To use an expression now established: we have gone from the world of “OR” to the world of “AND”! Concretely, this means that a growing number of companies, in increasingly varied sectors of activity, can no longer choose between costs and differentiation, between local and global, short and long term, operation and innovation, …
Pursuing several strategic objectives simultaneously without being able to prioritize each other means, for these companies, the impossibility of subordinating the organizational logics that correspond to them.
Prioritization of organizational logics
From time immemorial, companies have adopted structures resulting from different organizational logics : functions, products, customers, geographic regions, etc. But they have subordinated them to each other. Following the example of this agro-food group which subordinated the functional logic to the “country” logic, itself subordinated to the product logic (the poles, the first level of division of labor / grouping of activities, come from a divisional logic by products).
What changes, when we go from the world of “OR” to the world of “AND”, is that this hierarchy is no longer possible. Different organizational logics must be brought together at the same level. Two options are then available to companies.
In a hybrid structure, the first level of division of labor / grouping of activities results from different organizational logics: functional departments coexist with divisional departments, which themselves may come from different organizational logics (products, customers or regions).
This telecommunications company has set up two Business Units, for its R&D and marketing activities, in an organizational logic by products (the products are grouped by technologies: radio transmission (MTA) on the one hand, data transmission (DAN ) on the other), associated with a functional logic for its production activities (a production department brings together the two factories) and marketing (a single department includes sales on French territory (NSO) and sales to ‘international (ISO)).
The hybrid structure allows several organizational logics to coexist at the same level, but remains vertical. The “silos” are just different in nature. The matrix structure, on the other hand, brings together different organizational logics by superimposing them on each other. In the case of a two-dimensional structure, like the example of this aeronautics company, there is a vertical dimension (resulting from a functional logic) and a horizontal dimension (the aircraft programs resulting from a logic by products).
Unlike the hybrid structure, the matrix structure breaks with the famous principle of hierarchical uniqueness, enunciated by Henri Fayol more than a century ago.
Centralization Versus Decentralization
Hybrid structures and matrix structures have one thing in common: they allow several organizational logics to coexist at the same level. But, beyond that, they present a number of differences, at least one of which is fundamental: hybrid structures are hyper-centralized, where matrix structures, in order to function correctly, are necessarily decentralized.
Hybrid structures are by nature hyper-centralized. Why ? Because the place where the trade-offs between the different organizational logics are made is at the top of the hierarchy. It is the General Manager, whose N-1s have different organizational logic, who is the only one able to make the arbitrations according to the circumstances and the nature of the problems encountered.
In matrix structures, on the contrary, as I explained in a previous post , trade-offs are carried out first by the operational units, objects of a double hierarchical connection. This is the challenge: to solve locally, in a differentiated way according to the characteristics of the sub-environments, the paradoxes and contradictions that we could not or wanted to solve at the global level.
Change managerial logic
But, for this principle to become reality, it requires a change in managerial logic. In other words, and as proposed in another post , this requires going from “Report to” to “Support from”. And this is where, in general, the shoe pinches!
We can thus understand why many companies prefer to adopt hybrid structures rather than matrix structures. The managerial challenge is less ambitious, the coordination costs lower.
But is the concentration of all powers at the top of the hierarchy that this type of structure requires still compatible with the demands of today’s complex world? It seems to me that the answer is in the question!