The rise of secret shadow departments in matrix organizations

One of the key objectives in many matrix organization implementations is to release resources tied up in the traditional vertical silos of function and geography. This requires a certain amount of centralization as these resources are brought into a central pool for allocation.

Many experienced managers feel a loss of control as the resources they used to “own” are now shared in matrix management and do not report to them. Some respond by building up secret “shadow organizations” that they control to do the same work.

As an example, in one of my clients, engineering resources that used to be allocated to geographic markets were centralized into global centres of expertise, to support whole global industry groups. One of the senior managers, new to matrix management, in a mature market quietly built a new “customer service” department, staffed by people with suspiciously similar skills to their old engineering groups.

The senior manager controlled this department directly and, if the central group would not support one of his engineering development initiatives, it was re-branded as a customer support problem and the manager could resource it from the engineers he controlled.

Some of his colleagues admired his initiative, but this behavior is the opposite of what the organization wanted in the matrix. It led the duplication of resources and kept resources locked up in the old silo.

There are a number of issues underpinning this little case study, including:

1. Was the central resource allocation the right one? If the centre had rightly decided it was more effective to allocate scarce resources to another market, then the local manager was undermining effective resource allocation. If the centre was wrong then the process needs fixing.

2. How was the existing leader incented?  If they are only measured and rewarded on their own market performance then their only incentive is to focus on their own numbers rather than the overall performance of the company.

3. Does the leader have the new skills they need to access the resources in the matrix? If they are used only to hierarchical management with resources they control directly, they may lack the skills or inclination to influence without authority and engage with others to get the resources they need. They may require some skills training or coaching in how to operate in this new way of working.

4. Is the central group delivering? It may be that shadow departments are a rational response to a lack of trust in or a lack of delivery by the centre, if so this needs to be addressed quickly. However make sure this is not just a power grab by the managers who feel they lost control in the new matrix organization, and have a vested interest in the failure of the new central group (politics does happen)

5. Is it a mind-set or attitude problem? Some experienced managers remain convinced that it is not possible to be accountable without control or to influence without authority. Traditional management worked well for them in the past and they are sure that matrix management will not work.

Matrix management is, however, the norm for many of the world’s most successful companies. It does work and it seems inevitable at a certain level of complexity. If existing leaders cannot cope with this then they may be best served by moving to jobs outside the matrix (some jobs will still be purely local) or outside the organization.

I have also seen shadow resources emerge in the form of employing consultants, headcount limits are evaded by employing part timers or off site project teams. All these are attempts to avoid internal controls, resource allocation or to deal with a central resource that is not delivering, rather than putting the effort in to either comply with or improve the process.

If you are responsible for the success of the matrix in your company, look out for the emergence of shadow organizations and resources that mirror what the central groups are supposed to be doing – it is always an indication of a problem.

If you need to build the skills, ways of working and confidence to make matrix management work in your team or organization, why not contact us and see who we can help?