Guide

Business organisational structure

Matrix organisational structure

A matrix organisational structure doesn't follow the traditional, hierarchical model. In the matrix structure, you share resources and staff across teams and projects, as well as within departments or functions.

What is a matrix organisational structure?

A matrix structure is a combination of two or more types of organisational structures. It is a way of arranging your business so that you set up reporting relationships as a grid, or a matrix, rather than in the traditional hierarchy.

In this structure, employees usually have dual reporting relationships - generally to their functional manager as well as the project manager. Typically, one reporting line will take priority over the other (eg staff may have to report to their functional manager before reporting to the project manager).

Examples of matrix structure

Different forms of matrix structure exist. These fall under three main categories, depending on the level of power of the project manager:

  • Functional or weak matrix - the functional manager retains most of the power and is in charge of the people and resources. The project manager has a minimal role and tends to carry out administrative or coordinating tasks.
  • Strong matrix - the project manager holds most of the power and authority, controls the project budget and manages staff. The role of the functional manager is limited.
  • Balanced matrix - the functional managers and the project managers share the power and the authority over staff and budget.

In large organisations, it is possible to involve all these types of matrix structure at different levels within a business. This is sometimes referred to as a 'composite organisation'.

The advantages of a matrix organisational structure

The main advantage of the matrix structure is that it can:

  • improve decision-making, since there are two chains of command
  • help break down traditional ‘silo’ barriers
  • improve communication across the business
  • allow staff to apply their skills in different roles
  • help share best practice and ideas across teams
  • increase efficiencies due to sharing resources across departments

The matrix structure can also help businesses achieve quick market adaptation to changing customer needs, as it can decrease the lead time to produce a new product. This structure is most suitable for businesses operating in a dynamic environment.

The disadvantages of a matrix organisational structure

A matrix structure may not be well suited for businesses working in a more settled environment, with set customer requirements. Because of its complexity, and the need for employees to report to two bosses, it can lead to:

  • confusion regarding roles, responsibilities and priorities
  • divided loyalties between project teams
  • blurred lines of accountability
  • difficulties in coordinating tasks or functions
  • power struggle between the project manager and the functional manager
  • large overhead costs, on account of having multiple managers

Matrix organisational structure vs functional

A matrix organisational structure often exists alongside a traditional functional structure. It is common in large and multi-project organisations that relocate employees when and where they need them. For smaller businesses with limited resources, organisational structure by function may be more suited.