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Matrix organisational structure an outdated concept


The organisational structure is extremely important for the success of a Digital Product Company. In this blog post, I will explore how a matrix organisational structure built in the style of a matrix organisation can harm your company.

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We believe the matrix organisational structure is a completely outdated model for companies that are creating Digital Products, but the organisational model is just a piece of it!

An organisational structure with a matrix design is bad

Spotify's document about tribes and guilds became extremely popular in the Agile community. If you take a look into their organisational structure, you will see they are using a matrix organisational structure and in my opinion, this is not the best approach. I still believe they were not able to get rid of it because of political and human reasons, but that is another story, not directly relevant to this post.

Before I continue, I would like to explain what an organisation structure based in a matrix organisational structure is, just to make sure that you fully understand what I want to say. In simple terms, a matrix organisation is an organisation where vertical projects are staffed with several individuals from different parts of the company belonging to several different departments. This approach is extremely common nowadays when companies start to implement Agile.

Agile asks for cross-functional teams, and therefore companies start to build teams around different people with different skills within the organisation. At first glance, this seems like an appealing concept, but as I will explain later on, the promised effect does not work out as intended. Below you can find a picture that represents an organisational structure based on the matrix method:

matrix organisational structure with functional managers

Over the years, I have worked with many companies where this organisation structure is present; based on my experience, I will outline the following problems common to it.

Extremely Political Environment

It is not uncommon for organisations with this kind of setup to suffer from political issues. The team in this situation is a bunch of individuals from different parts of the organisation that are brought together to deliver something.

My experience tells me the problem is not with team members but with line managers. If everything is going well, line managers tend to say the success is a result of their team members.

If something really bad happens, line managers tend to say the problems are due to the other departments. They enter into “save my ass” mode, trying to cover their ass instead of helping the organisation to find the problem.

Blame Culture

I believe this is partly the result of the previous problem. When something goes wrong, people from different departments try to save their asses and blame everyone other than themselves. Unfortunately, I see this happen too often.

Horizontal Line interference

Over the span of my career, I’ve seen this happen in almost every company where I worked: Moving towards Agile is something difficult for most of the middle managers.

There are clear roles for Product Owners, Scrum Masters, and Team Members, but nothing for Agile Managers.

Managers try to do their best to help people, but in my humble opinion, most of the time their actions in these situations cause more harm than good. They try to give “one on one” help to people regarding career development, they try to establish team events, and they try to do many other things, but in reality, all these activities remove people’s focus from their product team.

Another typical example is the practice of having all these line managers in all kinds of meetings, for example, dailies, planning, reviews, etc. Because they want to see what their guys are doing, they go to these meetings, but unfortunately, most of them cannot keep quiet, and therefore they end up sabotaging the discussion and making all these meetings quite inefficient.

Decisions take a lot of time to be made

Of course, in theory, the team should own all their decisions, but with so many "chefs in the kitchen", I can guarantee that any decision that ought to take just a few minutes will take weeks of negotiation with this kind of organisation structure—Not productive at all.

Individual Goals mess

People that follow my work know how I hate personal goals attached to individual performance. In this organisational structure, I believe we have the right setup to launch the company into chaos and drain people´s individual motivation.

Let me explain: Having several horizontal line managers implies (in most organisations) that each different person will have a different goal or goals defined by his/her manager.

Now, if you imagine that in a team of 7, everyone has two goals, for example, this means that we have a total of 14 individual goals that have nothing to do with the team goal, which is the most important one.

Of course, you can say the team as a whole will have their goal, and all the individual goals will end up aligned with the team goal, but do you believe that with so many different managers, different people, and different goals, people will be aligned with the team goals? Well, hardly...

Interference with new hiring

Several years ago I had the opportunity to be part of a sad story. At that time I was Scrum Master, and the team was recruiting a developer; of course, we all looked for senior developers. We had several interviews with several candidates, but only one guy seemed to be a perfect fit for our team. We all agreed he was our man. We communicated with everyone and said he should be hired.

A couple of days later, the head of software development informed us that HE had chosen another guy. So basically, a guy who was not part of our team, which would not work on a daily basis with the new developer, who did not have any idea about what we needed, decided the future of the whole team. Later on, we found out that he was simply trying to achieve his personal yearly goal (saving money for the department).

Our companies are full of such cases, demonstrating how the horizontal line manages without understanding their place in Agile Organisations, and how this can harm the company a great deal.

