than other forms. What starts as a high-performance team becomes a documented process where everyone needs to be satisfied...and that eventually degrades rapidly as the high-performance people are replaced by median-performance people. Further, the "worker bees" tend toward unintended behaviors: cleaving to whoever writes their review, playing politics (or one boss against another), or paralysis awaiting a consensus that never comes. Worse yet, the effective people -- the ones who actually get the matrix to DO something -- are generally under-appreciated, underpaid (relative to the difficulty of getting the company to do something, not relative to job title), and frustrated. They leave, and then the organization has no means to accomplish anything beyond inertia.

The cure is leadership. This is the true issue, regardless of organization type. Good leaders set high expectations and do not tolerate pathological organizational behavior. Folks like JJW have not worked in a company with such leadership. I am not surprised: truly excellent leadership teams are a rarity in my experience.

Wolfgang Thiele

The experience of Manfred Maus, founder of OBI stores and me is that matrix organizations are very complicated. A main problem is that employees have always two bosses. If the employees tend to be opportunists they can play around with them for their own benefit. In other cases it makes the organization slow.

Dr. Jay Galbraith

I have been studying and consulting in matrix organizations since 1967. That year I learned about matrix at the Commercial Airplane Division of Boeing. To summarize my experience over the years, I would say that most implementations of matrix fail to meet their objectives. This fact has led many managers to state, “matrix doesn’t work” for all the reasons that Guido and the various commentators have mentioned. But while most fail, many succeed. And those who succeed are the high performers that I listed. So my view is that it is incorrect to say that matrix does not work, because it does. It does at the high performers. I think it is correct to say that most managements fail at matrix. They tolerate the lack of clarity, long decision cycles and ambiguous roles and responsibilities. They tolerate the horse-trading because they are too weak to confront the tough decisions. All of the examples given by Guido and others are management failures — not matrix failures.
There is nothing inherent in a matrix that makes it slow. IBM works continuously to get timely price quotes for solutions involving multiple Strategic Business Units. They streamline the process, define responsibilities, form pricing centers, and so on. There is nothing inherent in a matrix that leads to lack of clarity. The successful matrix implementers use tools for decision rights, RACI (responsibility) charts or the RAPID process from Bain to define roles and responsibilities. The management failures either do not take the time to define roles, or fail to enforce the agreed allocation of roles. There is nothing inherent in a matrix that leads to horse-trading at lower levels. The successful companies like Intel have a process for discovering strategic disputes. They channel them to the Executive Committee where they get resolved on a timely basis. The management failures occur because the leaders do not have the stomach to say "No." They say ‘yes’ to everything. Weak leadership will kill you in a matrix. You have to have a robust planning process within which a strong management team sets priorities and decides what we are not going to do. I could go on. The point is that the reasons given for matrix failures are really management failures. There is nothing inherent in matrix that makes organizations slow, unclear, indecisive, etc.
The point that I want to contest is that an intelligently designed line organization can achieve nearly all of the supposed advantages of a matrix. It cannot. Suppose the intelligently determined structure for a company is a grouping of product divisions. A line structure of, let’s say, nine product divisions will then give you speed to market, product focus and product excellence. But it will also give the company nine Customer Relationship Management systems, and nine sales compensation plans. It will get nine of everything. Customers will four, five or even nine different sales people calling on them. Customers hate this feature of product line companies. The answer is a matrix of functions across product divisions. When implemented correctly, this matrix will yield fast time-to-market along with product excellence and the elimination of redundancies across product lines. Key account sales temas and managers will give a single point of contact for multi-product customers. Under these conditions, the customer is better served with a matrix. It goes without saying that the leadership must clarify roles, set priorities, streamline processes, reward collaboration and eliminate the silos as well as the command-and-controllers.

The essence of matrix is that it achieves the both/and. A single line organization results from either/or thinking. The achievement of the both/and results in superior performance and is a competitive advantage at Nokia, P&G, IBM and Schlumberger. For a more in-depth discussion, see my book, “Designing Matrix Organizations That Actually Work” published by Jossey-Bass in 2009.

