How do managers at a 15,000-employee global manufacturing company thrive within the matrix?
“It requires constant education,” says Lucinda Smith, GPHR, senior vice president for human resources of AGCO Corp., a global manufacturer of agricultural equipment based in Duluth, Ga.
It helps when your chief executive officer has authored a management book that promotes the benefits, and acknowledges the challenges, of matrix-style organizational structures.
“Since the classical organization forms—especially the functional organizational structure—no longer satisfy modern requirements, overlapping organizational forms were developed,” AGCO CEO Martin Richenhagen writes in Simply Management (Indigo Custom Publishing, 2006). The matrixed organization develops a “double management and command structure” that provides greater visibility, stronger governance and more control in large, complex companies.
A dual-reporting relationship is the defining characteristic of the matrix that AGCO’s 450 global managers work within. Dual reporting differentiates the matrix-style structures from the traditional hierarchical structures they are replacing at many companies across all industries.
Executives interested in reaping the benefits of matrix-style structures need significant assistance from their human resource professionals to ensure that the approach is suitable to the organization, properly implemented and monitored on an ongoing basis.
HR leaders have strong ties to many of the levers that make or break the matrix structure, says Carol Cooley, SPHR, vice president of human resources for Total Community Options, a Denver-based health care assisted-living services company. Those levers include recruiting, training, leadership development and performance management, notes Cooley, a member of the Society for Human Resource Management’s Organizational Development Special Expertise Panel. She previously worked for Wellpoint, a matrixed Fortune 50 health care company.
Dual Reporting Growing
In a matrix structure, an employee reports to two managers who are jointly responsible for the employee’s performance. Typically, one works in an administrative function, such as finance, HR, information technology, sales or marketing, and the other works in a business unit related to a product, service, customer or geography.
As a senior HR manager in Philadelphia-based Comcast Corp.’s technical operations division for the past two years, Charlotte Anderson, SPHR, GPHR, maintained a dual-reporting relationship with her technical operations vice president and her director of HR at corporate headquarters. Anderson’s primary role involved translating corporate HR guidance, information and policies to her colleagues in the context of their business environment and operations goals. Anderson says the matrix structure prevented her from feeling “isolated” or as if her HR work were “parallel to” or “removed from” the work of her division.
“I was very close to what the business was doing on a day-to-day basis, and I very much liked that,” Anderson says. She recently returned to her previous role as president of the organizational design and talent management consulting firm Amethyst and Iris in Hillsborough, N.J. Would Anderson have responded that way in her HR manager role if Comcast’s technical operations adhered to a traditional divisional or functional structure? “My gut says no, because I might not have been automatically included in business decisions,” she says. Human resources “could have been treated as more of an afterthought.”
Other HR professionals with matrix experience identify cross-functional team alignment in the service of a business goal as one of the top benefits of a matrix structure. For example, part of the reason Richenhagen introduced the matrix structure when he became CEO in 2004 was because AGCO had recently completed a number of acquisitions and he wanted to integrate and align the company.
“The matrix structure was a way to bring the company together,” Smith notes. Matrix management “makes our organization stronger. You get different viewpoints while also providing checks and balances across all the regional operations and across all functions.”
Cooley believes that matrix structures help workforces “get closer to the customer.” As an employee working within a matrix structure, “my function may be HR or marketing, but all of my activities and work are aligned with the business outcomes we want to achieve,” she explains.
As Cooley suggests, matrix structures may be applied to an entire company, select divisions, select job classes or business units within a company, or to smaller projects or initiatives. Richenhagen applied the matrix structure to all global management positions at AGCO, for example, while Comcast uses a matrix structure in its technical operations division. Moreover, some areas of an organization may be “matrix-esque,” even if formal dual-reporting relationships have not been implemented. For example, Cooley’s HR department provides shared services for several operating companies.
David de Wetter, a Dallas-based senior consultant in Towers Watson’s talent management and organization alignment practice, works with a global consumer products company that uses the matrix structure for product design, marketing and operations while relying on the traditional functional structure for other areas of the business, including sales.
Because matrix structures can be applied to all or parts of organizations as well as to projects, survey data on their prevalence are hard to come by. That said, reports from the field suggest that the use of matrix structures is growing. Among de Wetter’s global clients, most “have moved toward or are moving toward using the matrix structure for at least some of their areas,” he notes. “There is a major shift.”
Pros and Cons of Matrixed Organization
Martin Richenhagen, chief executive officer of Duluth, Ga.-based AGCO Corp., wrote Simply Management (Indigo Custom Publishing, 2006), a book that contains matrix-management guidance that members of his human resource department have incorporated into training activities. In this excerpt from the book, Richenhagen frames the pros and cons of the matrix structure:
- Better overview of a product [that is] manufactured in several areas or is sold by various subsidiaries in different markets.
