The matrix configuration is high on both dimensions: product/service/ customer and functional specialization, suggesting a need for a high infor- mation-processing capacity to achieve the twin goals of efficiency and effect- iveness. There is both the functional hierarchy and the divisional hierarchy for the same firm. The top executive is responsible for both the functional and divisional dimensions – to set policy, set priorities and resolve conflicts among the subunits. The top executive is not involved in the details of operations, but does oversee the entire firm. Most of the difficult coordination problems are handled by the matrix managers, i.e., those that act as a link between the lateral divisions and the functional hierarchy. Matrix managers make multiple variable tradeoffs which involve both the function and the division. Figure 4.5 illustrates a matrix in which functional specialization is combined with product orientation to yield coordination of functions across the product groups. As shown in Figure 4.5, the matrix configuration requires simultaneous coordination of the functional specialties across the projects, products,
services, or customers that the firm services. When there is a change in the timing of an activity, it ripples across the whole of the firm – called the jello effect.
The matrix can be very flexible, dealing with new information and adjusting to the new situations quickly to utilize limited resources to meet firm priorities. In general, a matrix organization can handle much more information than other organizational configurations. The advantage is that the matrix can realize both the efficiency of the functional form and the effectiveness of the divisional form – overcoming the limitations of both forms. When it works well, both efficiency and effectiveness result. Complicated tradeoffs are con- sidered; decisions are made; and the firm moves on. But when the matrix is not well managed, it can be neither efficient nor effective. The challenges of managing a matrix include reconciling conflicts between the lateral and verti- cal subunits, information overload, excessive meetings, and decision delay. The firm does not move. The matrix configuration requires managerial skills that include a focus on the entire firm as well as one’s own function or division, the acceptance of uncertainty, the willingness to consider complicated tradeoffs and negotiate realistic solutions, and a focus on results. These benefits must exceed the additional costs of coordination if the matrix is to be justified beyond the functional or divisional configurations.
The matrix configuration has many two-dimensional names in practice: function and product, function and project, specialty and industry customer, product and customer, product and region or country, basic technology and
Figure 4.5 A matrix configuration.
product – to name a few. There are also three-dimensional matrices, as many multinational firms have function, product, and country or regional dimen- sions. Procter & Gamble has a four-dimensional matrix of: global functions, global business units, regional products and the fourth, global customers (Galbraith, 2010). Matrix relations go beyond setting up the matrix configur- ation reporting relationships. Management must invest in developing cross- organizational coordination. This is realized in many ways: lateral relations, liaison roles, various coordinating committees – all of which consider issues which are not dealt with well or quickly within the hierarchy. Combining the matrix configuration together with its various other cross-organizational rela- tions, it is quite possible to have eight dimensions: function, product, region, customer, technology development, basic research, human resources, and inter-country finances – perhaps more to be managed and involving compli- cated tradeoffs and coordination. Most firms are not so complicated; yet, many modern firms have an array of matrix relations, or cross-organizational mech- anisms to coordinate across the dominant hierarchy in the firm.
How big can a matrix be? The matrix has both a functional and divisional dimension to manage simultaneously, so the size is the number of functions multiplied by the number of divisions. Given the jello effect, or more formally in NK theory where N is the number of subunits and K, the degree of interde- pendency, we suggest that the matrix can include only a small number of subunits, say four or five on each dimension. However, the big Swedish-Swiss multinational firm ABB at one time had a matrix configuration where there were over 100 separate SBUs along one dimension. They used an additional middle level of management in the matrix to support the complexity of interdependency to be coordinated. Still, the matrix was too complex to manage and was eventually dismantled and replaced with a simpler configur- ation. Yet quite recently, IBM has adopted a multidimensional and reconfigur- able organization which yields both the multidimensional coordinated and also a continuing reconfiguration; it goes beyond even the four dimensions. Per- haps more important is the reconfiguration aspect which permits it to adjust to an ever changing environment (Galbraith, 2010). It should be emphasized that the coordinating units do not span all of the dimensions of the organization as found in a two-dimensional matrix. The capacity to reconfigure the matrix is paramount here. In turbulent environments, it is not likely that one configur- ation of the matrix will work well for an extended time, it must be reconfigured regularly. It is both the matrix configuration and its capacity for reconfigur- ation that are needed – not a static matrix configuration.
When both efficiency and effectiveness are needed, the matrix configuration is an appropriate choice. The matrix is usually more costly to manage than a hierarchy as there are more managers, more information, and more compli- cated coordination to be done. Further, the managers must consider and deal with many considerations that simultaneously have overall effects as well as effects on the subunit. Individuals who have been successful in a hierarchy may not be comfortable or successful in a matrix configuration. The matrix must be justified in terms of the strategy and the firm’s environment.
The top management in the matrix has a focus on both efficiency and effectiveness – attempting to obtain both. The top management cannot direct the organization but must rely heavily upon the functional and divisional managers for the detailed, ongoing coordination adjustments in order to meet the firm priorities. Yet, the executive has much to do: set priorities, resolve differences among the subunits, and generally oversee the entire firm.
It is important to emphasize that the matrix can also lead to poor performance. The dual coordination across the functions and the divisions can lead to conflicts of priorities between the managers of subunits. If conflict management requires great involvement by the top executive, a major advantage of the matrix has been lost. The telltale signs of a matrix in trouble are, again: overload of decisions at the top as the managers are not able to solve problems; problems are not dealt with at all and opportunities are lost; budgets are exceeded; operations are not coordinated and resource utilization is lost or inefficient; employees are unhappy and confused; subunits are spending excessive time on coordinating with other subunits to the detriment of subunit performance; and opportunities are lost. When the matrix works well, it can achieve efficiency and effectiveness. But when things go badly, they can be very bad.
The organizational configuration is not the whole story; the organizational complexity is another property of the organization which can be designed to meet the goals of efficiency and effectiveness.