If you want to remain content in ordinary reality, take the blue pill and carry on with developing your business. But if you're growing like crazy and considering seismic changes to your business structure, AND are not unsettled by the thought of creating a matrix, then the red pill is for you. Go ahead, you'll enjoy the ride!
As your business grows and you have more people, you'll start to think more about structure. People in charge of development, sales, marketing, operations, maybe manufacturing, product management, customer service, quality, finance and so on. The people you appoint will assume responsibility for those functions. They'll likely have (and grow) a team, own a budget and be measured on objectives that are specific to their functions and consistent with the business mission. You're all in one place and the organisation is a simple vertical structure.
Then you open a sales office in France and you appoint someone to lead the French business. They bring in sales, marketing and customer service people to generate new business, and engage and support your French customers. Now you have a Head of Marketing in the UK and a France Country Manager, both of whom have marketing responsibilities, albeit for creation and delivery respectively. Your french marketing exec functionally reports to the Head of Marketing, but operationally to the France Country Manager. They have responsibility to support and execute the 'global' message, but in a way that respects french language, culture and the market, and is in-step with the rest of the french business.
Then the same happens in Germany, Italy, Spain and more.
Welcome to matrix management - a world where people effectively have two (or more) bosses; operational (often based on where they are) and functional, based on their job function.
I've heard people say, "I work in a matrix management system," as if this was the worst thing that could befall them. It isn't, and if it's introduced carefully and with rules, then matrix management (which can also be known as 'solid-line/dotted-line' reporting) can work very well, and can improve the quality and speed of organisational decision making.
The first thing you have to decide is which part of the matrix is the primary (solid) reporting line - either function or operation - and which is secondary (dotted). This is often linked to how the P&L is constructed - through functional or operational lines. In other words, if the primary P&L responsibility for France is held by the French Country Head, then that's usually the primary line for the matrix and their team will primarily report to them. This structure also has the benefit that you're building small multidisciplinary teams everywhere that are effectively autonomous, with delegated responsibility. That's what you want - right?
Here are some more thoughts:
Decide your primary reporting line carefully. Do you want to know, "Is France profitable?" or "Is XYZ product group profitable?" You'll say you want to know the profitability of both, which you do, but you can set gross profit targets for a product range, and net profit, after non-product related expenses, for the country.
Whatever you introduce, it must be consistent across the entire organisation. You can't have operational reporting for sales, and functional for customer service - it won't work and can be very confusing.
The secondary reporting line must have a say in budgeting, target setting, recruitment and decision making. So there could, for example, be a monthly sales meeting into which all the country sales people contribute.
Watch out for a spike in the number of meetings - and push to reduce them.
You can build a shadow P&L for the secondary reporting line, but this will introduce expense allocation, which can lead to arguments.
Your employee who reports to two people isn't the meat in the sandwich between two bosses who disagree with each other. The conduit to the secondary reporting line to resolve issues is through the first. Make that clear.
You can also use matrix management as a way of forming teams for project work. As per the France country example, the project team is formed with a Project Lead to whom each member of the team reports for the duration of the project. That becomes their primary reporting line, with the dotted-line providing support and resource.
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