Dr. Guido Quelle

We need a powerful organizational design that focuses on results rather than on methodology. Don't we talk about empowerment and delegation of responsibility? The matrix involves the risk of still discussing while the competitor already achieved results.

Helmut Prang

Fair enough, Jay. But what does it help if the matrix as a theoretical framework is suiting only the high performers while even you must concede that most implementations do fail?

Would those high performers not even be pretty damn good companies with a more traditional line organization? To link the performance of a company purely to its organization design is rather adventurous, I feel.

In my interim assignments, I have met matrix organizations in a few German-based MNC's. I have not been convinced that matrix works well. So in your reasoning, it's the management?

Let me add the argument of Identification for basically anyone working in a matrix. Where is your peer group, your fellows and comrades you share experience and trust of working with? Where is the joint spirit to go out and conquer the market? A matrix typically does not only blur responsibility and accountability, it hampers the creation of that feeling of belonging together, which can spark off excellence. After all, working environments are social environments too and let's not forget those principles they are based on.

Bill Goodwin

I've found this particular Debate Room debate fascinating and close to home. Over my last 25 years as a manager, executive and internal and external consultant, I've worked both in and on matrix. Before then, it was all single-line command and control. Matrix management in my experience is far superior if you have a complex business environment that requires integration of numerous business variables. For instance, if you're in a multifunctional, multi-business, multi-customer or multi-region (or global) business situation, you probably need a matrix to be competitive. If the situation is a lot simpler, then a simple matrix or none at all could be appropriate.

A story: 25 years ago the situation we faced in my company, a large multinational, required moving from a functional focus to business units. We learned quickly that even though our business focus became a whole lot better, functions provided mastery, career development and business process improvement and we still needed all of that. A matrix form of management with business units and functions emerged but it took years of work to be able to get an "and" result from the design. At first, too many people were distracted by the solid and dotted line thing both as a boss and subordinate, the command and control style of leadership was getting in the way and people were trying to engineer procedures and rules to keep things in balance. All it did was slow things down and make people angry. Eventually with a lot of work and some personnel changes, the matrices started to work well even though they required periodic attention. As a person in the middle of one of those at that time, I learned that my paycheck and performance review came from my business boss and my career and pay potential came from my functional boss and it was best if I integrated the two. Fortunately the two bosses worked fairly well together and I never got caught in a matrix sandwich. The solid and dotted line thinking went away for me and for others, too. Both lines were solid but in different ways.

As the business became more complex, we added multicustomer and multiregion to the mix about 10 years later. Things became a lot more complicated, appropriate leadership became more critical, and we worked through most of that, too. Without the practice with the functional and business matrices, I'm sure it would have been a lot harder if not impossible.

On the other hand, in some smaller companies I've worked with, a matrix would have been inappropriate - more complex and expensive than their business situation warranted.

One key learning from me is that a matrix is an organism, not a mechanism.
A minimum amount of procedures, rules, systems and other forms of bureaucracy should be applied even as people want to add more to engineer an outcome. Personal relationship are what make it run well and fast. Strong leadership keeps the goal in focus and things moving along, staying out of organizational tiffs along the way. Its like a network but a lot more organized and productive.

Net, I believe a matrix is far superior to a straight line organization in a complex business situation and with a culture that can handle a different way of managing and being managed. With thorough planning, some patience and some experienced help from people like Jay and Stu, it can be done and done well.

Dr. Herbert Tuerk

Success has many fathers. The failure remains a Waisenkind (orphan).
A powerful organization needs one responsible decision maker and no debating group. To work in a matrix organization is absolutely frustrating.

Gregory Kesler

I'd like to argue a specific theme in this discussion. Nearly 25 years of organization-design experience, inside and out, has taught me that the matrix can do all the harm and good described here by our colleagues. But the the fact is that multi-divisional, global companies simply have no choice, and the real issue is: Who is willing to master the matrix? Those who can choose to run a simple structure - functional when possible - should choose that option. But for most, that is not possible.

