Case Study：Organizational Change to the Matrix Structure

In 2019, SACC began to transform the Engineering R&D division in to project-oriented organization and started the operation of PMO. The R&D division includes different functional department, such as Stress Analysis Department, Structure Design Department and System Department, etc.

Introduction

Before 2019, projects were mainly conducted within the functional department. The technical leader took the responsibility of project management. The projects mainly focus on single functional domain, and conducted by team member from the same department. Cross functional cooperation within a complex project was rare.

Figure The organization structure of Engineering Research & Development Division before change

Challenge

For SACC, there are following motivations to conduct organizational change into matrix structure.

First, large and complex aeronautics projects, involving multiple disciplines and specialties could improve the company’s completability in the market. Thus, it becomes a company strategy to introduce a matrix structure to improve complex project management. A matrix structure allows for better coordination and collaboration across functional departments and project teams.

Second, A matrix structure offers greater flexibility in responding to changing project requirements. Aeronautics projects may encounter unforeseen challenges or changes in specifications, and a matrix organization can adapt quickly by reallocating resources as needed.

Third, A matrix structure promotes cross-functional collaboration. In aeronautics, where engineering, design, manufacturing, testing, and other functions are critical, a matrix allows specialists from different functional areas to work together seamlessly.

Analysis

Before the Change: An Eiffel Tower form company in large-power distance and collective national culture

China has a collective and high-power distance culture. This type of culture encourages the family form company. In such company, the loyalty to their own group is important. Each functional department was like a big family and the functional manager was the ‘father’. Like family, different department may have their own subculture. Any task distributed to employee must got the approval from the father. For an outsider, sometimes it is hard to get the technical support or human resource support.

In this case, the SACC has a long history of aircraft manufacturing and experience in cooperation with international companies, such as Airbus and Boeing. The company has well established hierarchy structure and has Eiffel Tower culture traits as well. For example, there are lots of rules and procedures. The role and responsibility of all employees including the bosses is well described, which means if he or she is replaced, there is no difference for others’ duty.

Make the Change-The Role of PMO

The organizational change into matrix organization will induce culture change from family form or Eiffel tower form into guided missile culture. The effectiveness in reconciliation of culture difference will affect the performance of the projects.

let’s review the ways of changings for Family and Eiffel tower organization. In the initial change phase, the change by “Power” and rules and procedures are important for Eiffel tower form with family mindset company. During the changing phase, the project performance should be monitored and adapt the management tools and techniques.

Change by power

The PMO needs to get the authorization from top management to conduct the change from the top management. The support from chief manager is very important to implement the change in the family type culture.

Change by rules and procedures

The PMO developed new rules and procedures to implement the change. The rules include the pay-for-performance system connected to project outcome, the project management procedures that specified the interface and responsibility of project manager, functional manager and chief manager.

The process of rules release showed traits of lower power distance and individualism. The rules and procedures are well discussed among project managers and functional managers before release, which shows a low power distance trait. Once the rules are released, they apply to every stakeholder without exception.

Change from the mindset

PMO provided the training and knowledge sharing about the goal and benefit of change. It is important for functional manager to believe that the object is not deprive their power but to achieve the strategy goal of company. They were convinced after observing the high value contributed by project managers.

Convincing instead of compelling shows a culture towards low-power distance style.

Solutions

Organizational Change with PMO

In 2019, the top management decided to change the organization into matrix organization. Project Management Office was established. The PMO recruited several project managers from different department. PMO developed project management procedures and standard to train new project managers.

The project manager was responsible for the team development and accomplish the project properly within the cost and time limit.

The R&D center also reshape the rewarding system. The top management established a pay for performance salary system that take individual performance in projects as the most important factor influencing the salary. The chief PMO manager believed the salary style could motivate engineers devote more into projects.

Figure The organizational change with new PMO department

Change in pay for performance

The shift to a matrix organization and the implementation of a pay-for-performance system aligns with individualistic values, focusing on individual contributions and rewards. Before the shift, the performance of functional engineer is measured by functional manager. After the shift, the employee’s performance is evaluated by the value contributed to project.

Result

Remove Cross Functional Cooperation Obstacles

The overall revenue of R&D department has increased since 2019. The cross functional cooperation becomes normal practices with procedures and guides.

For example, there was a structure design project that entered into detailed design phase. There is large amount of detailed 3D composite components design and 2D drawing task. The structure engineers are capable to do the task. However, there was not enough capable engineers available at that time. The project manager organized structure detailed design training to the system engineers already in the project team. The trainers’ value is well respected by team member and recognized by performance-pay-system. Thus, they got high performance measurement.

Discussion

Motivations and barriers in cooperation cross functional department

In collective culture, engineers have the intrinsic motivation to show contributions for the group. Even though some engineers don’t have personal interest in the certain technical domain, they still have the willing to learn better fit in the project team or their department. They want to feel needed when the team encountered a shortage in certain talent.

The matrix structure and pay-for performance system provided the extrinsic motivation to cooperate cross department. The value of cooperate and training is evaluated in the performance measure system. Those who contribute more to the project could get the highest salary.

The shift from a traditional functional structure to a matrix organization brought to the forefront the complexities of change management. Addressing motivations, fostering cross-functional collaboration, and aligning individual and organizational goals emerged as crucial strategies, showcasing the significance of cultural awareness in organizational transformation.