Learning and Competitiveness: The Role of Matrix Organizational Structures.

INTRODUCTION

Much has been said about the importance of learning as a strategic advantage in a highly competitive global marketplace. Learning is a major contributor to innovation and speed in the marketplace. These attributes are of special importance in rapidly changing industries

and for firms that are first movers. Learning not only enables their innovation strategies, but it is also integral as an intrinsic motivator. As Senge, et al. (1994) states, "If there is one single thing a learning organization does well, it is helping people to embrace change." Therefore, creating organizations that foster learning is both strategically and motivationally desirable and it contributes to the competitiveness of the firm. Many factors determine the learning capability of a firm including culture, processes, people, and organizational structure.

Matrix structures, unlike traditional structures are designed for both performance and learning. The learning capability of a matrix structure enables the organization to innovate and change--to be competitive in a dynamic and complex environment. To date, firms have used the matrix structure primarily for performance and neglected its capacity to engender learning--a unique and important characteristic. In this paper the role of matrix structures is examined to show its relationship to learning and competitiveness. Each of the roles within the matrix structure will be analyzed and distinguished from those of traditional structures. The decision, information sharing, and learning processes will be explored. The cultural and competency requirements of a matrix structure will be described. The matrix structure will be compared to the traditional structure with regard to knowledge creation and knowledge transfer.

Matrix structures became popular in the 1970's and 1980's as a means of dealing with increasing complexity and rate of change in the environment, e.g. markets, customers, suppliers, etc. (Bartlett and Ghoshal, 1990). While the matrix concept became popular, structures that were substantially matrix were limited and even those did not experience great success. Too often the matrix structure has created convoluted roles and relationships, decreasing both learning and effectiveness (Bartlett and Ghoshal, 1990). In large part, the problem with the implementation of matrix structures was that no one could effectively implement third-generation strategies and structures with second-generation managers in a first-generation culture. The matrix structure requires and demands an alignment with culture, processes, and people, which is similar to the organizational elements (culture, processes, and people) of the learning organization. A learning organization is characterized by: (1) substantial generative learning as well as adaptive learning; (2) leaders who are responsible for building the organization by developing creative tension between vision and current reality; and (2) managers who are designers of the organization and teachers and stewards (Senge 1990).

TRADITIONAL VS. MATRIX STRUCTURES

Dynamics

For managers to fully understand the matrix structure and the new roles that are needed for it to be effective, they need to appreciate how and why the matrix structure is different from the traditional structures. The traditional structures are based on the idea that information flows upward in the organization so that those in higher levels can make the decisions that are then passed down the hierarchy. Also, the structure, once established, makes it almost impossible not to follow this pattern of upward information--decisions at the top. This is a reasonable and effective structure in a simple and stable environment where the higher-level managers have greater skill and expertise than those at lower levels. The breakdown in the traditional structure comes with increased complexity and rate of change. The hierarchical system gets overloaded. Executives cannot get all of the relevant information that is needed to make the timely decisions and decisions cannot be effectively transmitted to persons in the business. Also, much more top and middle level management attention is needed to address the changing opportunities and threats, e.g., global markets and competition. The problem is that the traditional systems by design require the day-to-day attention of all managers--driving out the longer-term focus. (Janger, A. 1980; Mintzberg, H. 1983)

Silo Effect

A problem of the traditional structure is that it directs the routine day-to-clay decision making/coordination vertically to senior level management. The traditional organization is structured in one of two basic ways--either with a functional structure, e.g. marketing, that has a functional top management, or with an output structure, e.g., product groups, that has an output group (SBU) top management. Both of these structures produce a silo effect with excessive vertical information/decision flows and limited interaction across the organization. A major reason for this silo effect is that the source and power of coordination is with the head of the function or the head of the output group. Those managers at lower levels who are closer to the operations generally do not have complete information and/or responsibility to make many of the day-to-day decisions or to resolve conflicts.

