The matrix organizational structure requires that employees have more than one reporting relationship. This arrangement involves reporting to a manager within a functional organization, while also reporting to a project manager who is overseeing the work on a project that requires staffing from multiple functional areas.
A matrix organization is designed to encourage cooperation across functional silos, so that work requiring input from multiple functional areas can be managed more effectively and efficiently. It is especially useful for generating a higher level of responsiveness to customers by bringing together information from across the organization to assist them. This is useful to some degree, but the primary reporting relationship for an employee is still his or her manager within a functional unit. Another concern with this arrangement is that product or project managers have little power, and so must rely upon persuasion to obtain resources from the functional managers. A further concern is that functional managers can become frustrated with the demands of multiple product or project managers on their resources; a functional unit has a limited amount of resources, and most of those resources are likely to be targeted at the main responsibilities of the unit, not the special projects being advocated by product or project managers. Also, employees can be overwhelmed by the demands of the two bosses to whom they are assigned, resulting in ongoing meetings to resolve resource constraints. A final concern is that some employees will not be able to function well in this ambiguous organizational structure, and so will leave the firm. Because of these concerns, matrix structures are relatively uncommon.