You run a factory for a UK–based packaging company. You have always dealt with local customers, who could always call you directly with instructions or concerns. Now the CEO has created a Europe-wide organization with separate groups handling sales and manufacturing. You no longer have direct contact with your customers—and they are not happy about it.
Welcome to the “matrix-based” organization.
It’s a world of multiple bosses, endless relationships, and—as this example shows—murky accountabilities. It’s also a world of frustrated managers and employees, people who feel that they can’t take effective action or deal with a customer without running into a series of organizational obstacles.
Some form of matrix—or organizational structure—is essential for running any large company. A global consumer products company, for instance, must respond to local market needs and capitalize on global economies of scale. It needs organizations at both levels, and it needs to manage across those boundaries.
As companies grow, they become increasingly complex, especially in today’s world. When executives talk about crossing organizational boundaries, they usually mean not one or two boundaries but five or six, such as function, geographical region, process, product and customer.
To make this multifaceted system work—to turn it from a drag on performance into a source of support—a company needs to focus on its decision-making processes, not its organizational chart.
Here are just a few of the steps you company can take to do that:
1. Follow the money. High-performing companies know how each side of the business creates value and which decisions are key to unlocking that value. That helps them locate critical decisions at the appropriate points in the organization.
The wireless telecom company Vodafone, for instance, grew rapidly by acquisition. But then Vodafone saw opportunities for global scale advantage in three key areas—innovation, procurement and the development of best practices in marketing. So it created a system with country-based businesses plus global functions in the three areas where the additional complexity actually added value.
2. Align people around key priorities and principles. Most successful companies operate according to a set of core principles and priorities that supersede any matrix. These principles create a context enabling people anywhere in the organization to make appropriate tradeoffs.
At British American Tobacco several years ago, then-CEO Martin Broughton eliminated internal competition and established a handful of priorities that he believed would help BAT regain the top spot in its industry. BAT’s new priority of growth in premium global brands, for example, allowed global marketers and local salespeople to focus their joint attention on decisions relating to this objective.
3. Assign clear decision roles. People can have more than one boss, but decisions can’t. The most common problem we find in matrix organizations is confusion over who should play which role in key decisions. We use a tool called RAPID®—Recommend, Agree, Perform, Input, and Decide—to ensure that every role in an important decision is assigned to a specific individual or group.
4. Help leaders set the right tone. If leaders don’t make good decisions quickly, others are likely to dither. If leaders don’t collaborate across boundaries, others won’t either.
When Martin Broughton was leading BAT’s restructuring, he brought 140 of the company’s top leaders together in a three-day conference to kick off the new approach. The senior team then led a series of regional and functional conferences and sent videos explaining the changes to BAT’s operations in more than 70 countries. Team members followed up with e-mail updates to reinforce their expectations.
5. Foster a performance culture. This is the holy grail of decision effectiveness: an environment in which people naturally take responsibility for cross-boundary cooperation. It’s critical for a smoothly functioning matrix as well. Everyone makes it their job to ensure that the right people are involved in every decision, that individuals debate honestly and listen to one another, that decisions are promptly made and implemented. All that becomes simply “the way we do things around here.”
A matrix is often like a maze, hampering fast movement. But a decision-focused business with clear roles, good information and appropriate incentives contributes to quick, thoughtful action and high performance.
Looking for more ideas? Here are more ways companies can make the matrix work for them.
Paul Rogers is the managing partner of Bain’s London office and leads Bain’s Global Organization practice. Jenny Davis-Peccoud is senior director of Bain’s Global Organization practice. She is based in London.