6 Advantages and Disadvantages of a Matrix Organizational Structure

Apr 10, 2024
Reading time: 16 min

It’s easy to dismiss your company’s organizational structure as something that just “falls into place,” but getting it right can positively impact your operations and your people.

For example, a strong organizational structure provides clarity around roles and responsibilities, promotes collaboration, and equips employees with a sense of security about where they fit in the big picture. As a result, finding the right organizational structure for your needs requires significant attention.

While there’s no shortage of structure options, a matrix organizational structure offers companies an alternative to the traditional top-down hierarchy.

What is a Matrix Organizational Structure?

A matrix organizational structure is a cross-team effort to bring different roles together and create a grid-like reporting structure instead of a traditional hierarchy. This approach represents how work actually gets done, since the day-to-day of employees is rarely limited to interaction only within their functional group (e.g. Marketing, Sales, Finance).

Notably, a matrix organizational structure requires a different management style, with both functional and divisional management.

A functional manager represents the traditional vertical structure based on department or job function. Examples of this role are marketing managers, sales managers, and human resource managers.

A divisional manager, on the other hand, oversees a cross-functional team with representatives from each department. In this structure, a marketing specialist reports to their functional marketing manager as well as their divisional manager. Divisions may be based on business unit, geography, project, or anything else.

example of a matrix structure organization

A basic matrix structure with functional and divisional managers. [Source]

What is an example of a matrix structure organization? At the simplest level, an example of an organization using a matrix structure would be one that has set functional teams (e.g. Marketing, Sales, Customer Success) as well as more divisional teams with members from different functional areas that work together on specific initiatives. Nike is one famous example of a matrix structure organization, as the company has functional teams like HR and Merchandising as well as divisional teams based on both product and geographic region.

What are the pros and cons of a matrix structure? Matrix organizational structures offer companies and their employees tangible advantages to the way they work, such as shared knowledge, more informed decisions, and better morale. However, a matrix structure also has some disadvantages to be aware of, like lack of clarity, potential conflict, and slower processes.

3 Advantages of a Matrix Organizational Structure

You may be a startup seeking the best organizational structure for your new company. Or your business may have just completed an acquisition and you’re redesigning your systems and structures. Or maybe you find your traditional organizational model isn’t meeting your needs.

No matter your size or current situation, a matrix organizational structure offers countless advantages that can benefit your teams’ daily work.

1. Flexibility Between Departments Results in Shared Knowledge

Matrix organizations excel at bringing together the right people with the right skills. Think of it as the business version of the 1992 Dream Team: Experts from every functional area of a company come together to address a specific challenge, project, or goal.

Because you bring together a group of people to tackle a specific project, assignments are never permanent. This kind of flexibility results in:

  • Employee Skill Development: In the matrix structure, employees can move between projects or teams as needed. Doing so allows them to share their knowledge, expertise, and skills with a larger number of people than in traditional structures. Therefore, people are always learning new skills and considering different viewpoints, leading to continuous employee development and better results.
  • Alignment Across Departments: You will reinforce alignment across departments with employees moving in and out of project teams. What’s more, your people will share their experiences within the company, and any potential misalignment will surface quickly.
  • Integration of HR and DEIB: Your People and DEIB teams should be at the figurative table for all large decisions, but sometimes that doesn’t happen. A matrix organizational structure prioritizes having the right stakeholders working on each project, including at least one employee with expertise in diversity, equity, inclusion, and belonging. Having all of these viewpoints at the table leads to a stronger end result and helps maintain company values.

Consider the following examples of matrix structure organizations that put this shared knowledge to work. Starbucks focuses their teams geographically to understand and meet the needs of customers in different regions around the world, while other businesses organize their teams by specific strategic goals, such as improving the customer experience or driving business growth.

Then there’s Spotify, who dubbed their own version of the matrix structure “The Spotify Model.” As shown below, Tribes – made up of specialists and those passionate about a specific goal – team up to focus on a project. This structure gives their teams more autonomy in how they work and removes the barriers of formal processes. By doing so, Spotify believes its teams can work faster and better deliver on product and service-oriented goals.

Discover the Spotify org structure model

Project and functional elements of the Spotify model, an agile approach to a matrix organizational structure.

2. Open Communication Leads to Better-Informed Decisions

In a traditional functional structure, communication flows from the top-down. Oftentimes, these communications stay within their own department. It works, but different perspectives, stakeholders, or skill sets may be missing from the equation.

Alternatively, the cross-functional nature of matrix teams means leaders and teammates can more freely share what they know since everyone has to communicate with both functional teams and divisional teams. Having all of these perspectives allows leaders to make more informed decisions.

Consider the example of Sean, a customer success representative, who is on a project team tasked with identifying and correcting bugs within his company’s software. Sean reports to – and shares information with – both the project manager and the VP of Customer Success. Let’s say Sean shares details about this specific project with the VP of Customer Success, who then uses that information to develop a communication strategy for all customer success representatives to more easily share important information about bug fixes with customers. In this instance, the matrix model better positions the company for success by including wrap-around services and support to the project at hand.