The single greatest difference among companies that win with the matrix is the willingness and skill of top management to engage in managing a complex organization. Most don't like to, preferring to stay out of the conflicts and away from the hassles of operating governance. But it's in that stew that creative things happen - where the tensions serve shareholders (and other stakeholders) very well. If you have brands, you have products, you are managing across geographies, and you expect functions to deliver excellence. Learn to govern those tensions.

There are a number of terrific examples - but I'll call out Nike, a place where magic happens every day. Nike's matrix may be the most complex of all (although Chambers seems determined to earn Cisco that title). Geographies, product developers, categories, designers and other functions come together at Nike through continuous dialogue to land on the most exciting new stuff they can bring to the market. The best ideas win. The brand always sits at the center, as the anchor for decisions, and the top management team are personally engaged all along the way.

Top execs govern the process, and power levers are adjusted to keep a delicate balance. Consumers hang out on Nike's campus and top execs sit in on ideation meetings that feature teen sports lifestylers. But a regional exec convinced an idea won't fly in her region has a voice until someone at the top says, "We're moving on." It's conscious, it's deliberate, it's hands on. People always seem to feel like they're on one team.

Companies that don't need a matrix are better off without them. But any business that is global, or aspires to be, has no choice but to embrace it in some form. The secret sauce is in operating governance. Find executives that want to manage that process and teach them how.

Dr. Jay Galbraith

I would like to respond to Helmut’s thoughtful questions. First, the matrix is a suitable organization for an increasing number of companies. More than half of the inquiries that I get for my services are from companies that are discovering that there is no alternative but to learn how to make a matrix work.

Second, Procter & Gamble and IBM would be high performers anyway, but not as high if they adopted simpler structures. These are companies that pursue excellence and attempt to master complex structures. In doing so, they achieve a level of performance that Unilever and Hewlett-Packard cannot match. The high performers have achieved an ideal. They have discovered that their organizations are a competitive advantage that their competitors cannot match.

Indeed, Unilever’s recent reorganization is attempting to copy that of P&G. Unilever now has global functions, global business units and regions in a front-back hybrid structure. They will fail unless the organization is held together with all of the types of matrix relationships like you would find at Procter & Gamble.

Third, I do not believe I said that high performance results solely from the type of organization. When asked to explain P&G’s high performance, the CEO said it was due to three factors: (1) Strategy (shifting the portfolio from low margin and low growth to high margin and high growth businesses); (2) Their system of open innovation where half of their new products come from ideas originating outside of P&G; and (3) A “unique organization structure” (a four-dimensional matrix consisting of regions, global business units, global functions and global customer teams).

Dr. Jay Galbraith

As far as identity, most of the high performers are “one company” companies. Like the recent ads for IBM, the people say, “I’m an IBMer.” The same applies to Procter & Gamble. But they collect in high-performing work teams also. There are 250 people on the Wal-Mart team alone (itself a three-dimensional matrix), located next to the customer in Arkansas. Actually, there are many choices for identities in these multi-dimensional structures. People at P&G belong to a function and rotate between assignments on customer teams, businesses and regions. Or if they prefer, they can become specialists in surfactant chemistry, for example, and never leave the Winton Hill Laboratories. One of the advantages of matrix is that the two bosses represent two career paths and alternative identities.

Bill Goodwin raises some good points. We have been talking as if matrix was a unitary type. Bill describes his initial experiences with the two-dimensional matrix of business units and functions. This was the original type and was used extensively in R&D labs with functions and projects. Today, among the top companies, the two-dimensional matrix is a solved problem. These companies have moved on to the three-dimensional matrix by adding geographical units and the four-dimensional matrix by adding global customers or customer segments. Such structures are the state-of-the-art today. They are the current source of difficulty. They are much more challenging than the two-dimensional matrix structure.

Sharon Fleming

Can anybody provide a sample matrix organization chart? I am keen to see how this looks on paper. Regards.

Dr. Jay Galbraith

Sharon, I do not believe that the Debate Room format allows charts and diagrams. I can refer you to my book, "Designing Matrix Organizations that Actually Work." In chapter one you will find several charts depicting the simple two-dimensional matrix. Chapter six shows some three-dimensional models and chapter eight describes IBM’s multi-dimensional organization.

