CAN MATRIX BE THE SOLUTION?

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Abstract:

Matrix structures were thought to give the best solution to problems that companies have been struggling with, during the last decades, in terms of being effective and efficient in a fast changing business world. Event thou the Matrix Model may be a good match to large size and growing fast companies, it represents many difficulties in the implementation process. Essentially Matrix structure represents an alternative to the old bureaucratic centralized structure and tries to give answers to complex business situations, taking into account what the bureaucratic structure leaves out of discussion: How to use the human resources and how to divide the tasks. The Matrix Model suggests that using the human resources as needed and not as specialized only, would be of a great advantage in the today's complex business environments. But what Matrix doesn't take into account when suggesting this, is that: the more complex is the scheme of dividing tasks and teams throughout different work-divisions, so does become the human relationship management in terms of coping with concepts like authority, responsibility and communication, concepts that in reality make the implementation of Matrix Model difficult and inefficient.

Matrix tries to harmonically bring together people and processes no matter what different sectors or departments within organization they work for, in order to maximize the efficiency while staying versatile in grouping and teaming through different projects (David A. Nadler Michael L. Tushman, 1999).

As known, the traditional structure of a company is the model that seconds the business function. The company has a structure designed to help its workflow putting the organizational stress on the tasks which are grouped or divided in different departments such as Marketing, Finance and Accounting, HR. These tasks are supposed to be of similar nature and should express the same logic in terms of function in order to be grouped under the same department (John M. Boyle, 1971a).

On the other hand, in Matrix we have the"development of the three and the four dimensional matrices, when companies simultaneously apply either the functional-product-area dimensions, or the functional-product-customer-area dimensions or the functional-product-customer-area dimensions" (Burton et al, 2006, p.29).

Let's see how a small company changes its structure from simple functional to Matrix as its size grows by offering more products to the market.

This is the case of a small factory that manufactures only engines for luxury tourism airplanes at an early stage.

The company had a traditional simple structure. It had a manufacturing, sales and marketing, and the HR department.

In the small companies, due to the lack of personnel, allowing specialization may not be the best thing to do, thus they can require their staff to perform more than one task (Murray, O'Driscoll and Torres, 2002). "Smaller organizations frequently structure sales and marketing as a single integrated department that does not experience the conflict sometimes associated with separate sales and marketing departments" (Kotler et al., 2006). But Ashkenas (1999, a) argues that in order to make the company perform in an efficient way, duties and tasks are divided and everyone plays a precise role in the hierarchy, and the level of authority is crystal clear. Employees are pushed to specialize on specific processes, and the control is strong in order to ensure a flawless manufacturing process.

This kind of structure is clear and simple. There is no any extra layer between different departments. The communication is easy and simple. This is considered to be the most important advantage of this organization model (Milton Harris, Artur Ravi, 2002, a).

Let see some other advantages of this structure:

-Same goals within the same group/team, as result the team acts as a single unit - unity of action.

-Same methodologies of work which result in better understanding of each other efforts put to achieve the common targets - good peer-to-peer understanding.

- Easy ways to communicate between peers of the same team-communication.

In the above case, the engineers speak the same language and they are fully understood from the Marketing specialists whose common focus is on the same product. There are no middle layers that filter the top-down communication.

Another aspect that characterizes the company is its high level of hierarchic centralization. Orders fly top-down and they are easy to understand and obey. The company is not large and having a high level of centralization, in such a stable environment, may help doing better (Duncan, 1979). From a psychological point of view, "hierarchies fulfill our deep needs for order and security" (Harold J. Leavitt, 2003, p.99), things that small companies need most.

The company decides to expand the gamma of its products, entering the automobiles market by making a new small town car. This would be the first moment that the company starts to grow.

The production department has one head manager and two middle managers respectively for each manufacturing sub-departments: the aircraft and the automobile. Essentially, the work structure will be departmentalized based on product. There will be the car and the airplane departments and the workers will specialize on either one of these products.

The Marketing department will sell what the engineers come up with since the company addresses its products to the same Market and no geographic divisions are necessary.

The company is in a transformation cycle, and the work specialization is the driver for maximizing the product quality since the company will employ people based on their expertise. And as we know, better quality means higher prices and more money coming in to the company (Venditti, Phil, 2005).

