Greg Pye is the chief executive of a medium sized company that traditionally has been organized hierarchically according to function. After attending a management seminar, he decided to encourage inter-functional departmental co-operation implementing a matrix structure in the organization.
Greg agreed that a matrix organization and cross-functional team working would provide flexibility and enhanced performance to the organization. However, the company secretary drew Greg’s attention to some potential drawbacks. These include the possibility that people won’t know who they are meant to be reporting to, supervision will be difficult for their line manager who thinks they are working in their teams and team leaders will have no real authority over the team members.
After speaking to the company secretary, Greg began to have second thoughts about the matrix structure. Greg decides to ask for a more considered view of restructuring the company.
Greg Pye has asked you to explain:
(a) The advantages of the existing hierarchical structure (7 marks)
(b) The advantages of introducing a matrix structure (7 marks)
(c) How Greg and his management team can address the concerns expressed the company secretary (3 marks)
(d) How it might be possible to gain some of the benefits of a matrix structure without fully restructuring the organization
(a) The organisational structure defines the communications pattern, the control system and the command structure. The traditional hierarchical structure provides certainty, clarity and clearly. Such a structure defines:
o the communication pathways; the scalar principle provides an unbroken vertical communication line
o the linking mechanisms between management roles
o the allocation of formal responsibilities and authority
o the co-ordinating structure
o the relationships between departments, tasks and people and their duties
o the power structure; where power, control and decision making exists; strong leadership is possible
o management roles and official tasks
o the functional distinction between departments
o specialisation in departments, skills and management; procedures can be standardized
o unity of command; one superior and one source of influence
o the exception principle; decisions can be programmed and planning can form the basis of management
o decisions are made from the perspective of the whole organization
(b) The Matrix structure allows cross functional activities to be undertaken whilst maintaining the function, skills and loyalties of departments. This type of structure is often associated with organisations which are product driven. The advantages of such a structure can be described as:
o improvement in communication which will be lateral as well as hierarchical
o improved quality of decision making throughout the organization
o direct contact between managers and employees replaces rules and bureaucracy
o management motivation is improved greater involvement in decision making and control
o product driven rather than department driven and thus more aware of the market
o improved product knowledge all the management
o improves quality of decision making, specially at times of change
o adaptive to local geographic conditions
o removes the problem of ‘management islands’ associated with the departmental specialisms inherent in the hierarchical structure
o managers are able to see and understand the whole picture
o reduction of stress on senior management
o provides flexibility across the organization
o allows training and greater involvement for junior management
o improved control through de-centralised functions such as product budgets and profit centres
These ideas may well be more appropriate to a smaller firm such as Greg Pyeís and are essential in an environment where there is constant adaption to markets and technology.
(c) The concern that individuals and managers may not adapt to a more flexible structure may be addressed by:
o team development and building
o balancing the demands of uniformity and diversity inherent in the matrix structure.
o creating appropriate reporting systems
o creating product teams and customer groups
o addressing problems of trust and confidence that will arise from the removal of role certainty in the traditional organisation.
o a system of performance evaluation
o ensuring clear communication paths and patterns
(d) It should also be noted that many organisations display combinations of structure. A manufacturing division may be organised along traditional lines whilst the marketing department may be organised along the lines of a matrix organisation.
In reality, organisational structures are often a mix of formal, hierarchical structures and other forms. However, there is the danger that Greg Pye might end up with an inappropriate and clumsy construct. The benefits of both could be achieved through a hybrid structure.
The production department, with its need for uniformity and certainty could remain as a traditional hierarchical structure. The marketing department requires less formality and exists in a more uncertain environment, thus a matrix organisation, based in teams and products, might be more appropriate.
Overall however, a team based, product driven approach could be developed.