springboard to matrix management
David I. Clelend
Department of Industrial Engineering,
Systems Management Engineering
and Operations Research
University of Pittsburgh
Contemporary organizations are undergoing a metamorphosis in their structure and in the manner in which they are managed. A key characteristic of today’s organization is the growing use of “matrix” approaches which emphasize some form of team effort to integrate and synergize the application of resources to organizational problems and opportunities. The use of teams to deal with organizational situations is found in such forms as “project/program management”, “task forces”, “product management”, and “international matrix management”. Many other names are used to indicate a team effort in organizations such as: “people involvement teams”, “task teams”, “plural executive”, “satellite teams”, “project center management”, “new venture management”, etc. Current literature tends to group all these team-related efforts under the generic title of “matrix organization” or “matrix management”. This paper will provide an overview of the growing use of organizational teams in the management of today’s organizations. In providing this overview the term “matrix management” will be used as a generic title to describe the overall concept of using teams as a fulcrum to integrate the utilization of resources in contemporary organizations.
Matrix management had its genesis in several ways. Product management, international management, and project/program management.
Project management emerged in an unobtrusive manner starting in the early 1960's. Project (or program) management was used to describe a type of structure which already existed in various uses. No one can claim to have invented project management; its beginnings are often cited in the ballistic missle program or the space program of the United States. The origins of project management can be found in the management of large scale ad hoc endeavors such as the Manhattan Project, large construction projects, or the use of naval task forces.
In the 1960’s we began to recognize project management for what it is. As early as 1961 Fisch, writing in the Harvard Business Review, spoke of the obsolescence of the line-staff concept and the growing trend of the use of a “functional-teamwork” approach to organization.1 In 1961, IBM established systems managers with overall responsibility for various computer models across functional divisional lines. In the 1960’s and 1970’s a wide variety of organizations experimented with the use of alternative project management organizational forms. Project management has reached a degree of maturity and has been the precursor of today’s matrix management approach.
EXTENT OF USAGE
How extent is matrix management in contemporary organizations? Its use is widespread and is growing. A review of the practices of some organizations today can give one insight into how extensively matrix management is used and why it is used.
The General Motors Company, certainly one of the more conservative organizations in the U.S. industrial complex, adopted matrix management in its engineering community in 1974. Within General Motors this adoption represents one of the most significant changes in organizational approaches since the profit center decentralization concept in the 1920’s and 1930’s. In the corporation, the use of a “project center” concept is one of the most important managerial innovations in years. Matrix management was devised to coordinate the efforts of the five automobile engineering divisions in General Motors. A “project center” consists of engineers temporarily assigned from the profit center division to work on a new engineering design. If a major new effort is planned — a body changeover — a project center is formed across the automobile divisions which operates for the duration of the change. People assigned to a project center work on engineering matters which are common to all divisions, such as frames, steering gear, electrical systems, and so on. The profit center complements but does not replace the lead division concept where one division has primary responsibility for taking innovation into production.
The fact that a company as traditionally organized as General Motors has gone to a form of a matrix system of management is significant. The motivation for the realignment of the engineering divisions within General Motors was to respond to a strategic change being followed in the marketplace, viz., the downsizing of the automobile.2
In the mid-1970’s Chase Manhattan’s corporate bank reshaped itself from a geographic form of organization into one that assembled calling officers into teams, each team organized to focus onto a single industry (such as drugs or electronics). Chase presently is steadily moving toward the matrix form of organization. According to Fortune
“A short time ago, an organization chart of the bank’s international department would have shown it almost entirely divided along geographical lines, with only merchant banking roped off and functioning more or less worldwide. Today the bank has several other cross-border operations, to which it may add still more, that give its structure an unmistakable matrix look: international institutions (which primarily means correspondent banks), export and trade financing, and private banking (for well-heeled individuals).”3
International Minerals and Chemical Corporation ventured into matrix management as a response to a top management crisis involving the company’s problem-solving and decision-making processes. This company’s agricultural business was organized on a product basis with separate profit centers. Duplicative sales effort with the same customers became evident. Inconsistencies between profit centers in pricing, terms, and agronomic effects confused customers. Salesmen representing different product divisions were contacting the same customer. Interdivision competition was more intense than competition with other suppliers. In summary, as each division exercised its prerogatives an overall loss of corporate effectiveness resulted. Eventually the ineffectiveness from a corporate viewpoint motivated the need to convert from a product-oriented structure to one based on functions. The functional approach alleviated the inefficiencies and duplication of the product-oriented structure but created the need form some coordinating mechanism. Common production units were used to provide marketing with products. This required coordination to insure that the right products got to the right markets.