Coordination Dilemma

Another limitation of these two traditional structures is that each directly addresses only one of the major coordination needs. The functional structure provides a single focal point for coordinating each input specialization, e.g. marketing, and the output structure provides a single focal point for coordinating each product group. Therefore, the functional structure provides strong coordination of inputs and weak coordination for outputs, and the product group structure does the opposite, providing strong coordination for outputs and weak coordination for the functions. In situations where both the functional and the output need strong coordination, these traditional structures are inadequate. The unresolved dilemma for traditional structures is which coordination needs to be addressed--function or product. The primary coordinating mechanism is having all activities under one senior executive. In the functional structure it is the functions that are at the top, and in the product structure each product group executive is at the top. The matrix structure resolves this dilemma by putting both function and product (output) at the top, which creates a duel reporting relationship. The matrix manager is the one who reports to both the functional and output managers (matrix bosses).

Decision-Making

The matrix structure works by reversing the flow of decision making. In a traditional organization the person higher in the organization is in a better position to make decisions because he/she has wider access to information. She/he is in an excellent position to coordinate either the function or the product group, but not both. The matrix manager is a focal point for both of the coordination needs--functions and product groups. However, this powerful coordination can only happen if the matrix manager is empowered to be that decision-maker. (If the matrix manager is not empowered to make the day-to-day decisions, and the decisions are pushed up the hierarchy, all you have is a convoluted traditional structure.) In summary, the matrix structure works by creating a single focal point of coordination for the functions and the product groups by reversing the flow of information and decision making.

Conflicts

In the traditional organization conflict is frequently suppressed. The structure does not provide the opportunity for those most affected to engage in a process that would lead to a collaborative resolution. With the matrix structure those same conflicts are brought out. The advantage of the matrix structure is that those suppressed conflicts can now be resolved, but only if the managers have excellent conflict resolution skills.

PRINCIPLES AND COMPETENCIES

The fundamental purpose of the traditional organization structure is for management to maximize the effectiveness of day-to-day operations of the firm, while the fundamental purpose of the matrix structure is for management to ensure the long-term success of the firm.

While applications vary, the underlying principles are based on an organizational structure that is radically different from traditional structures. If you ask the question, what does this mean for the average manager? I would say, new and substantially different roles for all of the managers within that system. If implemented effectively, it means more powerful roles for everyone and new and different leadership styles. The specific changes with regard to leadership depend, in part, on the particular position one has in the hierarchy, e.g., the matrix manager's role vs. the matrix boss's role--the bosses of the matrix manager. Some general changes that one should be aware of are listed in Figure 1. Some of the potential benefits of the matrix structure are listed in Figure 2.

FIGURE 1

Differences from a Traditional Structure to a Matrix Structure

Traditional                                      Matrix
Individual-based hierarchy--little shared   Team-based hierarchy--
authority shared authority
Teams: self-contained within unit           Teams: linked across units
Conflicts: (issues/problems) flow upward    Conflicts: flow downward to
Matrix Mgr.
Operations: micro-managed from above        Operations: self-managed
(by Matrix Mgr.)
Information flows upward--decisions         Information/decisions flows
to matrix manager
Middle managers focus on day-to-day         Middle managers (matrix
bosses) focus on strategic

FIGURE 2

Benefits of Matrix Structures Compared to Traditional Structures

* Swifter implementation

* Greater market responsiveness

* Better cross business integration

* More effective implementation

* Increased system and profit perspective

* Easier transition between jobs

* Integration of long and short term needs

* More innovative and entrepreneurial

* Better development for senior-level positions

Roles

The matrix structure requires different roles and different skills/competencies. In any matrix situation there are three distinct roles. (1) The matrix manager -- the person who is responsible for day-to-day implementation. The matrix manager has two bosses. (2) The matrix bosses--there are two sets of matrix bosses, one set for the functional areas and one for the product group areas. (3) The top boss--the leader to whom all the matrix bosses report. For a matrix organization to be effective each of these roles must function well and be supportive of the others.

