Matrix Reporting Structure: Adoption Challenges & Benefits
A matrix reporting structure is more useful than a traditional hierarchy reporting structure for some companies. With matrix reporting, reporting relationships take the form of a grid, or matrix. This results in dual reporting relationships for employees — for example, along functional, geographic and product lines.
Matrix reporting can result in many potential benefits. For example, a functional manager can help employees with skills development and task prioritization while a product line manager can be responsible for setting corporate direction with regard to product offerings. Adoption can also result in more efficient use of resources, better information flow throughout the company, and faster and improved decision-making.
Challenges to Adopting Matrix Reporting
However, there are challenges to adopting a this type of reporting structure. Due to conflicting demands on resources and overlapping reporting responsibilities, there may end up being turf battles between employees and departments. For this and other reasons, matrix reporting structures are often considered to be the most complex and difficult organizational structures to work within.
In addition, there also tend to be accounting challenges associated with matrix reporting structures. A substantial amount of accounting work is required to provide this type of reporting and many accounting systems are not designed to provide it. This can result in more demands on the accounting staff.
Certain non-financial systems, such as MRP and sales, may also require modification for matrix reporting. And when the switchover from a traditional hierarchy reporting structure to a matrix reporting structure occurs, the company may not have any accounting history to compare results.
When these challenges are not proactively addressed, negative outcomes can occur. Examples include the following:
There may be conflicting and confusing lines of reporting responsibilities, which can result in diminished morale among employees throughout the company.
The accounting department may be faced with a significant amount of additional work with the increase of financial, accounting and reporting requirements.
Improper interpretation of financial results can lead to the wrong operational conclusions.
Engaging a Project CFO or Part-Time CFO
A CFO partner brings the expertise and experience needed to facilitate the design and implementation of the new accounting structure and reporting formats. In addition, he or she will help define the organizational responsibilities in order to minimize confusion with regard to lines of reporting responsibilities.
The outsourced CFO will also serve as an independent arbiter if organizational boundary disputes occur. In this role, he or she will be able to offer substantial assistance in setting relevant financial and operational targets for the new reporting structure.
Your company could realize multiple benefits by bringing in a professional from a CFO services firm, and the following are a few examples:
Your new matrix structure will be rapidly implemented with minimal disruption to your company.
There will be clear lines of reporting responsibilities that eliminate confusion throughout the organization.
You will enjoy clearly defined and results-driven objectives and goals that serve to drive corporate objectives.
All relevant financial and operational systems that complement the new reporting structure will be successfully adapted.
For some companies, a matrix reporting structure is more useful than a traditional hierarchy reporting structure. With matrix reporting, reporting relationships take the form of a grid, or matrix, which results in dual reporting relationships for employees. Matrix reporting can result in many potential benefits, but there are also challenges to adopting a matrix reporting structure. An on-demand CFO partner from a CFO services firm can help you meet the challenges involved in matrix reporting and thus maximize the benefits of matrix reporting to your company.
Mark S. Becker, Partner, CFO Edge, LLC