Functional Organizational Structure

A functional organizational structure is one of the most effective setup based on which organization functions. While it has its advantages, it also has a few disadvantages.
Workspirited Staff
Last Updated: Apr 9, 2018
Every organization functions on some basic principles and a particular structure. Working by the principles of a particular organizational structure enables the achievement of a common goal, i.e. growth and development of the organization, and of the employees that comprise it. Assigning tasks, dividing and executing them, and working together to attain specific goals is possible in any organizational culture that functions on a structured hierarchy.
There are different types of organizational structures namely, the flat organizational structure, matrix organizational structure, a divisional organizational structure, pre-bureaucratic, bureaucratic, and post-bureaucratic structure, and a functional organizational structure. It is the functional structure that we will discuss in detail, here.
Functional Organizational Design
A functional organization is designed on a strong hierarchy where the positions and functions of each employee are clearly specified, with each having a specific function to perform. The organization may be divided into individual departments, where each department has a specific function, and all departments function individually to execute a project. Depending on the requirement of the organization, the type and function of each department will be decided. Thus, when an employee is appointed in the organization, based on her/his skills, she/he will be designated to the appropriate department. By grouping employees with similar skills, a department is formed to comprise a functional organizational structure. All departments are governed by one sole authority, and all functions are monitored and coordinated by this authority.
The functional organizational culture is most appropriate when an organization functions around only one product or service. Some examples would include organizations that have individually functioning units such as human resources, sales and marketing, creative departments, accounts and finance, advertising, etc.
Let's take into consideration a store that designs and sells fashion clothing and accessories. Here, there will be a creative department that makes the designs. It will be the job of the accounts and finance department to keep a tab on the amount spent on creating the design and for bulk manufacturing. The sales and marketing department will come up with specific plans to sell the products in question, the human resources department will ensure that employees are functioning to their highest potential, and the advertising department will come up with creative methods of attracting the consumer. All these activities will be governed by the president and mid-level managers of the organization. More products will lead to the creation of more departments and deeper hierarchies. Every department will have many other functions to perform, but these are the basic functions of each department.
While this may be the ideal setup in the functional organizational structure and design, it is possible that one or more of these jobs will be outsourced to external organizations. So, in terms of a chart, the organization would look like this:
functional organizational structure chart
Advantages
  • Since this structure is primarily based on intense specialization, it is believed that the functional structure will elicit only the best from each department.
  • When employees with similar interests are grouped together, they are likely to be more productive.
  • Providing instruction and executing various projects becomes simple because of the sound linear structure.
  • Each employee has a defined career path and has potential to grow within her/his department in the organization.
Disadvantages
  • The functional structure is the most bureaucratic and formal organizational structure because of the rigid hierarchy it follows. Every decision then, takes time to materialize.
  • Communication across departments becomes difficult because all of them are so distinct from each other.
  • Another disadvantage of this specialized approach is that the viewpoint of every department is narrow and limited, which does not allow them to see the bigger picture and work efficiently towards a common goal.
Finally, it can be said that among the various types of organizational structures a functional organizational structure is most suited to organizations that do not change their methods of work and function too often, and where there is lack of intense competition that requires quick action. This structure requires a very powerful management that can resolve internal conflicts and issues, and get employees to function as a team in spite of specialized departments. Further, it is ideal in a smaller setup where there is only one product or service to offer. For a larger setup, this structure may not prove very helpful.