Matrix Manager

The matrix structure puts the matrix manager in a position to fully manage the day-to-day (micro) aspects of the operation. That increased responsibility for the matrix manager means that he/she will need greater self-management and leadership skills. The day-to-day decisions and conflicts, which in a traditional organization were passed up the hierarchy, now flow to the matrix manager; therefore he/she needs to be more effective in decision making and conflict resolution. Also, the matrix manager needs to gain the support and resources from his/her two superiors, which calls for greater influence, communication, and negotiating skills, as well as tolerance for ambiguity. In summary, the matrix management is given a leadership/entrepreneurial role of being responsible for self-managing an important part of the business.

Matrix Bosses

The matrix boss plays the most crucial role in the matrix structure and the one that calls for the greatest change from the role in a traditional structure. If done effectively this role enables the matrix manager to effectively integrate day-to-day decisions, and, along with other matrix bosses, shape the future capability and direction of the firm. The roles shift from day-to-day performance to the long-term success and effectiveness of the organization. The matrix bosses no longer have the role of coordinating the day-to-day operations--micro managing the operation. Their role now is primarily creating the processes and systems, developing the talent, etc. for the long-term strategic success of the business. The role of the matrix bosses changes with regard to supervising their direct reports--the matrix managers. Now, these matrix bosses focus on the development of the matrix manager; coaching and advising the matrix managers, aligning the overall operations, and addressing concerns about improving the organizational processes and organizational performance become their focus. The matrix bosses need to build internal and external networks, create cross-organization teamwork, and continually align processes and resources with the strategy of the organization and with customer needs. Some of the typical issues for them include building the "bench strength" talent and capability of the operations, integrating technology, anticipating problems and preparing for change. In summary, the role of matrix bosses changes from directing the day-to-day operations to enabling the matrix manager, and positioning the business for future success.

Top Leaders

The role of the top leaders with regard to the matrix structure is to keep the two sides (function and product) aligned with the strategy of the firm and with each other. Also, persons in this position should balance the power and influence of the two sides and see themselves as part of a team that is building a stronger and more competitive organization. The most important role of the top leader is to support the matrix bosses in their new and important strategic role. If the top leader does not appreciate that the matrix bosses have a much more powerful role in the matrix structure than in the traditional structure, it is unlikely that the matrix structure will be effective at any level.

Skills

The skills for implementing a matrix structure are substantial. It not only requires creating a new culture and orientation, but also requires considerably different individual and team skills. Furthermore, it requires substantially more commitment and trust. Below are some of the types of training and development that might be useful to matrix managers and their bosses. The matrix manager needs skills to direct the operation, integrate diverse interests and activities, and ofttimes to resolve conflicts. The matrix bosses need the skill to create the vision and to build the organization. Building the organization requires learning.

FIGURE 3

                   Required Matrix Competencies

          Programs                  Matrix Manager   Matrix Boss   Both

*  Self-managing skills                   X
*  Project management                     X
*  Negotiating skills                     X
*  Leadership skills                      X
*  Communication skills                   X
*  Change Management                                 X
*  TQM -- continuous improvement                     X
*  Cross-unit team effectiveness                     X
*  Process Improvement                               X
*  Systems Thinking                                  X
*  Consulting skills                                 X
*  Strategic planning                                X
*  Conflict resolution skills                                      X
*  Entrepreneurial skills                                          X
*  Collaboration skills                                            X
*  Coaching skills                                                 X

LEARNING

The learning requirements are significantly different for organizations in stable environments as compared to those in dynamic and complex environments, as it is different for traditional structures vs. matrix structures. Furthermore, the various roles within the matrix structure require different types of learning and different types of knowledge creation.

Adaptive vs. Generative Learning

Learning has many definitions and several distinctions. For matrix structures it is helpful to distinguish between adaptive and generative learning. Adaptive learning is what generally occurs in organizations. It is responding to the situation or the environment - frequently at the single-loop level -- to solve the short-term problem. Traditional managers typically are comfortable and competent with adaptive learning. Much of the day-to-day decision making for the matrix manager is adaptive, but these managers must also join in a generative learning process with other managers.

