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Matrix management has been championed by many as the best way to manage the development of new products and services |1|. Born out of the aerospace race, matrix management is a "mixed" organizational form in which normal hierarchy is "overlayed" by some form of lateral authority, influence, or communication. In a matrix, there are usually two chains of command, one along functional lines and the other along project lines. Perham published, during the early 1970s, a list °f matrix users which included such prestigious companies as American Cyanamid, Avco, Carborundum, Caterpillar Tractor, General Telephone and Electronics, Hughes Aircraft, ITT, 3M, Monsanto Chemical, TRW, and Texas Instruments |2).

While matrix enjoyed widespread popularity in the seventies, discord has begun to surface in the eighties. For example, Texas Instruments reportedly dumped its matrix system, citing it as one of the principle reasons for economic decline |3|. Medtronic, one of the leading producers of cardiac pacemakers, scrapped its formal matrix system after two years of frustration |4|. Similarly, Xerox recently abandoned matrix, claiming that it had created a stranglehold on product development |5|. Probably the most damning criticism can be found in the popular In Search of Excellence, in which Peters and Waterman assert that

* Copyright © 1987 by the Regents of the University of California. Reprinted from the California Management Review, Vol. 29, No. 4. By permission of The Regents.

the tendency toward hopelessly complicated and ultimately unworkable structures "reaches its ultimate expression in the formal matrix organization structure Iwhichl regularly degenerates into anarchy and rapidly becomes bureaucratic and noncreative." |61

Is matrix management an unworkable system that eventually stifles the development of new products and services? Or is matrix management an effective mechanism for managing development projects in organizations? Hard evidence on the efficacy of matrix is virtually nonexistent. For the most part the literature consists of anecdotal success or failure stories. We believe that the issue has been obscured further by failing to recognize that there are different types of matrix. We further contend that the mixed reviews of matrix pertain more to different types of matrix rather than to matrix management in general.

While matrix has been applied to a number of different contexts (i.e., financial services, hospitals, construction), our focus is on its application to product development. To pursue this issue, we sampled over 500 managers, experienced in the development of new products and services, and collected data regarding both the usage and effectiveness of different matrix structures in their company. Before reporting the results, three different forms of matrix structures will be described and their relative advantages and disadvantages discussed.

Three Matrix Structures

Galbraith has distinguished different forms of matrix on a continuum which ranges from the functional organization to the pure project organization |7). The functional organization is the traditional hierarchical structure in which the organization is usually broken down into different functional areas, such as engineering, research, accounting, and administration. When applied to a product development effort, the project is divided into segments and assigned to relevant functional groups with the heads of the functional groups responsible for their segments of the project. Coordination is provided by functional and upper levels of management.

At the other end of the spectrum is the project organization, in which all the resources necessary to complete a project are separated from the regular functional structure and set up as a self-contained team headed by a project manager. The project manager has direct authority over all the personnel on the project.

Matrix organizations lie between these two extremes by integrating the functional structure with a horizontal project structure. Instead of dividing a project into separate parts or creating an autonomous team, project participants report simultaneously to both project and functional managers. The open violation of the principle of unity of command is the trademark of a matrix management.

Companies apply this matrix arrangement in a variety of different ways. Some organizations set up temporary matrix systems to deal with specific projects while matrix may be a permanent fixture in other organizations. In addition, specialists may work full-time on one project or contribute to a variety of projects. One useful way to examine different forms of matrix management is in terms of the relative influence of project and functional managers; three different forms of matrix can be identified.

A Functional Matrix occurs when the project manager's role is limited to coordinating the efforts of the functional groups involved. Functional managers are responsible for the design and completion of technical requirements within their discipline. The project manager basically acts as a staff assistant with indirect authority to expedite and monitor the project. Conversely, Project Matrix refers to a situation in which the project manager has direct authority to make decisions about personnel and work flow activities. Functional managers' involvement is limited to providing services and advisory support. Finally, a Balanced Matrix is one in which the project manager is responsible for defining what needs to be accomplished while the functional managers are concerned with how it will be accomplished. More specifically, the project manager establishes the overall plan for completing the project, integrates the contributions of the different disciplines, sets schedules, and monitors progress. The functional managers are responsible for assigning personnel and executing their segment of the project according to the standards and schedules set by the project manager. The merger of "how and what" requires both parties to share responsibility and authority over work flow operations. Table 1 summarizes these descriptions, as well as the functional and project organization from reference |8|.