Another good thing that comes along with work specialization is the Innovation since the specialists know how to transform the markets requests in new products (Andersson, M; Ejermo, O, 2008).

But this model has some problems that arise on the way.

It tends to split the company into divisions that do not depend on each other since those departments develop different products and address their products to different consumers and markets. This is mostly due to deep specialization in terms of producing goods and services and technologies used (David A. Garvin and Lynne C. Levesque, 2008a). The car engineers do not have much to talk with the airplane engineers since they use different technologies and have different targets. This complexity makes the employees involved in the manufacturing, to look at things from a narrow angle or better say "their focus is short-term and more tactical than strategic" (David A. Garvin and Lynne C. Levesque, 2008b). They tend to lose sight of the big picture, the very purpose why the company is in the business for.

Another issue is the high level of formalization which may become an obstacle in reaching the outcome by "killing" the innovation's initiative and reducing the human communication internally (Akhavan Alavi et al., 2010).

"If a job possesses high formalization, job owner would have lowest freedom in performing its related works, the time of doing the job and the way of doing it. In such circumstances, employees are expected to use similar inputs in a certain method which leads to predetermined results" (Robins, 2008, pp. 89 - 91, a).

On the other hand, deep specialization and routine standardized work, may lead to lower satisfaction from work process and as result in lower employee motivation which has a direct negative impact in the company's performance (Jesper B. Sørensen,2007).

In the scenario above, let suppose that the marketing department has come up with two new ideas:

To design even smaller cars with batteries and bio fueled.

The company wants to enter the Asian market with smaller luxury tourism airplanes with two sits.

As the company grows in size with two more products, so does the need for a new structure that reflects this change (Robbins, 1992, cited in Burton et al., 1996).

The challenge is what model to choose. Should this company choose a Matrix or keep the Divisional-Hierarchical structure, in order that best match the growing in size (Baligh et al. 1996). This will depend on how many levels are to be involved in decision making and how "to group the activities" in a meaningful and functional way (Milton Harris, Artur Ravi, 2002, b).

As we can see now, the old divisional formula, of being able to manage the manufacturing department of four different products and a complicated customer, geography and product oriented market, is not enough and the need for a MATRIX organization structure is immediate.

Marketing department will be divided in sub-divisions. Some of which, will cover the market geographically and some of the other sub-divisions will address the advertising campaign to different classes of consumers. This department will be redesigned to best fit the needs of reaching different markets with different goals. It needs to change its structure considering that change is crucial and important for progress and success (Richard Luecke, 2003).

David A. Nadler and Michael L. Tushman state that "the organization's capacity to understand its environment and to make the right kinds of strategic changes at the appropriate point in the cycle will determine its competitive strength" (p.46).

Under the new circumstances, managers will have to redesign the teaming up and grouping process in order to cope with larger span of control<->coordination and reporting hierarchy<-> moving around different teams issues. The new typology need to be "…versatile for capturing the complexity of a variety of management issues "(Burton et al. 2004).

For example: the project of bio fueled cars will be composed by teams of:

1-mechanic engineers, the same ones that team up for small standard cars.

2- Industrial Designers.

3- Interior Designers.

4- Marketing specialist who will coordinate the Production, R&D Department, Sales Department and the advertising campaign.

But the project for luxury tourism airplanes designated for the Asian markets will be composed of:

1- Aerodynamic engineers, the same ones that team up for the standardized airplanes.

2- Mechanic engineers for engines, the same that team up for the car engines.

3- Aerodynamic Designers

4- Interior Designers, the same that team up for car designing

5- Marketing specialist for the Asian Markets.

In such a fast and precarious change, the managers don't need people to be specialized only on one process but specialized simultaneously on too many processes possibly. Managers get their people to perform more than one task. The managers learnt how to group different activities together and how to team up people as they are needed for, instead of grouping them on what they are deeply specialized for. This would permit in theory to put the focus on optimizing the workflow process (Ashkenas, 1999b).

Size is an important factor that determines the structure of the company and Matrix, theoretically, is the best response to complex business requirements and large size companies since it is based on "function and project or function and product or customer dimensions" (Nebojša Janićijević, Ana Aleksić, 2007).

