BURNING BUSINESS CONTROVERSY: WHETHER MATRIX ORGANIZATIONS ARE MORE SUCCESSFUL THAN OTHER FORMS

MULTI-DIMENSIONAL ORGANIZATIONAL DESIGN (MATRIX) IS THE BEST WAY TO RESTRUCTURE A BUSINESS

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.