Designing Matrix Organizations That Work: Lessons from the P&G Case

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Designing matrix organizations that work: Lessons from the P&G case

Ronald Jean Degen
International School of Management Paris


Working paper nº 33/2009


globADVANTAGE Center of Research in International Business & Strategy

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WORKING PAPER Nº 33/2009 July 2009

Com o apoio da UNISUL Business School



Ronald Jean Degen Ph.D. Candidate at the International School of Management Paris Vice Chairman of Masisa Chile Address: E-mail: Phone: +55 41 9918 9000 Cabanha Orgânica Lomas Negras Ltda. Caixa Postal 95 Campo Alegre, SC 89294-000 Brasil

Ronald Jean Degen is in the Ph.D. Program of the International School of Management in Paris, and the Vice Chairman of Masisa in Chile. . He was a Professor at the Getúlio Vargas Graduate Business School of São Paulo where he pioneered the introduction of teaching entrepreneurship in 1980 and wrote the first textbook in Portuguese on entrepreneurship published in 1989 by McGraw-Hill. He just published a new textbook on entrepreneurship that was published in 2009 by Pearson Education.


Designing matrix organizations that work: Lessons from the P&G case ABSTRACT The purpose of this paper is to illustrate why companies adopted the matrix, what problems they had, the solutions for these problems based on Galbraith (2009) and other authors like Davis & Lawrence (1977), and the state of the art of matrix structure design today like the P&G front-back hybrid matrix organization. The matrix organization concept emerged from the US aerospace industry in the 1960s and was adopted by many companies in the early 1970s. In the late 1970s and early 1980s many companies were experiencing trouble with its operation and many argued like Peters & Waterman in their bestseller In search of excellence in 1982 (p. 306) that the matrix was too complex to work properly. Galbraith (2009, p. 10-14) explains that the reason for the problems were that the matrix in these organizations was wrongly adopted, hastily installed, and inappropriately implemented. He explains that adopting a matrix structure requires a collaborative organization form, proper power, and accountability distribution, complementing changes to the information systems, planning and budgeting process, the performance evaluation and bonus system, and so on. To illustrate the historical evolution of organization structure to the simple matrix and then to more complex matrix organizations we used the P&G case (Piskorski & Spadini 2007). Keywords: Matrix organization, organization structure design, front-back hybrid matrix organization.


Designing matrix organizations that work: Lessons from the P&G case

INTRODUCTION “Matrix organization is one of those management concepts, like Total Quality Management (TQM) or reengineering, that became very popular and then went through the management fashion cycle” writes Galbraith (2009, p.10). He continues explaining that the matrix became popular in the 1970s and early 1980s and was wrongly adopted, hastily installed and inappropriately implemented by many organizations. Therefore, word spread that the matrix does not work. In 1982, Peters and Waterman wrote the death sentence to the matrix: Our favorite candidate for the wrong kind of complex response is the matrix organization structure (p.306). They explain that the matrix organization is very confusing, people do not know to whom they should report to, and virtually none of the excellent companies they surveyed informed that they had formal matrix with the exception of project management companies like Boeing. Galbraith (2009, p.9) says that this assertion is not true. Besides Boeing, Intel, Digital...
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