In what form of organization does an employee report to multiple managers?

A matrix organization is a company structure where teams report to multiple leaders. The matrix design keeps open communication between teams and can help companies create more innovative products and services. Using this structure prevents teams from needing to realign every time a new project begins.

How can you empower teams to move quickly on complex projects without getting bogged down by stakeholder reviews and approvals? Organizational structure may be the answer. Most work environments have chains of command in place so that everyone has clarity around decision-making authority. 

A hierarchical organizational chart has the chief executive officer at the top. The chief operating officer and the chief financial officer are right below them. Department managers then branch off from the top leadership roles, with project managers branching off from there.

A matrix organization differs from this classic structure since team members report to both a project manager and a department lead. In the guide below, we’ll discuss what a matrix organization is and how you can use one for complex projects. 

What is a matrix organization?

A matrix organization is a work structure where team members report to multiple leaders. In a matrix organization, team members (whether remote or in-house) report to a project manager as well as their department head. This management structure can help your company create new products and services without realigning teams.

Each organization is unique (and has unique needs). Even so, each organizational structure will have a few key components in common.

Key elements of an organizational structure

No matter the organization’s size, certain aspects of workplace decision-making and processes need to be clear. Many small businesses handle these designations informally. As a company grows, though, it’s helpful to revisit and clarify these hierarchies (or lack thereof). At the minimum, each organization needs to designate:

Work specialization

Work specializations are less formally known as roles or job descriptions. They outline what a person is responsible for within an organization or on a smaller team. Clear work specializations allow you to make the best use of talent. They make it clear what an individual person’s responsibilities and measures of success are, and help safeguard against a thinning of resources..

Chain of command

If your organization, like many, relies on a mix of people managers and individual contributors, you need to establish a chain of command. This gives people clear direction on who they should reach out to for support. When people from other departments need to check on the status of cross-functional projects, it makes it easy to find out who’s driving them.

Departmentalization and compartmentalization

Compartmentalizing people into departments creates teams of people whose jobs are organized around a specific type of work. A department could be human resources, sales, marketing, or IT. People in these departments often share common skill sets and work together frequently on projects. Each department is typically led by an executive.

Span of control

The number of team members that report to a given manager is formally referred to as “span of control.” If a manager has a large number of direct reports, the team is often subdivided into smaller departments. This happens often at large companies, where multiple people may fill a similar job function.

Centralization and decentralization

Better thought of as “top-down vs. bottom-up management,” the terms centralization and decentralization refer to how much influence upper-level leaders have over an organization. Of course, all leaders have power over their organizations. But decentralized management structures tend to have more agile decision making happening at all levels. Employees are empowered to perform their roles and make decisions as they see fit.

Formalization

Formalization determines how much standardizing there is across the organization. It may affect functions, systems, job descriptions, and the flow of information. Organizations with high formalization are often more mature and highly systematized. Done well, this kind of structure should boost innovation, not stifle it.

The importance of organizational structures

Organizational structures are important because they help businesses implement efficient decision-making processes. By assigning specialized roles to lower-level employees, businesses can make better decisions faster. 

Additionally, organizational structures provide a clear org chart that helps businesses keep track of their human resources. When your company is small, it’s hard to imagine that you’d ever lose track of what everyone is doing. After all, in startups and small businesses, it often feels like everyone is doing everything.

As you grow, these silos become more distinct from each other. At that point, an organizational structure helps you identify gaps in skills and support within your business. People’s roles become more specialized and individual teams grow bigger. Revisiting the allocation of work prevents the duplication of effort and reflects business priorities.

Keep in mind, however, that behind these flowcharts are real people. The leaders and employees represented in an organizational chart each work best under different circumstances and with different leadership styles. If you don’t keep them included in the what and why of your organizational shifts, they’re more likely to resist changes when they occur.

Since change is inevitable, it’s a good idea to communicate early and often as things shift. Strive for as much transparency in the workplace as possible. And if you do make changes in your organization, make time to check in with the people being affected. You can try to minimize the impact to them and help create a transition plan if need be.

