FGI NEWS – ISSUE 05: COMPLEXITY

Diversity is vital: The matrix organization

The modern market is a network of transactions and reciprocal effects. It is much more similar
to dynamic systems such as the Internet than to the medieval marketplace. Doing business
has therefore become more complex and will continue to become even more so in the future.
How should a company act in such an environment? How can it organize itself as an agile,
living system?
Matrix management is one possible answer, although not a simple one.

The matrix – or the principle of organized tension

In light of increasing pressure to adapt, companies with a classic hierarchy are faced with a problem: the classic
hierarchy itself. Being the opposite of flexible, such hierarchies are rigid and slow. Companies seeking to make
themselves ready for the future are therefore looking for ways to increase their flexibility and adaptation skills,
enabling them to react rapidly to unforeseeable changes.
This situation can be compared to an acrobat on a tightrope: In order to maintain his balance on the rope, the
acrobat must have the freedom to move from one instable position to another. Accordingly, the variables that he
manipulates (such as the position of his arms and the frequency of his arm movements) must be highly flexible in
order to safeguard the stability of other, more fundamental characteristics.
To attain such flexibility, companies are increasingly turning to the principles embodied in the matrix organization.
In its simplest form, this combines two guidance systems and organizes the company according to both functions
(procurement, production or sales) and objects (products, countries or projects). Each employee thus has two
supervisors. Whereas the classic hierarchy is one dimensional, i.e. vertical, the matrix organization is two
dimensional, i.e. vertical and horizontal.
This has far-reaching consequences. As a result of different perspectives on the system (a manager from the
procurement department has a completely different viewpoint than a product manger) and the corresponding
exchange of information and ideas, additional information becomes available very rapidly and in different areas of
the company. In theory, this leads to greater overall awareness of problems and faster reaction times; the quantity
and quality of decisions increases. In practice, however, there is one problem – the pressure to reach an
agreement despite the presence of different perspectives and interests.
This clearly shows that the matrix organization makes fundamentally more complex demands of management.
Structural shaping of the company alone is not enough. Holistic approaches that provide physiological and
psychological guidance are required instead.

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An organizational matrix is always a communication matrix
A company matrix is a living system with its own cardiovascular system. Information is the organization's oxygen.
Those seeking to successfully manage a matrix must have outstanding media competence and a complex
understanding of communication. After all, a company’s propensity to communicate is also an indicator of its
stability and flexibility. Every business transaction revolves around offer and demand, assurance and acceptance,
development and processing. Because of its horizontal and vertical integration, the matrix offers communication
advantages: The left hand knows what the right hand is doing. Consequently, the organizational matrix is always
a conversational matrix. It forces entrepreneurs and top managers to make communication their first priority,
expanding and revising their channels accordingly. Above all else, the matrix manager must concentrate on
honing his or her own self-concept. A commanding and rigid style may have been taken as evidence of strong
leadership in a classic hierarchy, but in the matrix it merely yields subordinates who pretend to be led. A
competent leader therefore establishes only that framework which allows workflow processes to be restructured.
This includes encouraging employees to test their freedom and flexibility and make full use of them. After all, the
flexible, learning organization requires room for new ideas, and its members require opportunities to cultivate an
independent working style.
With regard to decision-making processes, this means that the chain of command and the flow of information are
small loops instead of vertical, top-down processes. The more a business enterprise becomes a network of inter-
communicating units, the more definitive power-based processes shift into the hands of the employees. In a living
matrix, organization and communication permeate each other. This can manifest itself in workflow processes, in
the internal computer network or even in the architecture of the buildings. An international carmaker recently
demonstrated what form the latter can take when it housed a team of approximately 600 PR, marketing and sales
employees in a glass building located at the entrance to its factory. The airy ribs that naturally run through the
departments as they transverse the building are what make this structure so unique. The barriers, gatehouse and
infamous fence around the perimeter of the grounds are now things of the past. Obviously, this company has
realized that short, transparent paths make it more agile and more communicative, enabling both customers and
employees to experience its true spirit firsthand.

