It was a long day at work and you want to take your mind off of things. You open your Amazon account to browse. If you pay close attention to the website, you’ll notice how well-defined every category is and how convenient it’s for you to shop anything and everything. In a way, Amazon has become a one-stop-shop for all your basic needs.
But how is it possible that Amazon has managed to rope in such a wide variety of products and services in such little time? It’s a matrix organizational structure in disguise. They’re able to manage every division because functions and responsibilities are clearly laid out. Wondering what a matrix organization looks like? Read on!
Structure Of Matrix Organization
Unlike other organizational structures, the matrix structure is complex. While most businesses implement a hierarchical system, a matrix organization creates a reporting relationship by creating a grid i.e., a matrix. Therefore, an individual reports to two or more managers or team leaders at the same time. Typically, a project or product manager and a functional manager supervise an employee.
An individual engages with multiple functional areas and works on different projects. Big projects or product development processes often rely on matrix structures. They are becoming more common in today’s world of business. Large organizations, especially those with global operations and multiple business units benefit from a matrix structure.
Example Of Matrix Organizational Structure
A matrix organizational structure allows an organization to decentralize authority, distributing the decision-making power to multiple stakeholders. There is increased accountability as everyone has two or more people guiding them on their work. Also, you get improved project and function coordination, boosting operational efficiency and productivity. However, there are several disadvantages like high administrative costs, confusion about the chain of command (who has more authority) and placing excessive importance on group decision-making. Such disadvantages make you wonder whether a matrix organizational structure is feasible in today’s workplace.
Let’s look at some existing examples of matrix organizations and see how effective it has been in driving global businesses.
You’ve probably heard about Philips, the Dutch multinational electronics enterprise. Set up in the 1970s, it’s an early example of matrix structure. In fact, it was the first organization to set a matrix structure after the Second World War. It created a network of national organizations (NOs) and product divisions (PDs). Despite the large network, it successfully managed conflicts by setting up a coordination committee.
However, Philips realized that it was too confusing for everyone because of a lack of accountability. It was in the 1990s that the organization upgraded its structure to solve the recurring challenges. This reorganization separated a few powerful PDs who had worldwide responsibilities of managing the profits and losses. Currently, employees report to both product division and geographical managers and the structure continues to excel.
Starbucks, one of the leading coffee chains is another great example of matrix organization. Let’s look at the individual features and see how this example of matrix structure stands out in today’s business world.
The corporate headquarters has several functional divisions, such as finance, marketing and human resources. They make decisions and implement policies that every subsidiary must abide by. Top-down monitoring and management help in maintaining business standards across the globe. The Chief Executive Officer and other important decision-makers oversee the functioning of these independent departments at the headquarters. Therefore, a functional hierarchy helps in organization-wide development and implementing growth strategies.
Geographic And Product-Based Divisions
As the name suggests, geographic divisions are based on the physical locations of business operations. In addition to global markets (e.g., Middle East and Europe), Starbucks has finer divisions such as Western, Southeast and Northeast. Every local manager reports to at least two people—geographic head (e.g., President of Africa Operations) and functional head (e.g., Marketing head). On the other hand, product-based divisions address the various product lines. For example, there is one division for coffee, another for baked goods and another for merchandise. Starbucks can focus on product expansion, thereby making the best use of a matrix structure.
In a nutshell, the structural characteristics of an organization are instrumental in shaping strategic management decisions in the business. Its development history is proof of a multinational organization that will continue to grow and earn profits.
Some of the most successful organizations in the world use a matrix structure. It brings strategies to life and people closer together. Sharing responsibilities while aligning goals, resources and guidelines make this type of organizational structure a very successful one.
To make the best use of a matrix organizational structure and increase collaboration, you need to identify the power structures and decision-makers. Harappa Education’s Navigating Workplaces course will teach you how to identify your cultural fit, engage with various stakeholders and understand the various types of powers people hold. Get skilled at collaborating effectively at work!
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