* Is your organization still small enough that everyone knows each other?

* Is your product still so simple that every team member understands it inside and out?

Then, teamwork is easy to organize.

You come together, discuss what needs to be done, and do it.

However, successful companies grow, and inevitably, a point comes where the group becomes too large and the product too complicated for this simple approach.

Now you must change how you collaborate because the simple way is no longer viable.

Today, I will discuss an approach that is very widespread but also highly controversial.

It is the Matrix Organization.

On the one hand, it has been used in many large and successful organizations for a long time.

On the other hand, people often complain that this organization creates unclear responsibilities, excessive communication channels, and high inefficiencies.

So let's look at what advantages a matrix organization offers and how to avoid the disadvantages.

Which problem needs to be solved?

Developing a product requires many different skills. These skills are brought to the team by appropriately qualified employees.

* There's an expert for purchasing services,

* an expert in selling the product,

* and the developer who knows how to design a product that fulfills the required functions and works reliably,

* and so on... – You understand the concept.

In a product development project, all these people with their individual skills must work together to create a common result in the form of a new or further developed product.

This creates the need to organize the collaboration of these groups of people, to establish individual responsibilities, and to coordinate the distribution of tasks.

The form in which this is organized is called "Process Organization" because the purpose of this organizational form is to control the workflow.

The Project Organization, with its roles and rules, which I describe in many articles in my newsletter, is a form of Process Organization.

This is how it usually starts:

There's someone who has a product vision, and the first thing he does is look for allies with the most urgent skills to make the product happen. That's what we call a startup.

This organization grows over time with success and reaches a size where expertise is no longer represented by just one or a few employees. Suddenly, many employees are working in the same field of competence.

Now we suddenly have the problem of coordinating people with the same skills.

Groups need to agree on the application and development of their common skills. Competence-specific strategies must be developed and operationally implemented with careful planning and execution to ensure effectiveness.

Things often go wrong at that point because there is a lack of expertise in what the right target organization should look like.

Here are some examples of competence-related strategies that require careful consideration, as they affect the future of the entire company, not just a single project.

* A purchasing strategy describes which suppliers to work with and how to negotiate favorable prices.

* A product strategy describes how the product should evolve to meet customer requirements and market conditions over the long term.

* A development strategy describes which technologies are suitable for future products and therefore need to be understood and prepared.

* An after-sales strategy outlines the processes that support the customer during product use and help maintain their loyalty to the company.

* etc.

For this to be successful, responsibilities need a clear definition, and tasks must be appropriately distributed.

One of how this can be done is through a Functional Organization.

In Functional Organizations, responsibilities are mapped to organizational units. You can learn more about the Functional Organization in my blog article on my website.

The Matrix Organization

We have two different aspects that need to be organized simultaneously.

* Regulating responsibilities and tasks regarding the process of product development. —> Project Organization

* Regulating responsibilities and tasks regarding the development and application of expertise. —> Functional Organization

Both affect the same employees!

So there are two dimensions that the employee must satisfy.

The mathematically educated reader will easily understand that a two-dimensional problem can be represented as a matrix.

Hence the term "Matrix Organization."

Properties of a Matrix Organization

Unlike in a one-dimensional line organization, in a matrix organization, the employee has two management relationships.

He receives tasks and goals from both the project manager and the functional manager, and must be accountable to both.

The two dimensions of a matrix have equal priority for the employee. This means he must satisfy both aspects simultaneously.

To make it clear and explicit:

In a Matrix Organization, the managers each focus on one dimension, while the employee, as an integrator, must account for both dimensions with a common solution.

So far, so good. This is still relatively simple.

But there's still one question to answer:

Who takes care of personnel management in a matrix organization?

So, who is responsible for supporting the employees when help is needed, evaluating their performance, making decisions about their development and compensation, and resolving conflicts between employees, etc.?

Ideally, one could use another management level for this third dimension in the matrix organization.

Typically, this is not done because there is reluctance to invest in so many managers. As a result, one of the two existing management dimensions is assigned personnel management in a dual role.

This makes sense in theory and is feasible, but in practice causes a serious methodological problem.

The manager who has been given personnel management competence automatically gains more weight than the manager who doesn't have it.