3. Cross-Collaboration Boosts Employee Engagement and Morale

In a matrix organizational structure, employees move between projects or teams as needed. This naturally leads to your people sharing knowledge, expertise, and skills. Besides aligning departments, this cross-collaboration results in:

  • Higher Employee Engagement: Employee engagement leads to a slew of benefits, such as increased productivity and decreased turnover. And with a potential 32.6 million Americans working remotely by 2025, it’s important to create a culture that promotes teamwork and cross-functionality so people feel connected, no matter where they’re located.
  • Consistent Employee Growth: When your people habitually switch teams, they are not only exposed to new areas of expertise, but also consistently create new working relationships. These soft skills are important; in fact, 73% of business leaders believe they’re more important than job-specific skills.
  • Increased Team Performance and Profitability: A team of people with different areas of expertise and perspectives sets your project up for success. Furthermore, it helps employees feel valued for their knowledge and skills, and when that happens they’re more likely to feel connected and perform better, leading to a 21% increase in profitability.

3 Disadvantages of a Matrix Organizational Structure

Of course a matrix organizational structure is not without its challenges (warning: they all involve the role of the manager). Companies that recognize these challenges upfront and plan to address them can help minimize the negative impact.

1. Overlapping Teams = Lack of Clarity Around Roles and Responsibilities

A complex reporting structure can cause confusion around roles and responsibilities. For example, managers may go back and forth on who is responsible for the professional development of individual employees.

Team members can also experience confusion. While moving to new teams may offer employees exciting challenges to tackle, this shift also presents a new set of work dynamics, such as workload distribution, task ownership, and knowledge sharing. Pair that with an employee’s commitment to their functional department, and it’s easy to see how employees may exist in a near-constant state of stress when it comes to their primary responsibilities.

Thus, clear roles and responsibilities are crucial. McKinsey’s Organizational Health Index argues that clear, accountable roles are a top driver of overall organizational health. High role clarity is also linked to greater performance, engagement, and satisfaction.

Never fear – companies can navigate role complexity and ambiguity by establishing clear accountability. For example, org chart software allows leadership and employees alike to visualize their reporting structure. Moreover, the right platform can even deliver drill-down capabilities that allow employees to view manager or team member profiles, which include their title, skill sets, and responsibilities.

an org chart with employee profiles helps people stay connected

ChartHop’s org chart takes you directly to employee’s profile pages, giving greater visibility into your team’s makeup and structure.

2. Multiple Managers = Potential Conflict

Functional and project managers are bound to have conflicting goals or priorities, and that conflict trickles down to team dynamics.

A regional sales manager, for example, might have very clear sales growth goals for an upcoming quarter. However, a project manager might not prioritize those goals in their team’s current project. As they engage in discussions over where to direct efforts, the team is left in limbo, unable to move forward until a resolution is reached.

Conflict can also arise through challenges for authority and deciding which manager has the final say on a decision. Say a project team built a new software feature or a customer engagement campaign. Which manager has final say on the execution? The project manager might view it as one of their responsibilities, but maybe the director of product or a customer success manager believes the decision is theirs.

In order to mitigate this potential issue and effectively support your organization’s goals, your managers must strike a balance. One way to do so is by implementing training and education programs to ensure managers receive the tools and knowledge to navigate the complexities of a matrix structure.

For example, AGCO, an agricultural machinery company, supports its matrix structure by offering specialized training that emphasizes communication between managers. Additionally, all managers take a course on the complexities of the matrix structure. This training covers required management and leadership skills to help coordinate decision-making processes and develop problem solving skills.

Ultimately, if you choose to use a matrix structure, you should establish expectations and clear manager roles to reduce any conflict among people and teams.

3. More Information = Slower Decision-Making

Too many cooks in the kitchen can result in slower decision-making. This is because multiple managers weighing in on a task or issue can mean a longer time to resolution or execution, especially if your managers disagree on the best course of action.

As mentioned above, the lack of clarity regarding authority, or overlapping authority, can delay decision-making efforts. While managers may go back and forth over a desire to own the decision, it’s also likely managers do not wish to own a decision for fear of potential fallout. Either would delay execution.

Additionally, the complex nature of a matrix organization means it might take longer for teams to reach consensus regarding next steps. With information moving freely between teams, it can be difficult to ensure everyone is on the same page about the current state of a project.

You can prevent these kinds of roadblocks by adopting clear decision-making processes and frameworks. When managers and teams are on the same page about how to approach a decision, the team can move from the decision to implementation phase at a faster pace. Establishing who owns the final decision or the decision-making process before the work begins can save the team from major delays toward the end of their work or project.

Is a Matrix Organizational Structure Right For You?

Matrix organizational structures have taken a backseat to other approaches in the last decade. Yet, as more companies adopt distributed workforce practices, collaborative, transparent, and flexible structures will play a key role in success.

Knowing that a matrix structure’s flexibility supports agile teams, promotes engagement, and values cross-collaboration, it’s time to decide if your organization needs improvement in these areas. If so, transitioning to a matrix structure may be a strong move in the right direction.

Interested in other changes your People team can make to help your organization thrive? Our webinar dives into a first-hand look at advice from People leaders.

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