Beyond the Matrix Organization

In this McKinsey Quarterly archive article recently republished from 1979, “Beyond the Matrix Organization”, Tom Peters “examines the flaws of the matrix-organization design and explores several more effective approaches to implement no more than one or two essential corporate thrusts at a time”.

Here’s a sample from the article:

“In contrast, matrix rests on an overly optimistic model of how people in organizations actually behave. Its central concept—that simultaneous decisions can routinely be made along multiple dimensions with fragmented accountability—overestimates the information-processing capacity of most human brains and the problem-solving capability of most social systems. Multiplying the signals to which managers are expected to respond eventually overloads the circuits.”

It was interesting to read this 1979 article because it reflects the widespread assumption at the time that matrix organizations can’t work effectively.  It’s unfortunately still a widespread view with many articles online focusing on the disadvantages of what is admittedly a complex structure.

Unfortunately this flies in the face of the fact that over 90% of the world’s top organizations use this organization form. When I studied the FTSE 50 and Fortune 50 companies, for example, the only ones that didn’t have some form of matrix were those who were purely domestic or simple organizations like mineral exporters. It seems that the matrix is the structure of choice for the world’s most successful organizations.  So why do we see such a negative “press” for the matrix?

Firstly, a lot of this dates back 40 years. How are you going to run an integrated multi-site operation without good communications technology and easy travel? In the 70’s it was sometimes even difficult to get an international phone line and travel was significantly more expensive. It is unsurprising that a complex organization structure would not work effectively when the people within it couldn’t easily talk to each other.

Integrated business processes, like ERP, stitch the organization together today in a way that was impossible 30 or 40 years ago when early spreadsheets were the state-of-the-art.

Secondly, the business environment has become much more complex and challenging with global competition and customers and synergies to be found in integration of global functions and business processes. Simple locally focused organizations often cannot compete with those whom have mastered global scale.

So these business imperatives, enabled by information and communications technology mean that the matrix is now both a viable and completely normal choice.

Where I do agree with Peters is that structure change is not the solution. It’s far too blunt and slow a tool to give the flexibility we need to cope with competing goals in a modern organization.

In our experience, structural reorganizations rarely solve problems, but they do often disrupt the networks and communities that actually get work done; so they may sometimes make things worse.

It’s interesting that he raises the typical challenges of making the matrix work, such as power struggles, “groupitis” etc. and blames the matrix structure for this rather than the way people work. In our own work we focus on the behaviours that help you clarify accountabilities, deal with ambiguity, simplify cooperation. Whilst he accepts that structure isn’t the solution, he credits it with causing the problems.

He also quotes a whole range of alternatives from organizations like GE, Hewlett-Packard, P&G, IBM and GM – all of these now operate some form of matrix.

His recommendations, such as focusing on particular single themes for a period or simplifying senior leader focus to one or two key thrusts seems very simplistic given today’s more complex, multi-stakeholder business environment. The matrix implies competing goals. We want to be good at both the global and the local, the business unit and the function, the country and the global process. A matrix enshrines these dilemmas, if we could choose one or the other once and for all, or even for a period of time, then we wouldn’t need a matrix. The world’s most successful companies however have found that this is not a reality.

In his final paragraph Peters states:

“What is called for is, in fact, the antithesis of undirected restlessness. It is the painstaking infusion of tension to bring about the kind of dynamic imbalance that has always been the hallmark of the successful, growing organization.”

The matrix actually enshrines this dynamic balance by giving a voice to multiple competing demands of the business. One scientific definition of a “matrix” is “a medium in which something else grows”; for example a petri dish. The matrix creates this dynamic tension and provides a structure for it to be played out on a daily basis. What grows in this matrix and enables its success is all about skills and ways of working.

Whilst the global business landscape and information technology have changed beyond recognition in the last 30 to 40 years, a lot of skill development lags behind.

If you operate in this can complex environment, are your people trained in how to make the matrix work, operate in virtual teams and with colleagues in different parts of the world? Is it embedded throughout your capability development from how you lead is one of multiple bosses to how you run a meeting virtually and across cultures? Are our ways of working adapted to an environment where we rarely get face-to-face and where individuals with multiple bosses may be the only people who really understand their complete role in the reality of their performance?

If we don’t develop these ways of working than no globally integrated structure will work successfully. But this isn’t the fault of the structure.

Source: “Beyond the matrix organization“: by Tom Peters, published by McKinsey Quarterly archive, September 1979.

Blog posting updated:  23 October 2014

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