The terms “matrix” and “decentralized” refer to different types of organizational structures, or the way in which reporting relationships, decision-making authority and resource flows are distributed and delegated in an organization. Decentralized structures feature flatter hierarchies and greater decision-making power for a wider range of employees. A matrix structure is a specific organizational design that combines elements of both centralized and decentralized structures.

Decentralized Organizations

To understand decentralized organizations, it helps to grasp the concept of centralized organizational structure. Decisions, communication and resources flow from top to bottom in a vertical hierarchy in centralized organizations. Things flow more horizontally in decentralized organizations, meaning employees are more empowered to make decisions. In a decentralized structure, frontline associates often seek information from peers rather than supervisors and share resources with each other rather than looking upward in the chain of command. A cashier deciding whether to accept a product return rather than calling a manager is an example of decentralized decision-making authority. A graphic designer offering to help another team finish a project is an example of decentralized resource sharing.

Matrix Organizational Structure

A matrix structure is a hybrid organizational design because it mixes both horizontal and vertical reporting relationships. The term “matrix” derives from the concept of crisscrossing lines of authority and decision-making ability. In a matrix structure, employees are grouped into functional departments with top-down hierarchies but also form cross-functional project teams in which they are fully responsible for their own actions and decisions. For example, a quality assurance tester at a software company could be part of a hierarchical quality department, reporting to a mid-level manager, but he also could be chosen to participate in a side-project that his manager does not oversee. In day-to-day operations, the tester would report to his direct supervisor, simultaneously setting his own goals and making his own workflow decisions related to the side project.

Advantages for Small Businesses

Both decentralized and matrix organizational structures carry inherent benefits for small businesses. A major advantage of a decentralized structure is the freedom it grants to company owners to focus on higher-level concerns. Equipping and allowing the workforce to make managerial decisions on the front line can keep operations flowing smoothly and can go a long way toward building strong relationships with customers. Matrix structures allow small businesses to make the most of their human resources by combining permanent and temporary roles in each job description. Flatter organizational structures also can reduce salary expenses by broadening each person's responsibilities and employing fewer managers.

Choosing an Organizational Structure

Whether a decentralized structure or a matrix structure is best for your business depends on a variety of factors, such as type of business or types of employees. If your products require specialized handling for safety, a more centralized structure can help to ensure that safety standards are adhered to consistently. If you conduct door-to-door sales, you may find it more beneficial to give employees more freedom in their customer interactions. If you employ teenage seasonal workers, you might consider a structure with numerous layers of management. If you employ specialists with doctorate degrees, a decentralized matrix structure may bring out the highest quality of work.