Matrix structures and performance: the search for optimal adjustment to organizational objectives

Abstract

Matrix structures continue to be utilized at high-tech companies despite considerable evidence about the many shortcomings of the method. Empirical research among companies employing matrix structures revealed three different resource allocation policies: (1) profit and cost centers; (2) direct priorities; and (3) comprehensive allocation planning. In order to evaluate organizational performance for each policy, a simulation was constructed to ascertain the optimal distribution of influence for managers under different work parameters and for various organizational objectives. The simulation provided answers for when organizational and market conditions necessitate increases or reductions in the influence of project managers in order to reach optimum performance. Based on the organizational objectives selected for this study, different patterns were found to characterize decision-making. Patterns varied considerably. At one extreme, the distribution of influence for reaching a specific objective remained stable despite changes in work parameters. In contrast, another pattern involved a high dependence between a specific work profile and the optimization of performance, with changes in each work parameter leading to quite different decisions about whether to increase, decrease, or maintain influence.