Size can also determine the level of technology in a company. A large company can afford to spend more to develop the internal information technology in order to improve the company's internal infrastructure (Edward E. Lawler III, 1997). In a matrix model, to make easier the control over different projects, a cutting edge technology is needed especially when fast back-ups and new processing methods and complex access privileges systems are needed. K. Abdul Ghani (2002) states "The firm's technology influences the organizational structure at operational and administrative levels, and consequently, the performance of the firm" (p.157-175).

But Robins (2008, b) argues that "The impact of technology on structure is not true in all occasions if we accept unique simplified vision on technology. The possibility of using structural dimensions in organization's operational part or near to it is further and possibility of their utilization in small organizations compared to large ones is diverse. The impact of technology on some structural dimensions is more than other ones" (p. 172 - 174).

Decentralization Issue

Size influences the level of decentralization. The implementation of the matrix model at this stage may enhance the company performance through the decentralization of the decision making process. The rational for this is that a bureaucratic centralized organization model, makes the making of decision process slow and as result can obstacle the activity of the company, assuming that the quicker the process the more efficient (Andrews, Rhys et al., 2009).

Authority/Reporting Issue

In the Matrix model, some specialists are found in two or more teams, working on two or more projects simultaneously, reporting to two or more supervisors, team leaders or managers and different project managers have authority or report for the same issue. People work under tight time/quality constrains about which they have little to say, but bear a big responsibility and are part of a complex and overlapping reporting system (David A. Garvin and Lynne C. Levesque, 2008).

"Breakdown of coordination, communication and control" between sub-divisions within the same department that design and produce different products. The work will be organized around different teams which will have to face problems of "unclear levels of accountability", and the authority-responsibility issue may put in danger the strategy implementation of the company (David A. Garvin and Lynne C. Levesque, 2008).

This may result in a chaotic situation sometimes (Milton Harris, Artur Ravi, 2002). Ashkenas 2002), called it "Ingenious in theory but confusing in practice" (p. 120). "Design that produces what might be called organizational schizophrenia" (Ackoff, 1994, p. 95, cited in Janićijević, Nebojša; Aleksić).

Allocation of Capital

This allocation of capital will not be as much effective as thought, due to the lack of total and detailed control which derives from the complexity of the cooperation.

But on the other hand a centralized structure would make a more efficient allocation of capitals over different departments, due to its closer control and hierarchic approach over these departments (Milton Harris, Artur Ravi, 2002). But Mises (1956, cited in Carnis, Laurent A. H) argues that "As bureaucracy is not concerned with maximizing profit, it is not obliged, in allocating resources, to take account of the system of relative prices" (p.50).

CONCLUSION:

As we saw the implementation of the Matrix Model in practice is very different from what the theory states. To make a model work we need a great combination of elements like: Business/Product/Service/Customer/Geography divisional functional orientations with controlling elements such as authority- responsibility-reporting and division of tasks. In other words, we will never apply the perfect structure unless we do not take into account the most important ingredient for which the Matrix was a promoter of: Human Relationship Management and put it in the context of a clear Authority - Responsibility - Reporting system.

Until we do this, "…hierarchies remain the best available mechanism for doing complex work" (Harold J. Leavitt, 2003, p.99).

THE ORGANIZATION STRUCTURE OF A DEBT COLLECTION AGENCY

Main Organizational Structure of the Company:

-Administrator

The Departments:

-Operational Department - Coordination - Finance/Accounting - Sales - HR Department:

Operational Department manages three Accounts which are the customer-companies:

Nr.

Account

Company Name

Description of Service

1

Energy Power Supply Company

Late Payments Collection

2

Bank of the Second level

Bad Mortgages Portfolio

3

Mobile Telephone Company

Late Payments Collection

The General Operational Manager is the head of the Operational Department.

Each of the accounts represents a subdivision within the main department and has its own structure:

The structure of each account:

In the head of the subdivision is the Head Account Manager.

Each Account is divided into three sub-accounts: Public/Budgeting, Private, and Households Accounts. We call them "Portfolios".

Each Account subdivision has its own Regional and Zonal Portfolio Manager and so on. The span of control of the Account Manger is three Regional Managers for each department as follows:

Public/Budgeting Private ________________Households__________

Power Supply Company Bank Mobile Telephone Company

1. Regional Manager 1. Regional Manager 1- Regional Manager

2. Zonal Manager 2- Zonal Manager 2- Zonal Manager

3. Team Leaders 3- Team Leaders 3- Team Leaders

4. Electricians/Billing Workers/C-C. 4- Financial Adviser /C-C 4-Account Officer/C-C

C-C stands for Calling Center/Customer Care which is the same operation center for all the accounts.