For matrix bosses and top leaders most of their learning should be generative and double-loop -- dealing with underlying problems. Generative learning requires new and different ways of viewing the world, competition, and customers from which fundamentally new approaches are developed. Also generative learning requires a systemic and long-term view of processes and events. It is only through this kind of thinking and learning that matrix managers can build the organization. From this complex process the matrix bosses and top leaders need to create simple and powerful new perspectives. Finally these middle and top leaders must engage each other and the matrix managers collaboratively in the design and implementation of changes. The matrix managers combine their generative learning about operations with the organization building learning of the middle and top leaders to co-create changes.

Knowledge Creation

Tacit Knowledge: Tacit knowledge informs actions--it is understood and used but not easily communicated, replicated or imitated. The understandings and skills of the master craftsman are examples of tacit knowledge. It cannot be forced or demanded, it can only be enabled. Attempts to control and administer innovation/knowledge creation will fail to achieve the desired outcomes. Tacit knowledge creation requires a change from an aggressive and competitive internal culture to one that is more caring and trusting because the knowledge creation process is a social and team-based relational activity. (Von Knogh, et al 2000). Von Knogh, et al (2000) state "Knowledge workers cannot be bullied into creativity or information sharing; and the traditional forms of compensation and organizational hierarchy do not motivate people sufficiently for them to develop the strong relationships required for knowledge creation on a continuing basis."

The matrix bosses and the top leaders must develop and utilize their own and others' tacit knowledge and create the climate, processes and conversations that will convert the tacit knowledge into innovation.

Cycle of Knowledge Creation

According to Nonaka, et al (2000) tacit and explicit knowledge are complementary, and both types of knowledge are essential to knowledge creation. They specify four stages of knowledge creation:

1. Socialization (tacit to tacit) is the process of extending tacit knowledge through shared experiences. (Creating new tacit knowledge and converting it to explicit knowledge is a major source of innovation.) For example, managers gather information from sales and production sites, share experiences (tacit knowledge) with suppliers and customers and engage in dialogue with competitors. In socialization, self-transcendence is fundamental because tacit knowledge can only be shared through direct experiences, which go beyond individuals.

2. Externalization (tacit to explicit) is the process of articulating tacit knowledge into explicit knowledge. For example it is the concept creation process in new product development. In externalization, an individual becomes one with the group. Here, the sum of the individual's intentions and ideas fuse and become integrated with the group's mental world.

3. Combination (explicit to explicit) is the process of converting explicit knowledge into more complex and systematic sets of explicit knowledge. For example, managers engage in planning strategies and operations, assembling internal and external data by using published literature, computer simulation and forecasting.

4. Internalization (explicit to tacit) is closely related to `learning by doing.' Explicit knowledge, such as the product concepts or the manufacturing procedures is implemented. During the implementation new insights (tacit knowledge) are developed by reviewing and reflecting on the new procedures. For example, matrix managers reflect on how new procedures affect the relationships with subordinates, peers, and bosses. (Nonaka, et al. 2000).

For the learning organization, it is important that all aspects of this learning cycle are used and that the subsequent learning is integrated and implemented. Adaptive learning would mostly involve "combination" and "internalization," that is, the explicit-explicit and explicit-tacit stages. The matrix managers, as they solve day-to-day problems, are going to work mostly in these two stages. The matrix bosses and top leaders as they observe and interpret their changing environments, its opportunities and threats, and new ways of building the organization will operate more in the "socialization" and "externalization" stages. But, also, at times the matrix bosses need to incorporate the new tacit knowledge that is being developed by matrix managers into new explicit knowledge (externalization).

The matrix structure, by design, provides an opportunity for organizations to operate in all stages of this learning cycle and to integrate that knowledge to build the organization and to improve performance. In traditional structures almost all managers operate nearly exclusively in the combination stage (explicit-explicit) and have limited opportunity to integrate anything other than explicit knowledge.

ALIGNMENT OF CULTURE, PROCESSES AND PEOPLE

Throughout this paper the relationship among culture, processes, and people have been addressed. Here I will address the need for their alignment, which is part of the organizational building process. Too often with matrix structures the matrix bosses are so busy micro-managing the matrix manager that they not only fail to build the organization, but also they fail to address alignment issues which almost guarantees failure. Furthermore, alignment alone is not sufficient; the alignment must support a high level of both adaptive and generative learning.

