Introduction to Matrix Management

A leader is responsible to empower his people and get the best out of them. Yet an organisational structure can either help or hamper performance. Worst, it can make or break success.

Looking at the fast-changing world of the global economy, whatsoever slows up and obstructs decision-making is a challenge. Hierarchical management is rather unattractive and functional silos are unlikable. Instead, employees desire to create teams equipped with flexibility, cooperation and coordination.

Recognising that companies have both vertical and horizontal chains of command, the matrix model is created. The concept of this principle lies in the ability to manage the collaboration of people across various functions and achieve strategic objectives through key projects.

Consider this scenario:

Ian is a sales executive of a company. His role is to sell a new product under the supervision of a product manager. The manager is expert about the product and she is accountable to coordinate the people across the organisation, making sure the product is achieved.

Moreover, Ian also reports to the sales manager who oversees his overall performance, monitors his pay and benefits and guides his personal development.

Complicated it may seem but this set-up is common to companies that seek to maximise the effect of expert product managers, without compromising the function of the staffing overhead in control of the organisation. This is a successful approach to management known as Matrix Management.

Matrix Management Defined

Matrix management is a type of organisational management wherein employees of similar skills are shared for work assignments. Simply stated, it is a structure in which the workforce reports to multiple managers of different roles.

For example, a team of engineers work under the supervision of their department head, which is the engineering manager. However, the same people from the engineering department may be assigned to other projects where they report to the project manager. Thus, while working on a designated project, each engineer has to work under various managers to accomplish the job.

Historical Background

Although some critics say that matrix management was first adopted in the Second World War, its origins can be traced more reliably to the US space programme of the 1960’s when President Kennedy has drawn his vision of putting a man on the moon. In order to accomplish the objective, NASA revolutionised its approach on the project leading to the consequent birth of ?matrix organisation?. This strategic method facilitated the energy, creativity and decision-making to triumph the grand vision.

In the 1970’s, matrix organisation received huge attention as the only new form of organisation in the twentieth century. In fact it was applied by Digital Equipment, Xerox, and Citibank. Despite its initial success, the enthusiasm of corporations with regards to matrix organisation declined in the 1980’s, largely because it was complex.

Furthermore, the drive for motivating people to work creatively and flexibly has only strengthened. And by the 1990’s, the evolution of matrix management geared towards creation and empowerment of virtual teams that focused on customer service and speedy delivery.

Although all forms of matrix has loopholes and flaws, research says that until today, matrix management is still the leading approach used by companies to achieve organisational goals.

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2015 ESOS Guidelines Chapter 2 – Deadlines and Status Changes

The ESOS process is deadline driven and meeting key dates is a non-negotiable. The penalties for not complying / providing false or misleading information are ?50,000 each. Simply not maintaining adequate records could cost you ?5,000. The carrot on the end of the stick is the financial benefits you stand to gain.

Qualifying for inclusion under the ESOS umbrella depends on the status of your company in terms of employee numbers, turnover and balance sheet on 31 December 2014. Regardless of whether you meet the 2014 threshold or not, you must reconsider your situation on 31 December 2018, 2022 and 2026.

Compliance Period Qualification Date Compliance Period Compliance Date
1 31 December 2014 From 17 July 2014* to 5 December 2015 5 December 2015
2 31 December 2018 From 6 December 2015 to 5 December 2019 5 December 2019
3 31 December 2022 From 6 December 2019 to 5 December 2023 5 December 2023
4 31 December 2026 From 6 December 2023 to 5 December 2027 5 December 2027

Notes:

1. The first compliance period begins on the date the regulations became effective

2. Energy audits from 6 December 2011 onward may go towards the first compliance report

Changes in Organisation Status

If your organisation status changes after a qualification date when you met compliance thresholds, you are still bound to complete your ESOS assessment for that compliance period. This is regardless of any change in size or structure. Your qualification status then remains in force until the next qualification date when you must reconsider it.

How COBIT helps you achieve SOX Compliance

First released way back in 1996, COBIT has already been around for quite a while. One reason why it never took off was because companies were never compelled to use it ? until now. Today, many CEOs and CIOs are finding it to be a vital tool for achieving SOX compliance in IT.

Thanks to SOX, COBIT (Control Objectives for Information and related Technology) is now one of the most widely accepted source of guidance among companies who have IT integrated with their accounting/financial systems. It has also gained general acceptability with third parties and regulators. But how did this happen?

Role of control frameworks in SOX compliance

You see, the Sarbanes-Oxley Act, despite having clearly manifested the urgency of establishing effective internal controls, does not provide a road map for you to follow nor does it specify a yardstick to help you determine whether an acceptable mileage in the right direction has already been achieved.

In other words, if you were a CIO and you wanted to find guidance on what steps you had to take to achieve compliance, you wouldn’t be able to find the answers in the legislation itself.

That can be a big problem. Two of your main SOX compliance obligations as a CEO or CIO is to assume responsibility in establishing internal controls over financial reporting and to certify their effectiveness. After that, the external auditors are supposed to attest to your assertions. Obviously, there has to be a well-defined basis before you can make such assertions and auditors can attest to anything.

