Matrix Organizational Structure
After reading the case, do you thing matrix organization structure can always bring success? A1. Matrix structure is effective in relatively large companies that cater to the needs of diverse markets with varying requirements. It is based on the basis of decentralizing power to various functional and operational heads so that they understand their respective domains or geographical regions and frame strategies accordingly. It is especially effective when an organization is in the growth phase and wants to go global with its products and services.
There is a well defined hierarchy and the decisions taken by the individual domain of functional heads are more often than not in sync with each other. It lends the company flexibility and allows it to focus on multiple business goals. It also enables the company to establish economies of scale and facilitates in innovative solutions to complex, technical problems. On the contrary if a company is a start up phase their might be a fight for resources between the individual departments. Here a matrix structure can lead to a state of ambiguity as the divisional officers have to report to multiple divisional heads which creates conflict.
The individual units end up competing with each other. Also there are additional costs owing to additional management and administration requirements. In such scenarios, centralized decision making system would be more effective than the matrix organizational structure. Q2. Identify some companies which have failed subsequent to introduction of matrix structure. List the reasons for failure and suggest what could be the appropriate structure for them? A2. In the 1990’s, some of the leading auto makers of the world resorted to the matrix structure-Toyota, Renault, Nissan, Ford, Mitsubishi etc.
They were not entirely successful in their implementation. More power was delegated to the functional heads and leads to carry out the individual processes with their resources. The reasons for their failure could be: 1. The system became very complicated and difficult for the functional heads to carry out their functions. 2. There were too many functional divisions but not many engineers with the desired specializations 3. Coordination across projects was lacking 4. Each manger had to handle too many projects. 5. Production costs were higher 6. There wasn’t adequate sharing of common components among divisions 7.
Led to competition between the individual segments for the limited resources so as to reduce cost. These industries should balance the need for a matrix structure with the specialized manpower and machines at their disposal. Instead of resorting to too much specialization in allocating divisions, they should club specialized divisions having common raw materials and technology requirements so that the costs of production are reduced and there is efficient use of resources. Also there would be better coordination and synergy between the constituent divisions in such a case.