In the past couple of weeks, two new matrix structures have been announced.Fiat has re-introduced Chrysler's two-hat model that was quite successful when Eaton and Lutz were in charge. This was a time when Chrysler was regarded as the top U.S. car company. Then Daimler Benz acquired them.

The new model has a new manager from sales in charge of both the Chrysler brand and the sales function for all brands. Another manager has the Jeep brand and product development. So the leadership team has both a functional and a brand or profit center responsibility.

The other announcement was Analog Devices, Inc. ADI is the leading semiconductor designer and manufacturer for converters from analog signals to digital and back again. The movement to a “system on a chip” is the driving force. A whole signal chain from an ultrasound device can be put on a single chip. ADI is organizing verticals for medical devices, automotive, telecom, etc. to capture whole signal chains. These verticals will be organized across the functions forming a matrix organization.

So the trend continues…

Dr. Guido Quelle

I think it is at least audacious to observe a "trend" to matrix organizations. The other day I had the opportunity to work with a multinational client in order to strengthen their simple organizational line design which contributed to the company's success. A track record of continuous growth for more than 20 years is the reward. If they introduced a matrix, the customer would never, ever receive the products in such a short time as he does today.

Dr. Jay Galbraith

Guido, don’t say that to John Chambers. Instead, read about what he thinks in this week’s issue of the Economist. Mr. Chambers believes that the Cisco matrix is the model for the company of the future. Their matrix is also enabled by all of the new technology that is appearing. Cisco is becoming a collaborative model, which its customers can follow. Chambers says that companies have no choice but to learn how to make a matrix work. He thinks that the matrix allows him to respond more quickly to new opportunities. It allows him to create solutions from combinations of products that customers, and particularly governments, are demanding. One of Cisco’s new businesses is to help its customers get on the trend to matrix organizations and collaborative technologies.

John C Schuler

To clear the chaff, just step back and view the enterprise as a customer.

Think about the times you've had to ask multiple questions and schmooze multiple people--just to get to the right person to solve your problem or answer your question.

Successful Companies with a Matrix Structure are (less) successful in spite of their organizational lines.

Speaking--from experience over the years in Europe and the USA--as a salesperson, manager, and now consultant, I can vouch for the benefits of clean, clear lines of responsibility, authority, and communication.

John Schuler
Portland, Oregon

ANSHUL GUPTA

Well, it has been a very nice debate. But we tend to forget to define the basic rules of the game (debate), before we start debating on certain issues.

Here, the success of different companies differ, because these companies are operating in different environments.

The question of using a particular successful structure does not arise when we are able to see the reality without fighting the conflicting views toward our preconceived notions (what we call cognitive dissonance).

There are millions of companies around the globe, and I bet that you would agree with the fact that two companies operating in the same field, with the same strengths and arrays of products, may get different levels of success. One may succeed, while at the same time other may fail.

Analysts would explore different alibis, but the fact is that opportunities differ. You can blame the structural or managerial mistakes. But the fact of the matter is "strategies differs with the type of opportunity present."

That's why where P&G is successful, where others are not.

"Companies need what they need...not what others need."

- Anshul Gupta
Management Development Institute Gurgaon

Greg Smith

What an interesting and useful debate. Thank you all. My company is considering a matrix structure to help handle the launch of 2 new service lines.

The new business units are now more or less intact. Their services are up and we have been able to provide pilot customers. Nevertheless as global head of sales and CRM I am a little concerned about how our function will be integrated from here.

While we are happy to pick up the new lines and CRM, we have not been given the direct responsibility for them. Moreover, the new units' input into the sales process has been understandably amaturish. The traffic seems to be all one way.

We are an aggressive, global, team based sales and CRM operation. In many ways I can see how the Matrix could work for us but I am certain if the hybrid CRM or incentive scheme breaks down there will be a huge fallout.

My question is: How is the sales function usually integrated?

Serhat Alpar

Dr. Galbraith, it has been two years since this article was initiated; CISCO has been mentioned more than once as an example of successful implementation of a matrixed organization

Given their recent performance and significant strategic misses, what lessons can we learn about matrixed organizations? Where did they go wrong?

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