Most organizations evolve from functional structures within a country or other geographic region. In this case, we have a number of functions such as manufacturing, legal, HR, sales, marketing, IT etc. each reporting to a country or region head.
It was normal for individuals within the functions to have a single reporting line to a functional boss right the way up to the functional director, who reported to the country head or region general manager. The functions were often described as ‘silos’. People were recruited into a function, developed and managed within the function, and usually saw their career development as vertically within that function.
The functions were very successful in developing people and delivering work for a long time. Unfortunately, in modern organizations work stubbornly refuses to fit into these neat vertical silos.
As organizations grew they often became more international, integrated or developed multiple product groups. There started to be a requirement to coordinate across the group of companies – for example, to have a common IT approach or set of HR policies. The functional heads started to have a reporting relationship to a group level HR or IT person as well as to their country or region head. Initially this was often informal but, as the need for coordination increased, it often lead to dual reporting – a group level matrix.
Then, as organizations became more integrated the need for ‘horizontal’, cross functional and cross geographic working became more compelling:
- global customers demanded a single point of contact to speak to around the world;
- supply chains cut across geography and traditional functions such as manufacturing, purchasing, distribution;
- global projects and products required more coordination around the world;
- common systems in areas such as IT became more cost effective and efficient and enabled higher levels of integration and coordination.
Organization structure should always follow strategy, and as companies aspired to become more integrated and ‘joined up’ across functions and geographies, they tended to reflect this in the reporting lines of the organization.
Most matrix organization structures began with virtual teams, then introduced solid and dotted line reporting, eventually moving to the most complex form of matrix organization structure: solid line reporting to more than one boss.