The cooperative conflict

According to a sociological rule of thumb, the larger the group, the lower the chances of its realizing joint interests,
because the contribution made by individual members is barely noticeable. This observation coincides with our
everyday experience: We point the finger at others in order to make ourselves look better, we quickly use up
public resources as we expect immoderation in others, we put less effort into something than our co-workers –
after all, it doesn’t do any noticeable harm. In fact, the damage caused by the egotistical actions of individuals is
often barely measurable. A lack of solidarity and an insufficient cooperation culture can become huge cost factors
for companies, however, as what may appear to be a rational choice for an individual does not necessarily lead to
the best decision. When there is a fire in a movie theater, everyone runs for the exits. The resulting atmosphere of
panic is a direct result of rational action on an individual level. Yet the people in the burning movie theater would
be better off if they decided to cooperate by “keeping calm”.
This example also clearly demonstrates that cooperative behavior does not demand any altruism. On the
contrary, cooperative behavior is the basis for successful action. In the matrix, one doesn’t have to be better,
faster or more aggressive than everyone else to attain success. In fact, it is the very attempt to come out on top at
any price that prevents maximization of personal benefit. This principle takes some getting used to. After all, we
learn to compete unconditionally from childhood on, e.g. with siblings for our parents’ attention. Good zero-sum
players are poor win-win players, but the latter are urgently needed in the matrix organization.

fgi news 05 - „The Matrix Organisation“ 2 © FischerGroupInternational

Learning to be more like insects
It would be completely wrong to assume that cooperative behavior is just a misguided desire for harmony. Every
dispute demonstrates some level of cooperation, e.g. competition for the best possible customer service. Conflicts
are therefore not a sign of crisis, they are a sign that an organization has a variety of preferences which could
pose adaptive advantages in different situations. Perceiving conflict as cooperation is the first step towards a
sense of business fairness based not on rules but developing from mutually self-reinforcing behavioral patterns.
Ultimately, it is important to remember that, in the matrix, people must cultivate characteristics that more closely
resemble insects than wolves. How successful this development process is depends on how consistently
managers promote a culture of cooperative conflict. A joint vision and goals aren’t just helpful here, they are
essential.

The motor of the matrix: a joint vision

Stubbornness and narrow-mindedness are the natural enemies of the matrix. They often stem from highly
specialized responsibilities and competencies among managers and employees. Coordinated competencies are
positive and important, but they shouldn’t obstruct the view of what is necessary and generally correct. Defining
joint goals is therefore key for eradicating insular thinking and opening perspectives on the greater whole.
The quality of the message is decisive. A corporate vision should be emotionally gripping, integrative and
motivating. Above all else, however, it should relate to people’s everyday lives. The idea is not to produce
smooth-sounding rhetoric or an encouraging horoscope, but to attach importance and meaning to each person’s
role and action. Not until this has been accomplished can a vision develop its own dynamics. Not until then does it
trigger self-activation in the workforce. This type of vision requires clarity, continuity and consistency in
communication.
Generally speaking, people are more motivated and more productive when their work has a direct bearing on their
future. This is always the case when they can answer the question why they are doing something starting with the
word “because”. In addition, it creates measurable benefits for a company: Like a long-distance runner
considering the best way to utilize his or her strength reserves while running, employees who know where they
want to go look for the best way to reach their goals.
Modern companies cannot afford to develop their goals and visions without connecting them to their employees.
Effective management of HR tools therefore includes opening up individual perspectives and harmonizing them
with corporate goals.

Summary
The matrix is a complex entity, not a simple formula. Its principles must be evident in the attitude, culture and
vision of every area in the company. Only then will it become a living system able to leverage its evolutionary
advantages on the market.

fgi news 05 - „The Matrix Organisation“ 3 © FischerGroupInternational