Source | Harvard Business Review : By Herman Vantrappen and Frederic Wirtz
Most discussions about matrix organizations usually quickly devolve into a debate between two sides: those who love to hate the matrix, and those who hate to love the matrix. The former claim that a matrix structure slows decision making and obfuscates accountability. The latter retort that a matrix structure is an inescapable prerequisite for lateral coordination in large complex businesses. From our two decades of experience with organization design, we tend to side with the latter. In fact, we may even belong to a third camp, those who love to love the matrix. But our love is conditional upon its sparing and wise use.
Let’s get back to first principles first. Just in case you’ve forgotten, a manager in a matrix organization has two or more upward reporting lines to bosses who each represent a different business dimension, such as product, region, customer, capability, or function. It’s often a response to, or a prophylactic against, corporate silos. Silos can form in any company, regardless of how it’s organized, whether that’s around different products, different regions, or different types of customers. When a company reorganizes, it’s often because the strategy has also changed. For example, the French global energy player ENGIE recently tilted its primary dimension from product (such as power, services, and infrastructure) toward region in order to better serve its clients in the territories in which it operates. Likewise, the British communications services company BT Group recently tilted from product toward customer (such as consumer, business, and public sector). But such reorgs don’t make silos go away — they just create new ones. So it remains crucial to ensure lateral coordination between the various units.
Lateral coordination is accomplished rather easily at the top of a company. The executives in charge of the various groups sit together naturally in the top management team. Often, they are also incentivized for the company’s well-being as a whole.
But obviously the top management team cannot afford to let all day-to-day operational coordination issues escalate upward. Its real challenge is to achieve lateral coordination also at the levels below. This can be achieved through hard-wiring or soft-wiring. A matrix structure is an example of hard-wiring, because the two bosses of a manager in a matrixed position have the joint responsibility to set his objectives, supervise his work, do his appraisal, and ensure his development. For example, the procurement manager of a business unit would report both to the business unit head and to the corporate procurement officer.
Soft-wiring relies on more informal, organic, voluntary, temporary, or one-off instruments, such as an ad-hoc multi-dimensional task force, an annual corporate planning cycle, an advisory council, a central coordination function, or a company-wide knowledge management system. For example, the U.S. oilfield services company Schlumberger builds on its knowledge management system to share technical expertise across regions and products.