To provide the needed coordination, senior marketing people assumed a team responsibility to provide a horizontal effort aimed at pulling the market effort together. Originally, this effort was informal and temporary. Its value in blending the vertical and horizontal effort has caused the arrangement to become permanent. Now each divisional vice-president has autonomous responsibilities (the vertical organization) and responsibility for managing his resources in cooperation with other division managers (the horizontal organization).
International Minerals and Chemicals has used this form of matrix management for six years. Matrix management has favorably impacted on such things as production capacity, inventory reduction, receivables management, reduction of working capital, and the development of human resources.4
In the Mircowave Cooking Division of Litton Industries, the organization has evolved to a task team approach. Each team has a manager with representatives from several functional departments and top management participation as required. For new product development within the engineering department, a team includes a design engineer, a stylist, technicians, drafts people, quality and manufacturing engineers. A representative from marketing, buying, and a home economist are also included. Other people representing industrial engineering, cost accounting, production managers, and other specialties are added as needed during the life cycle of the project. The manufacturing function is organized into operating units as a self-contained task team responsible for all aspects of manufacturing a product series.5
Litton Industries claims significant benefits from the task team organization: sales increases, increase in market share and profit increases. According to George, the most striking feature of the company to outsiders and new comers is the openness of the organization demonstrated in several ways such as: receptiveness to new ideas and people, attitudes of sharing information, problems, opportunities, etc., at all levels in the organization.6
In one large U.S. corporation, the research and development laboratory is organized along project management lines. Each research and development project has a project manager; in some cases functional or department managers may also function as a project manager on some development project. These research and development laboratory project managers have a project team in the laboratory that provides specialized support to the project. This corporation is organized on a profit and loss center basis; each profit center buys research and development support from the corporate research and development laboratory. Each profit center will have a profit center project manager having complete responsibility for the project. Specialized resources of the research and development laboratory are committed to the profit center project manager by the research and development laboratory project manager. The research and development laboratory manager commits to the scope and objectives of the project, as specified by the profit center management. The profit and loss manager is kept informed of the project’s progress to the level of detail desired through periodic design and status reviews as the project is carried out.
This type of an intra-corporate organizational arrangement is used for evaluating emerging strategic projects which require the concepting, prototyping, designing and building of unique or first-of-a-kind industrial systems.
Emerging strategic projects are so important to a profit and loss center and so complex to manage that the profit and loss center has to draw on the research and development laboratory resources to support the project. An intracorporate project management system is evolved to serve this need; Figure 1 illustrates this arrangement. The profit and loss center appoints a project manager to manage all aspects of the project within the profit and loss center as well as through working with a project manager in the research and development laboratory who manages a project team in the laboratory. Technical guidance is provided to the profit and loss center project manager by the research and development technical and management personnel; all over-all decisions on the project are made by the profit and loss management team. Engineers, technicians, draftsmen facilities are assigned to work on the research and development project with the cost being borne by the customer — the profit and loss manager. The profit and loss project manager is furnished tecnhical reports along with cost and schedule information in order that project visibility is maintained by the profit and loss manager.
A pair of important advantages result from this organizational arrangement:
First — Corporate research and development resources are brought into focus to support the profit center need;
Second — The profit center project manager can facilitate the introduction of technology into strategic projects by virtue of his image as a local sponsor, i.e., a member of the profit center staff.
Figure 1. Relationship of Intra-Corporate Project Managers
Each project manager functions as an integrator-generalist responsible for insuring project synergy.
Each project manager is dependent on the other as they manage their respective project activities.
Sometimes project management is used to develop new business opportunities. Osgood and Wetzel have developed the concept of using project teams to identify a new business opportunity and turn it into a viable business. According to Osgood and Wetzel:
“The team would have direct decision-making responsibility for taking a new venture through the initial start-up stages, then gradually transferring this responsibility to administrative managers as the business approaches operating stability.”7
No one really knows the extent to which matrix management is used. It is found in government, industrial, military, educational and health service organizations. Its use appears to be extensive and continues to grow. There is a growing field of literature appearing on the generic subject of matrix management. To understand the breadth of the use of matrix management a taxonomy is suggested below. This taxonomy is based on the nature of the organizational interfaces that are created when matrix management is used.
