How a firm organizes its employees will affect the way they work and how they perform collectively. Firms should, then, carefully consider what type of organizational structure is best for their particular purposes. Two forms worth considering are the functional structure and the matrix structure. Managers should carefully weigh the merits of both forms to determine which is a better fit for their respective organizations.
In a functionally structured organization, the firm is organized according to the tasks that people perform. For example, an accounting firm might be divided into three functional divisions: accounting, sales and support staff. A functional structure allows employees to focus on what they do best. For instance, accountants will focus on doing accounting work rather than on sales. This focus allows an organization to be highly efficient.
The matrix organization structure is a more complicated structure in which the firm is divided both according to functions and products/services. For instance, a firm that manufactures consumer goods might have three product divisions: foods, personal care and cleaning products. It also might be divided into three functional divisions, such as research and development, marketing and distribution. Each person within the firm serves two divisions, one functional and one product. For example, a person might be a member of both the marketing division and the foods division.
Pros and Cons
The functional structure has the advantage of simplicity, however it does not encourage interdivisional cooperation and knowledge sharing. The matrix structure, in contrast, is highly encouraging of knowledge sharing and cooperation between divisions. The matrix structure is not without problems, however. Because employees in a matrix organization report to two departments, there can be conflicts in their duties. For example, if the marketing manager has a different opinion than the foods manager, it will make it difficult for an employee reporting to both to balance these interests.
Which to Choose
Because the matrix and functional organization systems have distinct advantages and disadvantages, it is important to select the one that is best suited to a particular organization. Firms that are simply interested in efficiency and not innovation, such as commodity manufacturers, should use the functional organization form, as it will increase efficiency and avoid confusion. Organizations that need to be innovative, however, are better off choosing a matrix form, as it allows for more knowledge sharing and interdivisional cooperation, which can lead to more creative developments.