Matrix is essentially a compromise between the traditional functional organization and a pure project organization. It is more flexible than a functional organization but not as flexible as a project team. At the same time, it is more efficient than a project team, but incurs administrative cost which is unnecessary in a

Table 1 Project Management Structures

Functional Organization:

Functional Matrix:

Balanced Matrix:

Project Matrix:

Project Team:

The project is divided into segments and assigned to relevant functional areas and/or groups within functional areas. The project is coordinated by functional and upper levels of management.

A person is formally designated to oversee the project across different functional areas. This person has limited authority over functional people involved and serves primarily to plan and coordinate the project. The functional managers retain primary responsibility for their specific segments of the project.

A person is assigned to oversee the project and interacts on an equal basis with functional managers. This person and the functional managers jointly direct work flow segments and approve technical and operational decisions.

A manager is assigned to oversee the project and is responsible for the completion of the project. Functional managers' involvement is limited to assigning personnel as needed and providing advisory expertise.

A manager is put in charge of a project team composed of a core group of personnel from several functional areas and/or groups, assigned on a full-time basis. The functional managers have no formal involvement.

functional organization. Table 2A summarizes the major advantages and disadvantages reported in the literature.

Many of the problems associated with matrix are in contradiction with its strengths. Critics have described matrix as being costly, cumbersome, and overburdening to manage, while proponents praise its efficiency and flexibility. Everyone agrees that matrix is a delicate system to manage, but few have discussed the relative efficacy of different types of matrix. With this in mind, the three types of matrix structures will be compared according to the advantages and disadvantages associated with matrix. Table 2B summarizes the tentative conclusions of this discussion.

Advantages:

* Efficient Use of Resources All three forms of matrix allow specialists as well as equipment to be shared across multiple projects.

* Project Integration Granting the project manager more control over work activities should increase project integration, but at the same time quality may suffer since input from functional areas is less concentrated.

• Flexibility The multidisciplinary involvement inherent in all three kinds of matrix should enhance flexibility and adaptive reactions. This should be especially true for the Balanced Matrix in which consensus through give-and-take are necessary to win joint approval. The Functional Matrix and Project Matrix are likely to be less flexible since authority is more clearly defined, making decisions less negotiable.

* Information Flow Vertical information flow should be enhanced under all forms of matrix, since one of the roles of the project manager is to be a central communication link with top management. Lateral communication, however, should be strongest in a Balanced Matrix. This is probably due more to necessity than design. Shared decision making places a premium on close communication through which agreements are eventually shaped. Conversely, lateral communication may suffer a bit under a project using Functional Matrix since the project manager and functional managers are not as dependent upon each other as in a Balanced Matrix.

Discipline Retention A key advantage that matrix has over the pure project team approach is that it allows participants to sustain their link with their functional area while working on multidisciplinary projects. This not only provides a home port for specialists to return to once work on the project is completed but also helps participants to remain technically sharp in their discipline. Still, the ability of participants to maintain ties with their specialty area is likely to decline as their involvement becomes more and more under the jurisdiction of the project manager.

Table 2A Advantages and Disadvantages of a Matrix Organization_

Advantages

+ Efficient use of resources—Individual specialists as well as equipment can be shared across projects.

+ Project integration—There is a clear and workable mechanism for coordinating work across functional lines.

+ Improved information flow—Communication is enhanced both laterally and vertically.

+ Flexibility—Frequent contact between members from different departments expedites decision making and adaptive responses.

+ Discipline retention—Functional experts and specialists are kept together even though projects come and go.

+ Improved motivation and commitment—Involvement of members in decision making enhances commitment and motivation.

Disadvantages

- Power struggles—Conflict occurs since boundaries of authority and responsibility deliberately overlap.

- Heightened conflict—Competition over scarce resources occurs especially when personnel are being shared across projects.

- Slow reaction time—Heavy emphasis on consultation and shared decision making retards timely decision making.

- Difficulty in monitoring and controlling—Multidiscipline involvement heightens information demands and makes it difficult to evaluate responsibility.

- Excessive overhead—Double management by creating project managers.

- Experienced stress—Dual reporting relations contributes to ambiguity and role conflict.

Tfcble 2B Comparative Advantages and Disadvantages of Three "types of Matrix Structures

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