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Newer Structural Models: Matrix, Team, and Network Designs
Principles of Management · Chapter 7: Designing the OrganizationSection 7.7 · lesson 39 of 11711 min · free with a free account
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In this lesson
The coordination problem each solves, and the one each creates.
- Describe the matrix, team-based and network structures
- Explain what each form solves and what it costs
- State the conditions under which a matrix works
- Select a contemporary form for a described situation
Transcript
Everything said in the video, section by section (1,530 words). Read along, or search it.
Designing the Organization
Newer Structural Models: Matrix, Team, and Network
The traditional forms share one clean rule. Each employee answers to a single boss, inside a fully internal hierarchy. The newer forms deliberately break that idea, each in its own way. This section covers three of them: the matrix, the team-based structure, and the network structure. For each, we'll ask what coordination problem it solves, and what problem it creates in return. We'll set out the three conditions a matrix needs, and look at make-or-buy logic. And we'll finish with the thread that ties all three forms together.
The Matrix Structure
2 Bosses, on Purpose
The matrix structure gives each employee dual reporting lines. Typically, one line is functional, and the other is a project or a product. Its defining feature is a deliberate violation of unity of command. That's Fayol's principle, from Subchapter three point five, that each employee should answer to one superior only. It's important to read that violation correctly. It is not an accident, and it is not a design flaw the matrix happens to carry. It's the structure's central, intentional choice. Everything the matrix solves, and everything it costs, follows from that one decision.
Solves and Costs
What the Matrix Buys, and What It Charges
What the matrix solves follows directly from that choice. It gives both dimensions a genuine voice in the decisions that affect an employee's work. And it puts the coordination conflict inside the structure itself. The conflict becomes an ongoing negotiation between two managers, both with a legitimate claim. A purely functional structure would escalate that same conflict upward every time, the bottleneck from Subchapter seven point five. What the matrix costs is equally real. Role ambiguity, from Subchapter seven point four, is close to built in by design. An employee with two legitimate managers can never be entirely sure which one's priorities should prevail. Conflicting priorities often reach the employee directly. The negotiation meant for the management level lands on her, and she has to reconcile the competing demands herself. Decisions slow down, because two managers must genuinely coordinate instead of following one clear line. And the matrix demands negotiation skill at every level. Managers, and often employees, must resolve dual claims without any formal tiebreaker built in.
When a Matrix Works
3 Conditions
A matrix works under three conditions. First, there must be a genuine need for both dimensions. Functional expertise and project or product focus must both matter enough to justify the coordination cost. Second, there must be clear rules about who decides what. Those rules specify in advance which kinds of decision belong to which manager, instead of leaving everything open to negotiation. Third, there must be managers on both axes who genuinely cooperate with each other. Here's the observation worth stating plainly. Matrices fail far more often on the third condition than on the first two. The need for both dimensions is often real. And clear rules can be written down. But two managers who won't actually cooperate can undermine even a well-designed matrix, however sound its formal rules are.
Figure 7.7.1
The Negotiation Lands on the Employee
Figure seven point seven point one shows a matrix at a fictional firm, Harborline Manufacturing. One employee reports up two lines, to a functional manager, and to a project manager. Beneath her sit three decisions that have to be allocated between those two managers. Which task takes priority this week? Who approves her leave? And who writes her performance review? Notice where all three questions sit. They're at the employee's own level, unresolved. Without clear rules on which manager owns each kind of decision, the negotiation doesn't stay with the managers. It lands directly on the employee. That's exactly the failure the case at the end of this section explores.
The Team-Based Structure
Organizing Around Autonomous Teams
The team-based structure organizes work around teams that hold substantial autonomy. That replaces individual roles arranged in a conventional hierarchy. The biggest change is to the manager's role. The manager stops directing individual work, and becomes a facilitator and boundary manager. That means supporting the team's process, and managing its relationship with the rest of the organization. It no longer means assigning and reviewing each individual task. The decision rights teams actually hold vary a great deal by design. Some team-based structures give teams real authority over scheduling, quality standards, and even hiring within the team. Others grant much narrower autonomy, dressed in team language, without the substance behind it. So when you assess a team-based design, look at the decision rights, not the vocabulary. Chapter eight takes this further, developing what makes a team function well once the structural choice is made.
