“In the 1980s and 1990s, matrix organizations were toxic—you didn’t want to touch one, didn’t want your boss to know you were using one,” Jay R. Galbraith, an organization design expert, told attendees at a recent organizational development conference sponsored by The Conference Board.
In recent years, Galbraith said, top performing companies such as Nokia, Proctor & Gamble, IBM and Toyota have been using matrix structures to gain competitive advantage.
“Matrix is out of the closet, and you have to learn how to make these things work,” Galbraith said.
Most matrix implementations fail to meet their objectives, so companies conclude that matrix does not work. But it doesn’t have to be that way. “It’s that most managements fail at matrix,” Galbraith said.
Design Challenges, Matrix Solutions
During the session, Amy Kates, principal of Downey Kates Associates, a New York City-based organization design firm, highlighted the design challenges that many companies face and how matrix organization helps cut across those challenges:
- Customer-centric design: Matrix organizations design around the customer, segmenting markets and selling solutions. Matrix organizations address how to be “operationally excellent and a product leader.”
- Readiness for innovation, organic growth: Matrix organizations help companies maintain a stable base of business units while they build their capability to assemble and disassemble teams around opportunities and projects.
Matrix effectiveness. - Centralization/decentralization dilemma: Matrix organizations are able to gain value from the parent company, make smart centralization/decentralization choices and connect units laterally.
- Global expansion: Matrix organizations look at options for connecting international units to the home country, create truly transnational companies, and balance globalization and localization.
“The one that we will focus on ends up falling into all these categories and we end up with some sort of matrix organization,” said Kates, who has co-authored a book on organization design with Galbraith.
Star Model
Galbraith is founder of the Breckenridge, Colo.-based Galbraith Management Consultants and a senior research scientist at the Center for Effective Organizations at the University of Southern California.
In the 1960s, he developed a framework for more structured decision making dubbed the “Star Model.” It encompasses strategy, organization design criteria, people, structure, rewards and processes. According to Galbraith, organization design is more than just structure. Different strategies lead to different organizations. For an organization to be effective, all the policies must be aligned with one another.
“This is the model I’ve used, and today every consulting firm has something like this,” Galbraith said.
The essence of strategies leading to matrix designs is the pursuit of the “and” rather than the “or,” Galbraith said. In other words, global and local, functional excellence and fast time to market, and national accounts and local accounts.
The key when designing a matrix, Galbraith noted, is to start with strategy. “The keys for me are the business processes and management processes,” he said. “You want to minimize the levels [of organizational structure that] you have. I try to get the levels out and make the matrix as tight as possible. Don’t spend all your time on dotted and solid lines.”
Different Matrix Designs
Organizations have adopted several different types of matrix designs with various degrees of success. Galbraith said most companies have mastered the simplest, which are two-dimensional and include products and functions.
Other matrix designs can be three-dimensional and might include functions, business units and countries. “This type is far more challenging and encounters cultural differences,” Galbraith said.
Others are even more complex and include four or more dimensions, such as those that arise when serving global customers. “This type is the cutting edge,” Galbraith said.
“The leadership at the top sees mastering the requisite complexity as a source of advantage,” Galbraith said. “They keep it simple for the customer.”
High-Performing Matrix Organizations
A lot can be learned from companies making it work, Galbraith said. Here are some key characteristics of successful matrix-driven organizations:
- They have sophisticated leaders who grew up on both sides of a matrix, manage conflict, work as a team and spend time “getting clear roles and understand power balancing,” he said.
- They create organization designs “that aren’t just about structure,” which are complete, and completely aligned. “It takes a complete design to make this work,” he said.
- They manage an effective change process that’s incorporated into the matrix.
Matrix is inherently a team-based design that runs on open debate and dialogue. - The high performers use the same techniques to guide the change process.
Kates added that “matrix is less of a structure problem and more about the other parts of the Star [Model].” Rewards result from more subjective assessments of performance, she said. The assessments result from top management’s discussions of what people achieved and how they achieved their results.
“Hire hard, manage easy” is the key guideline, according to Kates. “Some people thrive in a matrix, while command controllers do not.”
Assessing Matrix
Selecting the right people to be in a matrix is critical. “If you build a critical mass of people who have a similar mindset, you get to a tipping point,” Kates said.
There are several steps companies can take to assess their matrix and get it back on track if it’s not where it should be. It pays to look first at interpersonal skills and work and management processes.
“There isn’t really magic to making this work—it’s about the basics,” Kates said, adding that companies that succeed at matrix design “do all the basics all the time and pay attention to making all of them work.”
When it comes to interpersonal skills, make sure there are opportunities to build networks and relationships. Staff can use the tension created by the matrix to collaborate rather than compromise, ensuring that managers who share resources can work well together. Also, make sure matrixed positions are at the right level and that there is a culture of teamwork, with joint accountability when things “go well and when they go wrong” and frequent giving of credit to others, Kates said.
“If you don’t have a good team-based organization to start with, matrix shouldn’t even be on the table,” Kates said.
Work processes should be clear and streamlined, and there should be clear information flows and clarity around roles, responsibilities and handoffs. And when it comes to management processes, Kates said, there should be governance mechanisms “to force dialogue” and resolve issues quickly and at the right level, efficient and effective meetings, a minimum of management “rework” and “a robust process for objective setting, performance management and feedback.”
More on Organizational Structure
During another session, Michael G. Winston, former managing director, global head and chief leadership officer for Countrywide Financial Corp., said you can take two companies that are structured identically, with the same skill sets and same market conditions, and “one will skyrocket and the other will plummet.”
What makes some succeed? “The common denominator is that people seem to be the catalyst for great things to happen,” Winston said. “Leadership is the ultimate arbiter of organization success.”
Winston cautioned that no matter what organizational structure is put into place, “it will almost always be out of date” shortly after its inception if companies don’t organize and reorganize because the rate of change environmentally or technically “is usually fast enough to force distortions in that structure.”
Winston, a consultant who has held leadership positions in high tech and aerospace, shared several “personal convictions” about effective organization design. Among them:
- Proper structure facilitates performance but doesn’t guarantee successful performance. Meanwhile, improper structure leads to “doing it the hard way.”
- Changes in structure are disruptive—be careful.
- All structural benefits cannot be gained at the same time. Tradeoffs are needed to get the optimum balance of benefits.
- Proper staffing is critical to the success of the revised structure. Improper staffing frequently undermines sound structure.
- The most neglected aspect of organization design is the allocation of power.