The equal status of project and functional organization is no longer maintained when personnel management is assigned to one of the two dimensions, although this should be a fundamental principle.

Matrix Organization with Increased Complexity

In the matrix organization described so far, employees are clearly assigned to one specific functional area and one specific project.

This is only feasible if there are enough employees with each skill set to support all projects, and if the workload in each functional area and project is sufficient to occupy a full-time employee.

In today's times of ever-increasing specialization, this is often not the case, which means that employees are involved in several projects simultaneously.

As a consequence, an employee no longer has just two management relationships, one of which has an unjustified primacy, but rather a multitude of management relationships.

At this point, it should be clear that the matrix organization, particularly its more complex form, is often perceived as complicated and difficult to manage for a good reason.

Therefore, it is essential to establish rules that simplify the complexity and bring it back to a manageable level.

Managing a Matrix Organization

Clear Assignment of Responsibility

The responsibility assignment mentioned above is not clear enough to offer adequate guidance to employees and managers within the organization.

It is important to define responsibilities more precisely and transparently, particularly since the project manager rarely holds personnel management responsibility for the employees.

Therefore, the assignment of responsibility needs to be clarified.

Project Organization Steers — Functional Organization Delivers

This simple and easily understandable management principle highlights the core reason for the existence of the matrix organization.

The project organization is a process organization, so it makes sense to hold the managers within the project organization accountable for ensuring smooth operations.

The functional organization is responsible for the expertise, which is essential for producing high-quality work. Therefore, it should also be accountable for applying these skills and delivering the results.

However, this division of responsibility removes an important aspect of the project manager's role. After all, project managers are responsible for achieving the project goals.

This is the point that causes the most confusion in practice. Many project participants and stakeholders fail to realize that in a matrix organization, the project manager's holistic responsibility no longer exists.

So, who ensures that both dimensions truly fulfill their responsibilities?

The answer is simple:

The manager to whom both the project manager and the functional managers report is responsible.

If there is no special regulation in a company, then it is necessarily the CEO.

But of course, he can delegate this responsibility, which he will usually do.

But please don't delegate this responsibility to the Project Manager! Instead, identify a senior manager with the necessary skills to understand both dimensions of the matrix.

If the company culture supports Matrix Organization Thinking, it will not be a full-time job.

Clear Escalation Rules

Clearly defined escalation rules help operationally reinforce this shared responsibility.

Escalation rules are scenario descriptions that guide employees on which problems should follow which escalation path.

Give examples for:

* Which issues should be addressed with my functionally responsible superior?

* Which issues should be directed to the project manager?

Temporary Focus

To reduce the many reporting relationships in the complex matrix organization model, I recommend dividing the employees involved in the project into three categories.

* Employees who are dedicated to a specific project and work solely on it from start to finish.

* Employees who are assigned to a specific project for a set period, which may range from a few days to weeks or months. The key is that, at any given time, their work focuses exclusively on one project, even if the project changes in short cycles.

* Employees who contribute only a small portion of their time to a project and are available on call as needed.

By introducing time as a dimension, the number of management relationships at any given moment can be reduced, making performance management easier. However, this approach requires precise control over project processes.

Lean Project Organization

To avoid compensating for poor performance in functional areas by duplicating skills in the project organization, the project organization must be very lean.

Employees in the project organization should focus exclusively on project management tasks, while those responsible for delivering results should remain in the functional organization.

It's not uncommon for me to observe the attitude:

“Before explaining to the functional department what they should do, I might as well handle it myself quickly.”

This is tempting, of course, especially for tasks that require rather general or perhaps minor skills.

I advise against this approach, as it undermines the overall control model, creating room for misunderstandings and misinterpretations of responsibilities. This can lead to unfinished project tasks elsewhere, with potentially significant consequences for project success.

That’s it for today — the basics and key rules for working with and within a Matrix Organization.

Of course, there are still many specific and more detailed responsibilities that should be derived from this foundational control logic.

In further articles, I will go into detail about the roles and organizational structures required for this.

So, please subscribe to my newsletter to ensure you don’t miss these articles.

If you have questions or recommendations, please write in the comments, or let’s chat.

If you found this helpful, don’t forget to share it with others who might enjoy it too!

Get full access to Uwe Mierisch at uwemierisch.substack.com/subscribe