What are the challenges of managing a matrix organization like GM’s basketweave? How has GM chosen to address these challenges? GM’s basketweave structure fits into a simultaneous organization structure perfectly. The purpose of implementing this matrix structure is to achieving both differentiation and integration within different regional segments and also within functional units.
The new structure will help “to overhaul processes and reduce overlapping product lines, eliminating similar, often competing, models, and developing common systems for product development, design, and manufacture.1” The new management team expects basketweave structure will help them implementing their new strategy to cut cost and to improve GM’s management efficiency and productivity. Just as GM’s CEO Wagoner said “A matrix is a horrible way to run a business: it’s just better than anything else.”
The basketweave structure also faces a lot of challenges. First, on the organization structure level, the matrix structure is much more complicated to allow people who work in this structure coordinate with each other. The chain of command is not clearly defined as in a simpler structure. Staff in each of the regions has to report to both the leader of their own function and also to the region president. This violates the well known management principle of unity of command. Who controls work assignment, evaluation, compensation, budgeting and financial reporting accountabilities?
How to promote organizational communication and alignment? Any conflicts on above issues will severely affect the functionality of the whole organization. The next challenge following an unclear chain of command is the ambiguousness of responsibilities. How to balance the local interest and centralized coordination to ensure economies of scope and scale? If anything goes bad, who should take the responsibilities, the regional president or the global function leader?
The results of a bad decision from North America power train division will affect not only North America, but also other region’s power train division because of the matrix structure’s integration of the same functional unit. The third Challenge is link to people’s compensation and motivation. The matrix structure will break the traditional bond between pay grade and number of people under management. The functional units will face more developmental assignments and uncertainty of their staff’s career path.
How to align people with the new organization structure? The traditional compensation structure needs to be modified according to the new matrix structure so as to motivate employee better. The last challenge will be the shock to the company’s existing culture. The change of organization structure, compensation, personnel system and policy making process will definitely affect every employee and company’s culture. Whether employee can fit into the new culture will directly impact the implementation of the company’s new strategy.
In Order to Balance the matrix structure and clarify the responsibilities. GM forms the Automotive Strategy Board (ASB) by combining regional boards, global process councils and GM’s board of directors. ASB provides the highest-level oversight over all strategic, financial, operational matters and has the highest authority on policy making process. Wagoner took the following steps to make sure the new basketweave structure works.
First, GM clarified the responsibilities between regional divisions and functional divisions. They both have their own management councils or board to make their decisions, but all these decisions need to be sent to ASB for approval. All these decisions should be well discussed and summarized within either regional or functional divisions. Wagoner also makes sure each region presidents also take a role in functional unit. By letting each manager take two roles, Wagoner hopes all managers can broad their versions and find the balance themselves to help GM add more value. GM also created management development programs and career planning process to reinforce those managers’ interpersonal capabilities which is essential to a matrix structure.
These methods align GM’s cost reduction and efficiency improvement task with their organization structure. Second, to improve alignment between different departments and people, Wagoner let each ASB member clearly and openly expresses their individual objectives. After that, all managers can cross check with their staff and with each other to make sure expectation and schedules are matched and thus coordinate together accordingly to resolve any conflict and get the job done.
Third, Wagoner and Barclay also widen GM’s salary bands by holding open discussion in ASB meetings. They 2“eliminate the hierarchy it had fostered and instead encourage more lateral transfers for skills development”. This new compensation policy erases employee’s concern on the new matrix structure, and thus aligns people with GM’s organization structure. Last, by holding more and more open discussions and allowing more communication, the level of
trust was built up between all departments. Coordination and Efficiency become part of GM’s culture.