The purpose of any organisational structure is to create mechanisms of coordinating its activities and functions within. Typically, firms start out with an export department, and as they grow, they develop a more international structure to carry out all non-domestic activities.
The intensity of these activities warrant a major organisational reform in order that the structure can meet the end of executing all non-domestic activities. A matrix structure has managers from the product/area/division areas interacting and operating with intersecting lines of authority. Some of the issues may include finance managers deciding on the amount of R&D, and R&D has conflicts with marketing.
Disadvantages may include:
- Time consuming decision making processes.
- Influence costs where managers try to assert influence to obtain resources for themselves.
- Bureaucratic politics – scratching of each other’s back which in long term can lead to sub-optimal decisions.
In reality, there is difficulty in operating with a matrix structure. Each department will try to maximise the benefit to their department without thinking about the overall good of the company. This will have long term negative consequences thereof.
In short, be very careful whenever you are thinking of rearranging your corporate structure!
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