Company structures tend to follow one of three different patterns: line organizations,
line-and-staff organizations, and matrix organizations. But these organizational models
are not mutually exclusive. In fact, many management teams build their structure
using elements of each model at different levels of the organization.
Line organizations: A line organization typically has a clear, simple chain of
command from top to bottom. Each person is directly accountable to the person above
them, which means quick decision-making and no fuzziness about who is responsible
for what. The downside is a lack of specialists to provide advice or support for line
managers. This approach tends to work well for small businesses, but for medium and
large companies the result can be inflexibility, too much paperwork, and even
incompetence since experts aren't available to give their input into key decisions.
Line-and-staff organizations: This approach incorporates the benefits of a line
organization without all the drawbacks. Line managers supervise the functions that
contribute directly to profitability: production and marketing. Staff managers, on the
other hand, supervise the functions that provide advice and assistance to the line
departments. Examples include legal, accounting, and human resources. In a line-and
staff-organization, the line managers form the primary chain of authority in the
company. Staff departments work alongside line departments, but there is no direct
reporting relationship (except at the top of the company). Since staff people don't
report to line people, their authority comes from their know-how. This approach,
which overlays fast decision-making with additional expertise, tends to work well for
medium and large companies. But in some firms, the staff departments gain so much
power that they become dictatorial, imposing unreasonable limitations on the rest of
the company.
Matrix organizations: Matrix organizations build on the line-and-staff approach by
adding a lot more flexibility. A matrix structure brings together specialists from
different areas of the company to work on individual projects on a temporary basis. A
new product development team, for instance, might include representatives from
sales, engineering, finance, purchasing, and advertising. For the course of the project,
each specialist reports to the project manager AND to the head of his or her own
department (e.g., the vice-president of marketing). The matrix approach has been
particularly popular in the high-tech and aerospace industries.
The matrix structure offers several key advantages. It encourages teamwork and
communication across the organization. It offers flexibility in deploying key people. It
lends itself to innovative solutions. And not surprisingly—when managed well—the
matrix structure creates a higher level of motivation and satisfaction for employees.
But these advantages have a clear flip side. The need for constant communication
can bog down a company in too many meetings. The steady state of flux can be
overwhelming for both managers and employees, and having two bosses can cause
conflict and stress for everyone.
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