Solid vs Dotted line Reporting in Organization Design
Question: In a matrixed organization, how do you determine the solid vs dotted line reporting relationships?
Answer: In short, it depends on your business strategy. You should solid line the role to the organization where the role can most move the needle on strategy achievement.
For example, if a retailer's strategy is to go to market by geography, with a regional, customized product set that fits the local needs, preferences, and trends, then the merchants should solid line to the geography leader, and dotted line to the merchandising department. However, if the retailer's strategy is to have deep product expertise, then the merchants should solid line to the merchandising department, and dot into the geography leader.
It's funny - I've experienced, up close, a bank's organization that supposedly went to market by customer segment. However, the structure really undermined its strategy by creating huge, unwieldy departments that were organized by product that practically became entities unto themselves. They simply weren't set up well to cater to customer segment. Instead, they had a DDA private client group, a brokerage private client group, a XYZ private client group, etc. All of these fragmented private client groups made for a very fragmented customer experience at the bank. Not good.
Business strategies of centralization or decentralization also help point you in the right direction. If you are centralizing HR as an enabler to your business strategy, then HR leaders should report in centrally to HR, not unit heads… Unless, perhaps, there is a competing - and more important - strategic imperative that calls for a set of HR leaders that must respond super-quickly to the unit leaders, or know intimately all the intricacies of the particular business unit they're aligned to.
In other words, the risk of non-standard HR processes is outweighed by this advantage of closely knit HR and unit leader.
All of these solid/dotted decisions are trade offs, and they're not all clear. The tradeoff that one makes when there's a dotted line reporting relationship is that priorities will be selected in favor of the solid line relationship over all others. It's good to have eyes wide open when you make the tradeoffs.
One last tidbit: a matrixed organization has a bevy of advantages, including integrating multiple aspects of business. However, it's critical that roles are defined clearly so that matrixes employees don't have to suffer from role or priority confusion.
HR Business Partners: Have you seen an org structure that undermines strategy? Let's hear about it!
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