Traditionally, organisations were structured "vertically" around functions within countries or regions. These vertical silos gave focus, clarity and a career structure.
But over the last 20 years, fuelled by globalisation and increasing business complexity and enabled by information technology, work has become more "horizontal". Global customers now want a single point of contact to talk to around the world. Supply chains cut across traditional functions and organisational boundaries to include suppliers, partners and customers around the world, and more integrated business functions and common processes cut across business units and regions.
As a result, work today refuses to fit neatly into traditional vertical silos. And the upshot of this is growing tension between the historic power bases of functions, countries and regions and the needs of the new horizontal structures such as business processes, global functions and supply chains.
Initially, this tension manifests as a balance of power issue as power moves progressively towards the more horizontal structures. Organisations usually start with virtual teams then progress to dotted line reporting relationships and finally to dual solid line relationships to both the vertical and horizontal in a formal matrix organisation structure.
The move to a matrix usually reflects a recognition of this complexity, plus a reaction to the growing inability of the traditional vertical structure to cope.
The key reasons that organisations give for moving to a matrix are:
- To increase cooperation and communication across the traditional vertical silos and to unlock resources and talent that is currently inaccessible to the rest of the organization.
- To deliver "horizontal work" more effectively – to serve global customers, manage supply chains and run integrated business regions, functions and processes.
- To be able to respond more flexibly – to reflect the importance of both the global and the local, the business and the function in the structure and to respond quickly to changes in priorities.
- To develop broader people capabilities – a matrix helps us develop individuals with broader perspectives and skills who can deliver value across the business and manage in a more complex and interconnected environment.
However many organizations have struggled to make the matrix work. Some organizations even claim to have "abandoned the matrix" entirely (though in reality they usually just move to a simpler form of matrix). The disadvantages they cite usually include.
- Lack of accountability
- Unclear goals and roles
- Delays in decision-making (too many people getting involved)
- Increase in bureaucracy (a proliferation of meetings and committees)
- Increase in uncertainty and conflict
Yet it is clear that many of these disadvantages are about the way people work together, rather the structure itself. The move to a matrix organisation represents a significant step up in complexity in leadership and cooperation. Multiple bosses bring competing goals and divided loyalties. High levels of ambiguity can undermine clarity and lead to an increased need to manage trade-offs and conflict. Influence without authority and accountability without control become the norm.
We can also experience resistance from the historic silos. They have the advantages of legacy relationships, power and career development and they often see the rise of the horizontal functions as undermining their power. Country managers in particular can feel they are no longer in control in the way that they were in the past. They may be accountable for a country P&L where success in some areas of revenue generation and control over some costs lies with other people.
A successful matrix implementation matches structure, strategy, systems and skills, and we need to integrate all four Ss in order to be really successful.
Once the strategy is clear, organisations tend to spend a lot of time on structure. Reporting relationships, job and process design are very time-consuming, and can lead to a lot of change within the organisation. Several large multinationals have quoted 20% turnover in their management population following a matrix implementation - and most felt this was a positive development in changing the nature and culture of leadership.
However, making a formal structural change every time we need flexibility is a rather blunt instrument. Many organisations rely too much on structure to bring about change and this leads them to reorganise every 18 months. Not only do these constant structural changes not work, they actually hinder progress by disrupting the networks, communities, teams and groups that actually get things done.
Systems alignment is a huge task. Many organisations introduce enterprise wide supply chains and other planning processes at this stage. A full SAP implementation for a global organisation can take many years and tens or hundreds of millions of dollars.
Aligning systems to the matrix also involves changing the way we measure success; performance management, the structure of P&L's etc. need to reflect multiple accountabilities and encourage people to optimise the process across the whole organisation, rather than hit narrow departmental or functional targets.
Skills are often the poor relation. Having spent years and many millions on strategy, structure and systems, organisations may do little to change the skill set of the people who operate the matrix. This starts with communication. When we work with managers in large organisations and ask them, "why do you have a matrix?" the most common answer is "it's the latest fad from some management consultants". If managers don't understand the rationale behind the matrix they are unlikely to be successful in implementing it.
We then need to build the skill set and mindset that people need to be successful in this more complex environment - and this will be the theme of part two of this article.