When matrix management is used organizational interfaces are altered. These interfaces — when organizational elements come together — form the boundaries around which the matrix relationships develop. In this section an overview of the nature of these interfaces will be examined.
An interface is the place where independent systems meet and act on or communicate with each other. More broadly defined, an interface is an area in which diverse forces interact. Still another view of interface is the means by which interaction or communication is effected.
Organizational systems are connected by means of interfaces. Production systems, financial systems, marketing systems are in one sense independent systems unto themselves. As a contributing subsystem to the larger organizational system, they are integrated through a myriad of interfaces where they come together at common boundaries of interest to support organizational goals. To grasp the meaning of the matrix organization the notion of an interface has to be understood. Some other uses of the idea of an interface can help to set the stage for such understanding.
Metallurgists tell us that the boundary layers or interfaces between crystals in metals are where the strength of the metal is determined. It is the imperfections in these interfaces that allow us to shape metal mechanically. Geologists know that changes in the earth take place at the interfaces of surf and shore, in the earth’s structure where fault blocks move in different directions, or where the forest meets the snow line. In a society cultural changes take place at the boundary interfaces where different subcultures come together. A matrix organization takes on distinctive cultural characteristics as compared to the traditional way of managing activities. These cultural characteristics are the result of action at the boundary interfaces in the matrix organization where cultural change comes about. These interfaces — where organizational forces come together at common boundaries of interest — shape the pattern of authority, responsibility, and accountability needed to facilitate organizational effectiveness.
The nature of these interfaces depends on the kind of matrix organization that is being used. Four basic types can be identified in contemporary organizations. They are:
Case I: The Project-Functional Interface
Case II: The Product-Functional Interface
Case III: The Project-Program-Functional Interface
Case IV: The Product-Functional-Geographic Interface
A discussion of these cases follows.
Case I: The Project Functional Interface
This type of matrix organization is formed by creating an overlay of ad hoc projects on an existing functional structure. A project manager is appointed to manage the project by working with people in the functional organizations. Functional managers are responsible for providing a pool of resources to support project needs. Project managers are responsible for accomplishing project objectives on time and within a budget. Decisions affecting project objectives, schedules, and costs are usually shared by the project and functional managers with general managers interceding in those decisions which cannot be resolved at the project-functional level. Large projects may be a profit center; small projects are usually integrated into a profit center.
Today, the project-driven matrix organization is endemic to a wide variety of contemporary organizations where projects range in size from a small research and development project to an ad hoc activity as large as the construction of the Trans-Alaska Oil Pipeline. The project management concept is appropriate in those situations where senior management wants to focus attention on a partcular ad hoc activity.
Case II: The Product-Functional Interface
In business organizations the idea of product management is found. For example, in a cosmetics company an individual may be assigned profit and loss responsibility for a given product or brand. When many product managers are appointed with profit/loss responsibility, a matrix organization is created with a resulting product-functional interface. In some cases these product managers are basically information gatherers on product performance and have little or no authority over the heads of the functional departments. In other situations, a product manager may develop a product plan covering such matters as advertising, use of field sales force, research support, packaging, manufacturing programs and then is responsible for negotiating with the suitable functional departments for the support and costs of the product. Usually these plans are approved by top management which forms the basis of the authority of the product manager.
The term “product manager” is used in different ways ranging from a product division manager who has product and division profit and loss responsibility, to a staff assistant who reports to a marketing department head who is more of an “assistant to” than anything else. The term “brand manager” and “product manager” are sometimes used in the same vein. Product managers typically represent top management on assigned products. In carrying out this activity product managers work across traditional functional lines to bring together an organizational focus to achieve product objectives. A product manager may be appointed to take over a product production that has been developed by a project manager. Thus, product managers appear later in the product’s life cycle.
Product management in one of its earliest forms appeared in the early 1930’s. Proctor and Gamble used brand management nearly fifty years ago. Today product management is utilized in a wide range of situations. At one extreme a “product coordinator” is found who harmonizes the manufacturing and marketing activities associated with his products. Taken to its most complex form, product management is found in a profit center context where a general manager, say of a division, has authority and responsibility to manage the life cycle of a family of related products.
Case III: The Project-Program-Functional Interface
Organizations that are already using a matrix structure in managing projects sometimes find it useful to introduce another element into the matrix organization, viz., a program structure. The distinction between a project and program usually depends on the time limitations.