Types of organizational structures

There are several different types of organizational structures, each with its own advantages and disadvantages. The most common are functional, divisional, matrix, project team, flat, and network.

Functional organizational structures are best for small businesses because they allow for clear decision-making hierarchies. Each team operates as an individual “silo.” Once teams grow, they benefit from making these functional structures less rigid. Teams often move faster and collaborate better with more overlap.

Divisional structures are best for large businesses because they allow for more specialization. For example, a global company might divide their business into regions (such as EMEA/APAC), or broad service categories (like B2B/D2C).

In the matrix structure, employees work in both functional and project teams which may be structured differently. Employees then typically report to two bosses: one who oversees their day-to-day work, as well as another boss that oversees larger projects or tasks.

A project team approach would include any number of functions working together on a specific project without a permanent hierarchy. Employees report up through their individual bosses. But they also contribute to team efforts led by managers from other departments on the team as needed.

Flat organizations have as little hierarchical structure as possible. Middle managers are largely absent from staff. Instead, the workforce often reports directly to managers or leaders at the “highest” level. Highly-autonomous employees often thrive in these environments. The lack of hierarchy motivates people to make decisions, take ownership, and facilitates problem-solving.

In a network structure, individual freelancers, groups, or associations work together. They each work as separate functional teams, but may share an overarching entity. Professional associations often have this type of structure.

Choosing the best organizational structure for your company

When it comes to organizational structures, there is no one-size-fits-all solution. The best way to choose an organizational structure for your company is to first assess your business needs and goals. From there, you can match those needs with one of the common organizational structures. 

Although there isn’t a “right” answer, some organization structures are a better fit for your team than others. And while we normally advocate for trying several solutions until you find what works, that doesn’t work as well with organizational development. 

Company reorganizations (especially repeated ones) tend to destroy employee morale. Even when handled well, reorgs create uncertainty and stress on employees. Since they’re often a precursor to layoffs, people tend to fear losing their jobs — even when the changes are generally positive. And if there’s a pattern of other major changes rapidly coming down the line? That’s a recipe for cynicism and workplace burnout.

When deciding on an organizational structure, it’s important to keep these four factors in mind:

1. Service

The structure you choose will depend on the type of company you run. For example, companies that rely on a number of front-line employees are structured a lot differently than nonprofit organizations. Each will have a different organizational chart based on what they do and where they need to prioritize their efforts. 

To build an effective organization, you need to know which team members are there to facilitate the work of the people in the field and which employees support the leaders. For example, C-suite executives often have a team dedicated to supporting their efforts. But the customer service team exists to support the end user. Some roles, like marketing or product development, sit squarely in the middle. Your allocation of resources needs to reflect a balance between these two sets of needs.

2. Size

Company size is critical to consider when determining a formal organizational structure. Smaller companies often have a high deree of overlap in roles. They have less formalized structures. This lack of standardization can present some challenges, but it frees teams to grow rapidly. 

On the other hand, larger organizations tend to grow faster with a more centralized, formal structure. Why? It makes it easier for people to know where to find information, who to talk to in order to get things done, and avoid duplicating efforts needlessly. The challenges and unique strengths of each differently sized organization help inform the best type of arrangement.

3. Stage 

In order to create standardized systems, there (usually) needs to be something to systematize. It’s pretty hard — or deceptively easy — to develop systems for a business that has no clients, no services, and no employees.

In the early stages, not only do small companies benefit from a less formalized structure — they don’t need one. Once workflows emerge, patterns arise, and problems occur, they can reflect those learnings as a formal process. The need for reporting relationships and divisional structure arises as the need for systems does.

4. Systems 

Organizations at every stage — even with just one person — tend to organize their work by function. There’s accounting, marketing, and service right from day one. When this work is handled by a single person, there’s no need to articulate systems. More people means more need to define how, when, and why teamwork happens. 

In which organizational structure type does an employee report to two bosses?

What are the 4 types of organizational structure?

What is the number of people reporting to a manager called?

What is it called when each employee reports to only one manager?