Organizational Design

Organizational structure is a key part of organizational design that provides mechanisms of authority and delegation to people in order to facilitate the decision-making process. When an organization transitions into agile, they need to transition to a structure that supports the best possible outcomes for the teams and more important, the customer. Here we will explore the matrixed organizational structure (likely the most common), how organizations that transition to agile can benefit, and what issues the matrix structure can bring to the organization.

An Overview of the Matrix Organizational Structure

Unlike the traditional hierarchical structure with only one reporting line, the matrix organizational structure is a collection of two or more organizational structures, such as functional and project management. In a matrix structure, you can see reporting relationships organized as a matrix or a grid where each has two or more reporting relationships, like reporting to both functional and project managers who have project management responsibilities across different departments that intersect with each other on a matrix or a grid. These reporting lines can precede the other depending on the organizational responsibility structures.

The Origin of Matrix Organizational Structures

The matrix organizational structure originated in the 1960s in the aerospace industry, where US government employees were required to create a project management structure. By now, the matrix structure has become a widely-adopted organizational structure due to its inherent qualities like collaboration, combining knowledge of different teams, etc. Usually, you can see matrix structure in larger organizations or complete projects that depend on more than one department for project completion.

Types of Matrix Organizational Structures

There are three main matrix types: functional, strong, and balanced. Depending on size, an organization can have one or more of these types of matrices. The functional manager has more power in a functional matrix than the project manager. However, in a strong matrix, the project manager dominates over the functional manager in every aspect, including the budget and staff management. In a balanced matrix, both functional and project managers have equal responsibilities.

How can organizations benefit from transitioning to a matrix organizational structure?

Organizations that transition from traditional project management methodology to Agile have many benefits from adopting a matrix organizational structure over the traditional hierarchical structure.

Improves collaboration and communication across departments

The matrix structure brings skilled professionals in different departments together, encouraging collaboration between individuals across different departments. This helps create an open and dynamic work environment than traditional close organizational structures.

This cross-collaboration is useful when finding solutions to problems. For example, a problem that a team member in one department solved can share their experience to solve a problem in another department that would have gone unnoticed in a traditional hierarchical structure. It also means that teams can learn from other departments and stay up-to-date on what other departments are doing.

Also, it simplifies the recruiting process as it allows sharing expertise across different projects with existing people.

Improves the work efficiency

The matrix structure brings functional and project management structures together to promote faster decision making, issue escalation, resolution, product planning, execution, etc., better than in a traditional environment where project management has to follow up with everything. Therefore, it allows agile teams to be more productive, deploys products to the market faster, and adapt to the changing customer demands.

Opportunity to develop new skills and acquire new experience

In the traditional or hierarchical structure, you work with a closed circle. Therefore, there is less opportunity to expand their skill set outside the existing boundary. But in an open structure like this, not only the interpersonal and communication skills but also employees can develop organization and leadership skills and collect many other valuable experiences by connecting with employees across departments.

Reduce employee turnover

With an open, collaborative mindset, employee engagement can improve a lot by breaking silos among teams. They have opportunities to work with other projects even if one project ends. Thus in a matrix organizational structure, employee satisfaction in terms of project work, skill development, exposure to other teams, etc., is much better than in a traditional structure. Therefore, it helps to reduce employee turnover.

Can matrix organizational structures negatively impact Agile organizations?

A matrix organization's structure can confuse people for several reasons.

Difficult to divide time between cross collaborations

While the matrix structure improves the collaboration across teams, shared people may find it difficult to allocate time between cross-collaboration work. If the proportion of work allocation between departments is not clear for employees, they may focus only on one particular work rather than dividing time between the two.

Cross-collaboration can overload employees.

Since employees work across departments, there can be an additional burden on employees. In such cases, employees can face burnout, concentration challenges, and difficulties completing work assigned to them. As a result, employee work can suffer from less quality. Therefore, to avoid such complexities, it is important to consider their capacity when initial project plannings and allocate breathing time or buffer for the planned work in each iteration.

No clear definition of roles and responsibilities

In a matrix structure, there is no clear definition between the project and functional manager roles, which can lead to confusion among managers on their role in project involvement within departments. There can be questions on who should look over which project, etc. In addition, the matrix structure does not clearly define responsibilities among these two roles because both are managerial types. When the responsibilities are unclear, it affects the decision-making process.

Slow down the decision-making process

The lack of a clear definition of managerial responsibilities directly slows down decision-making. Also, since there are two or more reporting lines, decisions must go through more than one manager, which takes a considerable time to finalize. This is not limited to managerial roles. This is common to other team members as well because they involve in work across multiple teams. Therefore, decisions among team members also have to route across departments, slowing down the process.


A matrix organizational structure is a modern structure that eliminates most of the problems with traditional hierarchical structures. For organizations transitioning to Agile, matrix organizational structure provides many benefits such as improved collaboration, work efficiency, strengthening skills, reducing turnover, etc. On the other hand, if you do not adopt it in the right way, there can be consequences such as slowing down the decision-making, employee burnout, and lack of clear roles and responsibilities.

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