The Network Structure
A Small Core, Everything Else Contracted
The network structure is also called the modular structure. It keeps a small core that performs only the activities the organization considers genuinely distinctive. Everything else is contracted externally. What this buys is real flexibility. Capacity can expand or contract by adjusting external contracts, instead of hiring or laying off internal staff. And the organization can access specialized capability that would be expensive to build and maintain internally. What it costs is control, and capability. Activities performed outside the organization sit beyond its direct authority. And skills and institutional knowledge that live in a contracted relationship don't accumulate inside the organization. They don't compound over time the way internally built capability does.
Beyond the Chart
Boundaryless and Distributed Organizations
Two related ideas extend these flexible forms. The first is the boundaryless framing. It describes an aspiration behind network and similarly flexible structures. The aim is to minimize the barriers a conventional structure imposes. Some are internal, between departments. Others are external, between the organization and its partners and customers. In practice, boundaries are treated as deliberately permeable, rather than fixed. Information, people, and even work itself can cross them more readily than a traditional hierarchy allows. The second idea is virtual and distributed structures, where people work together without being physically co-located. Distance creates its own coordination problem. Recall the communication-follows-proximity effect from Subchapter seven point four. Distant colleagues communicate less readily by default, regardless of how much formal structure connects them on paper. Subchapter twelve point four takes that problem up in full.
Make or Buy
The Logic Behind Network Forms
Behind every network form sits the make-or-buy logic. For any given activity, should the organization perform it internally, which is make, or contract it externally, which is buy? The answer turns on one specific question. Which capabilities must be held internally, because they're genuinely distinctive to the organization's competitive position? Those are the ones to make. Other capabilities are better bought. They're widely available, and they're not distinctive to what the organization actually competes on. And they can be accessed more flexibly through a contract than through a permanent internal function. Get that line wrong, and you either carry costs you didn't need, or contract away what made you different.
Table 7.7.1
The 3 Contemporary Forms Compared
Table seven point seven point one sets the three forms side by side. The matrix holds functional and project conflict inside the structure, rather than escalating it. It creates role ambiguity, and conflicting priorities that reach the individual employee. It requires clear rules on who decides what, and genuine cooperation between the two axis managers. The team-based form gives the people closest to the work direct authority over how it gets done. It creates a demand for a real shift in the manager's role, which many managers find difficult. And it requires that teams be granted real decision rights, not just team language. The network form buys flexibility, and specialized capability without building and maintaining it. It creates a loss of control, and a loss of internally held capability over time. And it requires a clear, disciplined answer to which capabilities must stay internal.
The Common Thread
Trading Structural Clarity for Adaptability
All three forms share a common thread. Each trades structural clarity for adaptability. A matrix gives up the clarity of a single reporting line. In return, it gains the adaptability of representing two dimensions at once. A team-based structure gives up the clarity of individually assigned, individually reviewed tasks. It gains the adaptability a team with real autonomy brings to organizing its own work. A network structure gives up the clarity of a fully internal, permanent organization. It gains the adaptability of a small core, surrounded by flexible external relationships. That trade is right under some conditions, and wrong under others. That's the contingency logic from Subchapter five point five. No single structural answer is universally correct, independent of the environment an organization actually faces.
Case Vignette
2 Managers Who Never Spoke to Each Other
Here is a composite case, constructed for instruction. Devika worked in a matrix arrangement at Harborline Manufacturing. She reported to a functional engineering manager, and to a project manager leading a major product launch. Both managers considered their own priorities for her time self-evidently more urgent. And neither had ever discussed with the other how her time should be split. In the same week, Devika kept receiving conflicting instructions. Her functional manager expected her at a standing engineering review. Her project manager expected her at a launch-critical planning session, scheduled at the identical time. With no rule settling which claim came first, Devika made the call herself, each time. She was guessing which manager would be more upset by her absence on that occasion. The matrix itself wasn't the problem. Matrices commonly hold this kind of dual claim successfully. What was missing was the second condition: a clear, stated rule about which decisions belonged to which manager. Without it, the coordination meant for the management level landed, every time, on Devika.
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