A project is an activity planned for a finite duration with a specific objective and a target cost. When the project objective is successfully attained, the project is terminated.
A program is a broadly-defined functional or multifunctional activity planned for a continuing duration and providing leadership to influence organizational strategies.
A program structure is used in different ways within the matrix organization. Sometimes it is used as an infrastructure of related projects. The program element is appropriate in those instances where management wants to focus attention, to highlight or to emphasize the importance of a particular activity. This activity can be isolated, specified, tracked, and measured separately, and is ultimately integrated into some ongoing organizational purpose. Program managers may have administrative responsibility over people assigned from other elements of the organization, or may share these people with other managers. This is contrasted with project managers who usually do not have administrative responsibility over the people assigned from the functional elements.
Programs are used where it is necessary to assure more effective coordination across multiple components of the organization, including several profit centers on a continuing basis. Several examples of programs drawn from a company illustrate the cross-functional/cross organizational aspects of programs. In this company several programs were established to focus effort in the following areas:
Program management interfaces in the matrix organization center around program planning factors such as objectives, goals, and strategies since these factors place demands on project and functional activities. Three basic organizational interfaces take place: Project-Program-Functional. Decisions affecting the project cost, schedule, and objective are shared in some way by project, program, and functional managers. When these managers cannot agree on a decision, the common general manager of all three resolves the impasse.
Case IV: The Product-Functional-Geographic Interface
This structure is most visible in multinational corporations. Product managers are located in the profit center of the organization; geographic managers are responsible for a geographical portion of the market. The use of “in-country” managers is a common mechanism to provide geographic focus; in-country manufacturing divisions and sales operations report in some way to both product managers and geographic managers. In the Case IV matrix key decisions are shared in the three basic organizational elements: Product-Function-Geographic.
In the international company there are usually two coordinated avenues of strategic planning: by product, and by geography. Since decisions are shared, accountability for results is also shared in terms of product and geographic profitability through profit-center mechanisms on a product and geographic basis. International companies (particularly in Europe and Japan) emphasize group performance. This is reflected in their compensation policies. Financial visibility by product and geography is the norm in the multinational company.
In all these cases the organizational interfaces develop a cultural ambience where key managers share key decisions; authority and responsibility are complementary. Successful managers in the matrix organization have learned to work key decisions through the complementary interface managers. This sharing can be illustrated in the following manner:
Figure 2. Sharing in the Matrix Organization
A basic cultural factor affected by the matrix organization is the concept of the profit center and the delegation of authority to one manager who is held responsible for producing profitable results. Everything counts at the profit center level, everything is measured there, and people are rewarded accordingly. For those managers who have operated successfully for years in a decentralized profit-center mode, the sharing of decisions and results with some other manager outside the parent hierarchy can be a “cultural shock”. Certain key decisions are traditionally considered the profit center manager’s “territory” such as:
In the matrix organization, the profit center manager now must share these key decisions with others. For example, in product pricing in the international market the profit center manager will find it necessary to work with an “in-country” manager to establish price. Product sourcing decisions may be made by senior marketing executives at corporate headquarters rather than by the profit center manager. In practice, decision authority is complementary.
The use of the matrix organization in the project, product, and program context has been ably demonstrated in contemporary organizations. Matrix structures are becoming increasingly common in large international companies. Interfaces in the matrix organization bring about management circumstances where key decisions, accountability, and results are shared. The sharing context of today’s matrix organization approach will cause managers to sharpen their understanding of “participative management”, “consensus-Decision making”, group incentives, team management, and such factors which emphasize team action rather than individual performance.
1Gerald G. Fisch, “Line-Staff is Obsolete,” Harvard Business Review, September, 1961.
2Charles G. Burck, “How GM Turned Itself Around,” Fortune, January 16, 1978, pp. 87-100.
3“It’s a Stronger Bank that David Rockefeller is Passing to his Successor”, Fortune, January 14, 1980, p. 44.
4For a fuller discussion see Anthony E. Cascino, “How One Company Adapted Matrix Management in a Crisis,” AMACOM, 1979, pp. 57-62.
5William W. George, “Task Teams for Rapid Growth.” Harvard Business Review, March-April, 1977, pp. 71-79.
7Osgood, William R. and William E. Wetzel, Jr., “A Systems Approach to Venture Initiation,” Business Horizons, October 1977, p. 42.