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A matrix organizational structure combines functional and partition structures, dividing a company by projects or functions. It aims to increase efficiency through division of labor, but can lack focus and flexibility. Divisional options include profit/cost centers or projects, and product lines.
An organizational structure is the detailed structure of the management and product structure of a company. A matrix organizational structure is a hybrid model, combining aspects of functional and partition structures. A functional structure separates a business from different functions, such as manufacturing, human resources, and sales. Partition structures divide a company by projects, such as products, customers, or regions. By integrating both options into a matrix organizational structure, companies receive more benefits.
A functional organization attempts to exploit the division of labor theory. The theory states that separating workers into groups based on experience increases an organization’s efficiency. For example, including sales, marketing and promotion departments in one group can increase worker efficiency and productivity as employees generally have experience in all three activities. The matrix organizational structure uses this division as part of its basis for the structure of a company.
Divisional organization is the second aspect of a matrix organizational structure. There are two separation options for a divisional organizational structure. First, a firm can organize itself into profit or cost centers; the former tracks revenue and costs, and the latter only costs. Second, a divisional organization can separate operations by project. Projects can be a specific business segment, a regional office for sales and distribution, or a customer type such as industrial or wholesale.
Another type of matrix organizational structure is the division of a company along product lines. Under each product line there is a set of features. This allows a company to create specific management groups or teams to govern each product line. Through this division, a company can experience superior product quality as some managers and employees can focus on a single production line. This falls under the division of labor theory, which allows for a specialization of work to ensure operational quality.
The organizational structure of the matrix is not without its flaws. A major flaw is the inability to keep the entire company focused on overarching goals. For example, many companies have a single organizational mission. Having numerous functions and separate divisions weakens the ability to move all departments in one direction. Higher level management may be required to keep the business moving in the same direction.
Another shortcoming is the lack of flexibility in an organization. The organizational structure of the matrix focuses singularly on the division and specialization of labour. When a company removes a product line from its operation, the employees working on the project are subject to removal or job change. This can stiffen society and make it difficult to change smoothly as the business environment changes.
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