Business today is complex. Companies must grow profits and constantly innovate to outpace aggressive competitors. Work is more challenging from a technological perspective, yet workers are being asked to do more with less.

One of the most important decisions a business can make is how it will structure work teams for efficient and productive contributions. There are three common types of organizational structures used to ensure that the work of the firm is accomplished effectively:

• Functional organizations,
• Project-oriented structures, and
• Matrix (or hybrid) structures.

Previously, at the Idea Incubator blog, we have described the functional and project-oriented organizational structures. In a functional organizational structure, staff with similar skill sets are grouped in departments. While such a structure provides career congruence and specialization, the functional organizational structure lacks cross-functional collaboration necessary for more creative pursuits in innovation.

A project-oriented, or projectized, organizational structure is best suited for firms who conduct most work on a project basis. Recall that projects are temporary endeavors designed to create a unique product, service, or result. Third party contractors for EPC (engineering, procurement, and construction) are often structured in a project-oriented organization. While a projectized organizational structure offers excellent coordination and communication of activities to accomplish a common purpose, this type of organizational structure is more expensive to maintain. Some duplication of skill sets is expected across project groups or teams as well.

The Matrix Organizational Structure

A matrix, or hybrid, organizational structure is a blend of the functional and project-oriented structures.

The composite organization balances a traditional hierarchical department structure with temporary teams, structured into project work, to conduct special assignments. While functional departments maintain on-going operations, special project teams operate in parallel to accomplish specific project objectives.

Because the project teams are temporary in nature, the project staff in a hybrid organizational structure may include subject matter experts (SMEs) from many departments. Project teams working on critical issues may even establish working rules, procedures, and processes that are unique to the project. Meanwhile, the department functions will adhere to standard operating procedures established for the foundational business processes.

Depending on the authority levels and complexity of work, a matrix organization may be further classified as weak, balanced, or strong. A weak matrix organization generally resembles a functional organization with project teams convened only for small projects. Often the project manager is a part-time leader with heavy technical responsibilities to accomplish the work of the project. At the other end of the spectrum, a strong matrix organization closely resembles a project-oriented structure. In the strong matrix, a project manager has wide-ranging authority including staffing decision and budgetary responsibilities.

Benefits of Matrix Organizations

There are many benefits to utilizing a matrix organization structure for new product development (NPD) projects. A composite organization allows optimal use of resources so that both functional teams and project teams gain access to SMEs with special skills. Additional, because project teams are temporary, a matrix organization can accommodate these temporary assignments while still maintaining a “home” for staff.

Of course, cost benefits are significant for a matrix organization. Unlike the project-oriented structure in which special skill sets may be duplicated among project teams, expertise is available across both the functions and projects in a matrix organization from a single source.

Finally, the key benefit of a matrix organization is increased communication and coordination. Because of movement of resources between functions and project teams, lessons learned are readily transferred. Coordination of activities is enhanced between routine operations and special projects. For example, a factory shutdown required to install new equipment is managed well in a hybrid structure since activities can be integrated among operations, project teams, and sales.

Disadvantages of Matrix Organizations

As anyone who has ever worked in a matrix organization will tell you, there are significant disadvantages. The primary drawback of the matrix organizational structure is that staff are faced with a dual reporting system – two bosses. Tensions and frustrations can easily develop if on-going work is not balanced with project expectations in a matrix organization. Additionally, project managers and department heads may engage in lengthy negotiations over optimal use of key resources.

Thus, another drawback of the hybrid organizational structure is the reduced pace of decision-making. There are often more stakeholders to satisfy in any decision taken by a functional or project-oriented team than in a hybrid structure. Moreover, decisions are frequently revisited as team membership changes.

Finally, the biggest disadvantage to a matrix organization is that team members are often assigned to special project teams on top of their daily, routine work. While most people enjoy the work of special projects, added duties can lead to long work hours, stress, and other negative outcomes.

Using a Matrix Organizational Structure

Innovation projects are often executed in a hybrid organizational environment. Derivative products, incremental improvements, and product enhancements often use lightweight teams working in parallel with a conventional functional organization. For these type of new product development projects, a matrix organization is ideal because the project team utilizes both the breadth and depth of organizational expertise and knowledge.

Again, smaller projects requiring SMEs are also best implemented within a matrix organization. Often a project manager may serve in a part-time role as well as serving as a lead technical expert. Firms benefit from the matrix organizational structure to test individual’s management capabilities in this way, while still maintaining both technical and managerial promotion scales.

Matrix Organization Structure

Matrix organizational structures are a hybrid between pure functional and projectized organizational structures. An advantage of the hybrid structure for NPD projects is the ability to tap into the depth and breadth of expertise in the firm. Both communication and coordination are enhanced. A manageable drawback to a hybrid structure involves dual reporting systems for team members, while working in a matrix structure offers diverse opportunities for individuals.

For more information about NPD project team structures, see “NPDP Certification Exam Prep” (Chapter 6), available from Amazon. You can also learn more about mastering team skills as a project or engineering manager, please join us for an NPDP workshop. Workshops address the theory and best practices of teams working in innovation. NPDP workshops are held monthly through guided webinars or at your own pace in a cost-effective self-study format. We now also offer project management training through our partner, Leap University. Use code GNPS2015 to save $50 on your registration.

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