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Functional organization

From Wikipedia, the free encyclopedia

Functional organization is a type of organizational structure that uses the principle of
specialization based on function or role.
It allows decisions to be decentralized since issues are delegated to specialized persons or units,
leaving them the responsibility of implementing, evaluating, or controlling the given procedures
or goals.

Functional structure

A functional organizational structure is a structure that consists of activities such as coordination,

supervision and task allocation. The organizational structure determines how the organization
performs or operates. The term organizational structure refers to how the people in an
organization are grouped and to whom they report. One traditional way of organizing people is
by function. Some common functions within an organization include production, marketing,
human resources, and accounting.
This organizing of specialization leads to operational efficiencies where employees become
specialists within their own realm of expertise. The most typical problem with a functional
organizational structure is however that communication within the company can be rather rigid,
making the organization slow and inflexible. Therefore, lateral communication between
functions become very important, so that information is disseminated, not only vertically, but
also horizontally within the organization.
Employees within the functional divisions of an organization tend to perform a specialized set of
tasks, for instance the engineering department would be staffed only with software engineers.
This leads to operational efficiencies within that group. However it could also lead to a lack of
communication between the functional groups within an organization, making the organization
slow and inflexible.
As a whole, a functional organization is best suited as a producer of standardized goods and
services at large volume and low cost. Coordination and specialization of tasks are centralized in
a functional structure, which makes producing a limited amount of products or services efficient
and predictable. Moreover, efficiencies can further be realized as functional organizations
integrate their activities vertically so that products are sold and distributed quickly and at low
cost.[11] For instance, a small business could make components used in production of its products
instead of buying them.
Communication in organizations with functional organizational structures can be rigid because of
the standardized ways of operation and the high degree of formalization. This can further make
the decision-making process slow and inflexible.
Even though functional units often perform with a high level of efficiency, their level of
cooperation with each other is sometimes compromised. Such groups may have difficulty
working well with each other as they may be territorial and unwilling to cooperate. The
occurrence of infighting among units may cause delays, reduced commitment due to competing
interests, and wasted time, making projects fall behind schedule. This ultimately can bring down
production levels overall, and the company-wide employee commitment toward meeting
organizational goals.

Functional Structure

In a functional organizational structure the organization is

grouped based on functional areas, such as IT, finance, and
Key Points

Functional organization is a common type of organizational structure in which

the organization is grouped based on specialization by functional areas, such
as IT, finance, and marketing.

Some argue that functional departmentalization allows for greater

operational efficiencies in that employees with shared skills and knowledge
are grouped together by functions performed.

A disadvantage is that the different functional groups may not communicate, potentially
decreasing flexibility and innovation. A recent trend to combat this disadvantage is the
use of teams that cross traditional departmental lines.

6 Important Advantages of Functional

By Saritha Pujari Organization
The following are the advantages of functional organisation structure:
(1) Benefits of Specialisation:
The whole company is divided into many departments on the basis of major activities to be
performed. Each department is headed by an expert manager. This results in more and better
work being accomplished in much lesser time. Hence, the benefits of specialisation become

(2) Coordination is established:

All the persons working within a department are specialists of their respective jobs. It makes
coordination easier at the departmental level.
(3) Managerial Efficiency is increased:
It helps in increasing managerial efficiency because of performing the same work again and
again. Further, this results in increased profit.
(4) Minimal Duplication of Efforts:
In this type of organisation unnecessary duplication of efforts is eliminated. For example, the
function of finance is only carried out by the finance department. There is no need to establish
two or more departments. It makes it possible to utilise the human and other resources
(5) Training is facilitated:
It facilitates the training of personnel as the focus is only on a limited range of skills. For
example, the employees of finance department are given training of financial issues.
The organisational structure on the basis of functions is shown in the following diagram:
(6) Equal Weight age to All Functions:
It ensures that all the functions/activities get equal weight age.

Benefits & Disadvantages of a Functional Organizational Structure

by Chris Joseph, Demand Media

Organizations may choose from a number of common operating structures. One popular structure
is the functional organization, where the company is divided into separate units based on role,
such as accounting, marketing, research and development or distribution. The functional
structure offers a number of potential advantages as well as disadvantages.

An advantage of a functional organizational structure is that it offers a high level of
specialization. Each unit operates as a type of self-contained mini-company, charged with
carrying out its specific role. Employees typically start their careers in an entry-level position
within the function and develop specialized knowledge as they move up within the hierarchy.
They become experts within their functional area, and the unit and company benefit from their
expertise and experience over time.

Efficiency and Productivity

A worker who is an expert in his functional area can perform tasks with a high level of speed and
efficiency, which enhances productivity. Workers who know their jobs well can proceed with
confidence and with a minimum amount of mistakes. Because the career paths within the
functional unit are clear, the employees may be highly motivated to advance their careers by
reaching the next rung on the ladder, which may also make them more productive.
Related Reading: The Importance of Organizational Structure

Lack of Teamwork
While specialized units within the functional structure often perform with a high level of
efficiency, they may have difficulty working well with other units. If a project calls for several
units to work together, units may become territorial and unwilling to cooperate with each other.
In essence, each unit may act in what it perceives to be its own best interests instead of those of
the organization as a whole. Infighting may cause projects to fall behind schedule.

Difficult Management Control

Another potential disadvantage of the functional organization structure is that it can pose a
challenge for top management to maintain control as the organization expands. As organizations
get larger and top management needs to delegate more decision-making responsibilities to each
functional area, the degree of autonomy may also increase, making coordination of activities
more difficult. If the company expands into new geographic areas, maintaining control of and
managing the separate functions can be even more of a challenge.

5 main Disadvantages of Functional Organisation

5 main Disadvantages of Functional Organisation

1. The relationships are very complex. Too many cross-relationships between persons and
departments make the situation very vague.
2. The definition of authority and responsibility is not very clear since the responsibility is not
fixed. As such, it will be difficult to find out as to who is responsible if things go wrong.
3. Since there are a number of foremen, each being of equal rank, there are chances of clash and
4. Decisions are likely to be delayed as several bosses have to be consulted on a single issue.
5. Difficulties are likely to arise in coordination.
Functional organisation can be adopted by big as well as small concerns. But it will be better to
apply it to the higher levels.

In the functional structure, above, the employees are working in departments based on what they
are doing i.e. we have engineering department, maintenance department, finance department,
research department, Warehouse department, purchasing department. This structure enhances the
experience of each function. For example, all the maintenance engineers are working in the same
department and thus they will exchange knowledge and support each other. This structure saves
us money because of the economies of scale. This structure makes the coordination between
different department more difficult than other structures. It also does not allow for flexibility
because of the centralization.