The Zonal Manager is in charge of 4 different Teams and each team has a Leader. This chart goes down in terms of span of control, to the Team Leader who is in charge of managing a group of 8 specialists.

Pros:

People within the same Account are very communicative. As the tasks flow top-down the hierarchy so does the responsibility. People find it easy to orient themselves towards specific tasks and individual responsibility and tend to be clear on how to communicate their own responsibility to others. This enhance the team performance overall. INDIVIDUAL performance is connected strongly to how the TEAM performs as a whole. The team can do a very good site job but it means nothing if the regional performance doesn't increase.

Specialists change teams year-round, going to different places and locations. This helps them a lot to enjoy the new workplace and helps the company members profit from senior's experience. One important element is that the specialists do not take part in more than one team at the time.

Regional and Zonal Managers are the very spirit of this company as they gain and accumulate experience in fields of organization and negotiation with debtors. They are specialized in dealing with different class of debtors and divide work based on the difficulty of the cases. On the other hand, teams own some independence in choosing the debtors they want to deal with and this is totally up to personal experience that every team member has. So everybody is specialized in doing something specific.

Cons:

Little communication between the different accounts. Each of them:

-has different goals

-uses different methodologies

-has different timeframe targets

-different approach to short term outcomes which depend mostly on:

- How the main customer-company reacts on these outcomes,

- What are their business objectives considering that some of them are very flexible on how to communicate with their debtors on specific business cycles.

No experience exchange among homologues of different accounts. This gap of communication is directly reflected in the lower levels of representation such as team members and workers doing site-job, who mostly of the time does not know their homologues from different accounts.

Example: the zonal managers from the account of the energy power supply company don't know their colleagues from the Bank Account. This derives from the fact that the Regional and Zonal Managers of the Energy Power Supply Company are engineers by profession and their colleagues from the Bank Account are mostly people who have worked or been familiar with the bank procedures and products and have a direct experience on how the bank works with respect to the mortgages and loans. So everybody is very within-group oriented.

3- High level of formalization and bureaucracy. The initiatives on negotiations with debtors are managed exclusively from the top management and the site job employees have little to say here. In the case when help is needed from the low rank officers, the authorization must go through a lot of papers and signatures which are very time consuming and mostly of the time are done just for "filing" the case.

The bureaucratic hierarchic system is based mostly on obedience and strict results. The maximum of the quality often is achieved through rigid methodologies like, for example, setting a high reference for number of calls to be done during the day, or number of minutes to be spent with the customer on the phone. This method was used for some years in the company, but in the last year, the company is changing the work design, abandoning the bureaucratic model and adopting a more flexible customer oriented work design.

During this year, in the try to put more focus on the customer, my company has doubled the customer service premises and the number of people working there. The rational is that the company must do more on assisting the debtors and explaining to them what we do and the way we do it.

Another way of trying to be more flexible and less bureaucratic is getting the employees to participate in the management process.

Workers like to be part of the company and identify themselves with the very image of the company. They are supportive and dedicated to the job and company which promotes their human values and orients the collection strategy and rewarding system toward each individual involvement and contribution in the company success.

Example - Team leaders change teams on regular 6-months basis, in order to spread experience and raise motivation through the new comers. But, sometime the different accounts are located in different places which makes it hard for them to travel. To easy the commuting process and make the life easier to its own workers, my company has given them cars which were taken in leasing from external leasing companies. This shows to them that the company cares for them. If their individual work performance goes side by side with taking more responsibility, then the company engages in making their life more comfortable. This could be something like financing home mortgages at a lower rate than the banks do.

-If the company promotes loyalty, then the loyal workers will try to align their personal goals with the company's strategic ambitions, trying to raise their personal achievements level of collection, especially when they are team leaders, they will become gurus to their team mates of lower rank, showing their personal engagement in the day to day operations, especially when the work gets tough. For example in the case of dealing with difficult debtors, team leaders like to take the initiative on the negotiation regardless the level of work delegation.

CONCLUSION

My company has adopted a customer oriented structure. We are trying to be bureaucratic as less as possible and innovative as much as possible, but we still consider that a hierarchic centralization of authority-reporting system is more efficient at this stage of the companies' age.

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