- The matrix position is a direct and helpful source of cross-information.
- The matrix organization is well-suited for development of new business areas and coordination of complex processes with strong dependencies.
- Unclear responsibilities (if no areas of results are established), thus complicating governance and [control].
- [Employees holding] matrix positions and functional positions delegate responsibilities to each other.
- Uncertainty about who is to receive recognition for good performance and who is to be addressed for poor performance.
- Insufficient clarity concerning who is in charge, as well as decisions and direct authority.
- Potentially greater stress for employees.
Monitoring the ‘Matrix Tax’
Before moving to a matrix structure, leaders should be aware of what de Wetter describes as the “matrix tax”—structural challenges that HR professionals should address to prevent them from limiting the benefits the structure offers.
While matrix proponents promote the structure’s benefits in responding quickly to complex business challenges, the structure requires managers and employees to operate with less clarity concerning priorities, performance evaluations and decision-making. “Matrix structures require considerable group dynamic capabilities from the employees,” Richenhagen writes in his book, “as well as a high degree of tolerance for ambiguous situations.”
Hierarchical structures may get bogged down in bureaucracy, but decision-making authority within division and functional structures normally is clearly delineated. In contrast, employees and managers working within matrix structures frequently contend with competing priorities—those related to their administrative function and those related to their business or geographic unit or project team—when making decisions. For example, should a compensation manager within a product business unit experiencing high growth adhere to corporate policy with regard to performance bonus limits, or exceed those limits in some instances to help achieve the unit’s and/or the overall company’s revenue growth goals?
Matrix structures pose difficult challenges for HR professionals charged with ensuring equity and fairness across the organization. However, Cooley reasons, “you may want to reward employees differently [in one business unit] to achieve a high-growth objective.”
- De Wetter identifies two signs that the matrix tax may exceed the structure’s value:
- Decision-making gets bogged down because goals and accountability are not clearly defined.
- Employees who previously qualified as top performers in a hierarchy struggle in the matrix structure.
HR professionals working in matrix structures should monitor these indicators and be prepared to intervene—via communication and training—if and when these signs materialize or intensify. Furthermore, HR professionals should monitor relationships between managers who “share” direct reports. These relationships between an employee’s two managers are crucial to the success of a matrix structure: Following a difficult matrix experience, one veteran HR manager recalls, “Neither of the managers I reported to was very good.”
Factors Supporting Matrix Management
David de Wetter, a Dallas-based senior consultant in Towers Watson’s talent management and organization alignment practice, indicates that the following skills and conditions should be in place to help ensure the success of matrix-style organizational structures:
Critical Skills for Staff
- Negotiation and conflict management.
- Informal and political influence.
- Flexibility, adaptability and tolerance for ambiguity.
- Serve as catalyst for clarity.
- Credibility and objectivity.
- Cultural awareness.
Conditions for Success
- Clear rationale for the matrix structure.
- Clear objectives and metrics.
- Expected leadership behavior is identified, communicated and monitored.
- Open access to information by all parties.
- Performance management system that facilitates dual input.
- Line of sight for accountability.
HR managers can help keep the matrix tax at an acceptable level: first, by ensuring that the structure is a good fit for the organization, a business unit or even a project team; and second, by providing ongoing support through communication, training and leadership development.
Cooley suggests beginning with a pilot program in a project setting. Doing so enables leaders to “test the organizational tolerance for the matrix.” She asserts that the pilot matrix project’s criteria for success should be clearly defined so that the evaluation relies on quantitative and qualitative measures.
Once the decision to move forward with the structure has been made, the leaders of the matrixed company, business unit or project team should create a charter. The charter should spell out the rationale for the structure and the group’s mission, de Wetter explains. This involves making sure team goals, performance indicators, interdependencies and performance management systems are clearly identified.
HR professionals can help managers perform effectively within the structure by providing training to ensure that they possess and apply matrix-appropriate management skills and leadership qualities, such as dealing with ambiguity and conducting performance appraisals in tandem with another manager.
AGCO’s training repeatedly emphasizes the importance of communication between managers. The manufacturer’s matrix training and communication program is nearing its seventh anniversary, and the ongoing effort has become part of the culture. Every new manager—both new hires and those promoted to management positions—takes a two-day classroom course on the matrix taught by senior leaders. A module in the company’s learning management system also covers matrix management in great detail. The content reviews different organizational structures, presents the rationale behind the matrix structure and imparts specific guidance for managing within the matrix.
When asked how long it takes to implement a companywide matrix structure, Smith laughs at the idea of a timeline. “You can’t just make an announcement and expect everybody to adopt and understand it immediately,” she adds. “It takes training and communications.”
The author is a business writer based in Austin, Texas, who covers human resource, finance and ethics issues.