Some suggest that the matrix organization is the next level in organization development were some areas consist of traditional functional departments, such as IT, or HR, whereas other parts of the organization, such as sales and marketing, completely transformed into a process driven organization.
In a functional organization the resources and employees do what the boss says. In a process organization the boss is the customer and all resources and people work for the customer directly. In functional organizations bosses replace customers and they decide what is right to do in order to satisfy the customer requirements. In a process organization; bosses and people are to service the customers. Then what is matrix organization?. Matrix organziations are a mixed of both. Nevertheless, the criteria to manage the resources and people must be very clear. If the criteria is process then all resources and people must follow directly customer requirements. Empowerment, participation, commitment and decision making directly for customer are right features. But if the criteria is functions, then all resources and people must be follow the hierarchical bosses. Bosses will think what is right for servicing customer requirements with resources and people organization. Decision making is centralized, resources and people are to service to the organization hierarchy and lack of commitment and participation are present. The ideal situation is to combine both extremes, fucntional for short term profitability and process for long term customer satisfaction. Matrix is the right solution, some areas oriented to hierarchy and others to customers, but all with the same spirit: satisfy customer requirements a little better each day.
Matrix organizations are multi-functional, cross-discipline orgs, such that a horizontal line "cuts" across functional "stovepipes" provides something of a visual depiction. They are best suited for projects -- where specific beginning and end points are identified for a unique endeavor that requires diverse and independent thought to tackle the uncertainty inherent in projects. (Matrix positions can be somewhat uncomfortable for individuals temporarily assigned away from the "flagpole" or leadership of the stovepipes functional domain they came from. Because after all, they are not being observed if matrix end away for a while.) Process orgs conduct less complex, transactional functions -- think banking or insurance or even hospital operations. Functionals are the most traditional, and as Harold Leavitt and others point out, are hierarchical as well. Organizational design in accord with the work at hand is very important -- Gareth Morgan provides good insights in his classic, Images of Organizations. Hope that helps.
THE MATRIX IS A HYBRID BETWEEN THE FUNCTIONAL AND PRODUCT STRUCTURES . It is a structure that allows a subordinate to report to two bosses(Product and functional bosses)
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