Model I vs. Model II

Argyris and Schon's (1996) theories-in-use, Model I and Model II, distinguish values and behaviors that affect organizational learning and effectiveness. The governing variables for Model I Theory-in-use are (1) control the purpose of the meeting or encounter, (2) maximize winning and minimize losing, (3) suppress negative feelings, and (4) be rational. Model II Theory-in-use governing variables are (1) share valid information, (2) allow free and informed choice, and (3) foster internal commitment, e.g., mutual monitoring of implementation (Argyris and Sch6n 1996).

The first variable in Model I is "define goals and try to achieve them." This unilateral process is typical of hierarchical organizations. Information is selectively shared to control, direct, and motivate subordinates (and peers).

The second Model I variable, "maximize winning and minimize losing" can be seen in traditional structures where the objective is to maximize one's unit or function with little regard for its impact on others.

The third variable of Model I, "minimize generating or expressing negative feelings," is done in the context of defining (controlling) goals and maximizing winning. This behavior suppresses conflict in traditional structures.

The fourth variable, to "be rational," can be seen in claims that the traditional structure is based on long-standing and important principles like "unity of command" and the "scalar chain." "This is the counterpart of variable 3 (suppress feelings). It is an injunction to be objective and intellectual, and to suppress feelings" (Argyris and Schon 1996, p. 94).

The traditional structures mirror Model I and prompt a high degree of defensiveness, thereby limiting learning to single loop--solving the immediate surface problem. It is what Argyris and Schon (1996) call self-sealing behavior. The self-sealing behavior prompts defensive reactions and more self-sealing behaviors, which fracture the connections between and among people. This limits openness to learning and change. In fairness to the traditional structure it was designed as a top-down control and performance system--and not as a learning system. The problem today is not with the traditional structure, but with the Model I culture that defeats any structure that is designed for learning.

Model I governing variables, dynamics, and outcomes create win/lose, adversarial, exploitative behaviors, even though that may not be the intent of the parties. These values naturally become part of the organization's language and subconscious behaviors (culture). Complicating Model I is the value of not overtly hurting feelings or having open conflict. The need for harmony contributes to the self-sealing behaviors that block deeper (double loop) learning.

Model II provides an alternative culture for organizations--one that is consistent with learning. The governing variable, "shared information," empowers all of the parties and balances influence. Goals and procedures are established collaboratively, creating alignment, trust and the basis for win-win outcomes. In the matrix structure this type of collaboration is part of the design and is essential for the matrix manager and his/her two bosses.

The governing variable of "free choice" further strengthens win-win alignments and contributes to the creation of powerful internal motivation. Free choice not only is a powerful motivator but it is the basis for trust and learning. McKnight, Cummings, & Chervany, (1998); and Das & Teng (1998) suggest that building trust is a prerequisite to undertaking interorganizational activities. Trust, which is closely related to reciprocity, influences the choice of how much information and influence is shared (Ring & Van de Ven, 1996; Nooteboom, Berger, & Noorderhaven, 1997). In essence the matrix structure requires all the managers to be a learning, collaborative team. The greatest change from the traditional structure to the matrix structure is for the matrix bosses and top leaders. Unless they change to Model II behaviors and move the culture in that direction, the learning potential will not be achieved.

CONCLUSION

Competitiveness doesn't start in the marketplace, it starts in the organization and it is determined by how much the organization influences the environments and adapts to its changes. That ability to influence and change is determined by the quality of the organization's human assets. But it is not the human assets per se, but how they interact, their relationships and roles--how they create and apply knowledge--that determines competitiveness. The organization structure, in large part, determines the interactions and potential learning and thereby the realized value of those human assets.

There is little evidence and few examples of organizations that are true learning organizations. Most companies are still developing the required elements of culture, processes, and people (skills) and organizational structure. The matrix structure by design is a learning (and performance) structure. It is a structure that enables and demands learning. However, if a firm does not use it for generative learning, it will become dysfunctional, confused and inefficient.

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