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A matrix organizational structure is one of the most complicated reporting structures a company can implement. Read on to learn why a company might implement a matrix structure and the advantages and disadvantages for both company and staff.
Definition
A matrix organizational structure is a company structure in which the reporting relationships are set up as a grid, or matrix, rather than in the traditional hierarchy. In other words, employees have dual reporting relationships – generally to both a functional manager and a product manager.
Example
In the 1970s, Philips, a Dutch multinational electronics company, set up matrix management with its managers reporting to both a geographical manager and a product division manager. Many other large corporations, including Caterpillar Tractor, Hughes Aircraft, and Texas Instruments, also set up reporting along both functional and project lines around that time.
Advantages
In a matrix organization, instead of choosing between lining up staff along functional, geographic or product lines, management has both. Staffers report to a functional manager who can help with skills and help prioritize and review work, and to a product line manager who sets direction on product offerings by the company. This structure has some advantages:
Resources can be used efficiently, since experts and equipment can be shared across projects.
Products and projects are formally coordinated across functional departments.
Information flows both across and up through the organization.
Employees are in contact with many people, which helps with sharing of information and can speed the decision process.
Staffers have to work autonomously and do some self-management between their competing bosses; this can enhance motivation and decision making in employees who enjoy it.
Disadvantages
The matrix structure is generally considered the toughest organizational form to work in, due to the conflicting pulls on resources. The overlaps can lead to turf battles and difficulty in determining accountability. The major disadvantages of a matrix structure are:
 
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