So what can be done? How can we assemble cross-functional teams that have everything needed to allow high performance? Before I describe my approach, I want to warn you; this is quite a radical approach to traditional management. I know this cannot be implemented in most companies (or at least, those typical managers), but I truly believe in Peter Senge's words:

"It´s not enough to change the structures if the mindset behind does not change“

I think this is one of most companies’ biggest problems: they keep trying to solve old problems with old ways of working. If you truly want to make a difference, you truly must change the way you think—to that end; I choose to present something more radical than the norm.

We want to create teams that:

  • Are small, directly communicating with each other
  • Where everyone takes responsibility for their work
  • Make decisions fast
  • Celebrate small successes
  • Are not political
  • Have end-to-end responsibility
  • Are focused on real, important things
  • Can release their products several times a day if necessary
  • Budget independent
  • Have all the necessary people to make the product live

If you think about all these characteristics, this is exactly what a Startup is. So, why not create small Startups within our companies? Before you say this idea is ridiculous, consider the fact that there are several companies all over the world already testing this concept.

So, how can we assemble this kind of setup? To achieve this kind of setup we should create cross-functional teams that are fully independent. Everyone reports to the same person (the Startup CEO), and this small team has all the necessary people and necessary skills to make the product live. Below you can find a picture illustrating this setup.

matrix organisational structure with startups

Pros and Cons of this approach

Since I presented the positive aspects above, I will now focus on the negative points of this approach:

There is no space for middle management - If companies chose to implement this approach, middle managers would not have a role. Of course, they can do any other job that is necessary to release the product, but typically this will not be a manager role—it will be a specialist role, which means that middle managers must adapt to new jobs.

Communication with other Start-Ups - The ideal setup will be able to create fully independent products without requiring much communication with the rest of the organization, but we still want to share best practices with the rest of the company. Here people must be careful not to get isolated from the other parts of the organization. Typically a well-established Community of Practices will tackle this problem.

A lot of courage is needed - To implement this kind of approach, top management must have a lot of courage. This is a completely radical approach, and it requires a lot of courage to try something so new like this. Even if management can implement this, the company must have a great culture of learning from its mistakes, as this will be the only way to achieve success using this approach.

I believe if we have the courage and the vision to start building companies in this way, we will be able to create products faster and more successfully than ever.

Now I explained how we can assemble cross-functional teams without the overhead of having horizontal line managers interfering with the normal daily activities of the team. The approach that I used is a bit radical, and not all companies can implement something similar to it.

But what can we do if we are not able to be so radical?

Now I will explain how we can keep the old cross-functional setup with a matrix organisational structure, creating the ability for the organisation to keep all middle management. I want to be clear regarding how I feel about this approach, however; I believe this approach is not as optimal as the one suggested before, but I feel it is better than the normal traditional approach used for cross-functional teams inside of a matrix organisational structure.

Below you can find an example of a traditional cross-functional team with horizontal line managers:

So, what can we do to maximise this kind of setup and not suffer harm owing to the problems raised by my previous explanation? I believe the trick is to invest plenty of time in the coaching and training of middle management. In one of my previous blog posts, I explained what an Agile Manager does.

I explained that the Agile Manager is an Organisational Change Artist, Boundary Keeper, Value Maximiser, Lean Manager, Organisational Impediment Remover, and a Team Champion. Lyssa Adkins and Michael Spayd, in their article in Scrum Alliance: “The Manager’s Role in Agile” go deeper into this topic.

Organisations must involve and transform themselves; of course, this also applies to everyone in the company. The role of managers has changed, they cannot spend all day interfering with what´s going on within the team. They must spend most of their time analysing how the organisation is working and helping the organisation to grow and become leaner.

When the organisation chooses this approach, they must make sure that their managers will step away from controlling their people. They must understand their people belong to a product team and let them work with that team. Their people must feel part of the team, and that´s their highest priority. Individual goals should be abolished, and it should be established that only team goals matter.

When managers step away in this way, all the problems mentioned previously: Political Environment, Blame Culture, Horizontal Line interference, Slow Decision Making, Individual Goals Mess, and New Hirings Interference will disappear, or at least that is the objective.

The managers new role will be removing the Organisational Impediments. Having several managers caring about the organisation and helping the organisation to become leaner and faster is quite nice.

I still believe this is not the optimal solution, but I believe it can be a great intermediate approach for companies to reach the level of the “startup” setup that I presented here.

If you´d like to seek consultation on the best approach, strategy, or solution for your company, feel free to contact me.

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