Running a Business

Matrix Structure for Technology Firms

Written by Ankur Hazarika for Gaebler Ventures

Intellectual capital for technological firms is rare and costly; this makes it all the more important for them to optimize resource utilization. The matrix structure of organization helps tap the intellectual capital more efficiently.

Human resource optimization is a prime need of all startups.

For technology startups in particular, efficient utilization of intellectual capital assumes much more importance because technologically capable employees are all the more rare and costly.

Technology firms should be able to get the most out of the employee's capabilities without unduly taxing them. While haphazardly loading the employee with work is inefficient management, an employee can be loaded optimally by utilizing matrix management.

Matrix Management Structure

The matrix organization structure is arranged into verticals and horizontals.

The verticals are the resources or the expertise that the firm has. There might be a vertical for research, one for business development, one for HR and so on. Other technology firms might segregate the technical expertise into verticals like mechanical design, PCB fabrication, firmware writers etc.

The horizontals are the ongoing projects of the firm, e.g., if the company currently has three projects, there would be three verticals.

Managing the Matrix

The resources (verticals) are headed by a functional manager while the projects (horizontals) are headed by a project manager.

The resource heads provide employees, subject to availability, on request of the project heads. Each employee is part of a certain resource group (say research or production).

As and when projects arrive, employees are assigned to a project. Also, depending on expertise and availability, each employee could be put in similar work on other projects too.

Say there is an engineer in the firm who has expertise on microcontrollers. He would be under the vertical of 'electronics research'.

Let's say the firm bagged two projects - each of which requires a module based on microcontrollers. Since the work is related and both require his expertise, the engineer would be a part of both the teams. Similarly, the resources would be drawn from all verticals, and project horizontals would be formed for each project.

Advantages of Matrix Management

The matrix form of management allows critical expertise to be employed in many projects in an organized way. The firm need not employ multiple employees having the same expertise.

Experts can simultaneously work in similar problems in different projects and so there is no duplication and redoing of work.

Moreover, the learning of different functional teams (marketing, production etc) spreads across projects teams and this accelerates the learning curve.

What to Watch Out for When Using Matrix Management

There are certain caveats to be aware of before one utilizes matrix management.

The matrix form of organization structure is applicable only after the firm has grown beyond a point. For most technology related firms, the technical unit reaches this size pretty fast.

A schedule of the employee's engagements should be meticulously maintained. Otherwise, it might lead to him being misallocated to a project while he has no time to spare.

Managing multiple bosses is another concern - the lead of one project might demand too much from the employee, causing a concurrent project to suffer.

Matrix management leads to a lot of complexity and even large, accomplished firms like IBM and HP are known to have had a tough time managing this. A fine balance has to be struck between maintaining resource optimization and ensuring the manageability of the system.

Ankur Hazarika is currently studying at the School of Management, Indian Institute of Technology (SJMSOM, IIT B), in Mumbai, India. He has been closely associated with a host of entrepreneurship networks like NEN, TiE and BarCamp, and has worked with the Indian business incubator, Society for Innovation and Entrepreneurship (SINE).

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