In a Matrix Organization (MO) the traditional hierarchical type of management structure is complimented by horizontal management structure. It requires both a horizontal and vertical flow of information, knowledge and communication, hence the matrix. Instead of a typical pyramid shape, the structure is laid out across two axes, giving a horizontal level of management across business units in conjunction with the traditional vertical lines of authority.
It is normal for Matrix Organizations to have dual command structures, or even multiple command structures that can make working in a Matrix quite difficult. Employees must deal with dual sources of reward and punishment, dual communication, dual reporting, and multiple bosses, making it very different than a typical workplace, and drawing on their interpersonal skills to carefully maneuver between competing forces.
Matrix Organizations require extensive communication systems and can result in higher overhead because they create more management positions.
Typically, it has product groups or projects on the vertical axis and business units on the horizontal axis.
Teams of functional personnel (e.g., manufacturing, research and development, finance, and sales) report to a manager with profit responsibility bearing a title such as business manager, category manager, or new product manager. The functional personnel also report to their functional bosses, who are responsible for maintaining the quality of functional performance.