DESIGNING MATRIX ORGANIZATIONS THAT WORK: LESSONS FROM THE P&G CASE

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).