In the language of auditors, this ?well-defined basis? is known as a control framework. Simply put, once you certify the presence of adequate internal controls in your organisation, the external auditor will ask, ?What control framework did you use??

Knowing what control framework you employed will help external auditors determine how to proceed with their evaluations and tests. For your part, a control framework can serve as a guide to help you work towards specific objectives for achieving compliance. Both of you can use it as a common reference point before drawing any conclusions regarding your controls.

But there are many control frameworks out there. What should you use?

How SOX, COSO, and COBIT fit together

Fortunately, despite SOX?s silence regarding control frameworks, you aren’t left entirely to your own devices. You could actually take a hint from the SEC and PCAOB, two of the lead organisations responsible for implementing SOX. SEC and PCAOB point to the adoption of any widely accepted control framework.

In this regard, they both highly endorse COSO, a well-established internal control framework formulated by the Committee of Sponsoring Organisations of the Treadway Commission (COSO). Now, I must tell you, if you’re looking specifically for instructions pertaining to IT controls, you won’t find those in COSO either.

Although COSO is the most established control framework for enterprise governance and risk management you’ll ever find (and in fact, it’s what we recommend for your general accounting processes), it lacks many IT-related details. What is therefore needed for your IT processes is a framework that, in addition to being highly aligned with COSO, also provides more detailed considerations for IT.

This is where COBIT fits the bill.

How COBIT can contribute to your regulatory compliance endeavors

COBIT builds upon and adheres with COSO while providing a finer grain of detail focused on IT. You can even find a mapping between COBIT IT processes and COSO components within the COBIT document itself.

Designed with regulatory compliance in mind, COBIT lays down a clear path for developing policies and good practice for IT control, thus enabling you to bridge the gap between control requirements, technical issues, and business risks.

Some of the components you’ll find in COBIT include:

IT control objectives

These are statements defining specific desired results that, as a whole, characterise a well-managed IT process. They come in two forms for each COBIT-defined IT process: a high-level control objective and a number of detailed control objectives. These objectives will enable you to have a sense of direction by telling you exactly what you need to aim for.

Maturity models

These are used as benchmarks that give you a relative measurement stating where your level of management or control over an IT process or high-level control objective stands. It serves as a basis for setting as-is and to-be positions and enables support for gap analysis, which determines what needs to be done to achieve a chosen level. Basically, if a control objective points you to a direction, then its corresponding maturity model tells you how far in that direction you’ve gone.

RACI charts

These charts tell you who (e.g. CEO, CFO, Head of Operations, Head of IT Administration) should be Responsible, Accountable, Consulted, and Informed for each activity.

Goals and Metrics

These are sets of goals along with the corresponding metrics that allow you to measure against those goals. Goals and metrics are defined in three levels: IT goals and metrics, which define what business expects from IT; process goals and metrics, which define what the IT process should deliver to support It’s objectives; and activity goals and metrics, which measure how well the process is performing.

In addition to those, you’ll also find mappings of each process to the information criteria involved, IT resources that need to be leveraged, and the governance focus areas that are affected.

Everything is presented in a logical and manageable structure, so that you can easily draw connections between IT processes and business goals, which will in turn help you decide what appropriate governance and control is needed. Ultimately, COBIT can equip you with the right tools to maintain a cost-benefit balance as you work towards achieving SOX compliance.

ESOS What is the Truth?

When the UK administration introduced its ESOS Energy Savings Opportunity Scheme reactions from business people followed a familiar theme.

  • Do nothing it will go away
  • The next Westminster will drop this
  • Another stealth tax. I don’t have time for this
  • Give the problem to admin and tell them to fix it

ecovaro decided to share three facts with you. These are

(1) ESOS is not a government money spinner

(2) all major political parties support it, and

(3) it is a cost-effective way to put money back in your pocket while feeling better about what business pumps into the environment.

Four More ESOS Facts

1. You Cannot Give the Problem to Admin ? Energy is technical. The lead belongs with your operations staff because they understand how your systems work. Some things are best outsourced though. ecovaro is here to help.

2. ESOS is Not Going to Go Away ? A company inside the regulation net must submit its first report by 6 December 2015. Non-compliance risks the following penalties:

  • ?5,000 for not maintaining adequate records
  • ?50,000 for not completing the assessment
  • ?50,000 for making a false or misleading statement

3. The Employee Count is the Annual Average – The employment criteria (unlike balance sheet and turnover) is the monthly average of full and part-time employees taken across the full financial year. The fact you have <250 employees in December 2015 when the first report is due does not necessarily let you off the hook.

4. The 6 December 2014 Report is No Big Deal ? When you think about it the administration is hardly likely to spend years wading through 9,000 detailed company energy plans. It has no authority to comment in any case. All that is required is for a senior director to confirm reading the document, and a lead assessor to agree it complies with the law.

Does this mean that ESOS is a damp squib? We do not think so, although some firms may take the low road. ecovaro believes the financial benefits will carry the process forward, and that the imperative to make the world a better place will do the rest.

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