What is Functional Departmentalization? Definition, and Pros/Cons

What is Departmentalization By Function?

Departmentalization by function or functional departmentalization is when the departments are created on the basis of the nature of functions to be performed like sales, account, production, finance, marketing, personnel, etc. Here the similar nature of activities is grouped in one unit and other similar activities into another unit.

Departmentalization by function is the most common and popular departmentalization type among organizations. It emphasizes the specialization of work and leads to increased efficiency in work and organizational performance. It is appropriate in medium and large size organizations.

Note that functional departmentalization is based on organizational functions like production, marketing, and finance, and it is not based on management functions like planning, organizing, decision-making, and controlling.

Here, a departmental head or a manager is appointed in each department to supervise and control the activities of the respective department. All departmental heads are specialists and experts in their own areas of business.

The main feature of functional departmentation is that, in a case, when the workload of a particular department becomes more, a department may again be classified into sub-departments. Since the members working in the department have similar backgrounds and interests, it gives rise to specialization which makes manpower more efficient and skilled.

An example of functional departmentalization is,

Advantages of Departmentalization By Function

• Functional departmentation is the most logical and natural form of departmentation.
• It facilitates specialization and economies of scale.
• It lays emphasis on each and every activity.
• Facilitates workers’ efficiency and performance.
• Easier to supervise, communicate and coordinate the activities.
• Resources can be utilized at the optimum level including human resources.
• Decision-making and line of communication become simple and clear to understand.
• It facilitates delegation of authority and therefore, reduces the work burden of top-level managers.

Disadvantages of Functional Departmentalization

• In departmentalization by function, there is the possibility of delay in decision-making is high due to the centralized authority.
• Competition between departments may decrease organizational efficiency.
• Also, there may be a conflict between departments as the responsibilities are interdependent.
• There is an overemphasis on specialization.
• Supervision costs may become high due to the various departments to supervise.
• Difficult to adapt to changing business environment.
• It does not promote innovation and creativity because of the repetitive nature of tasks.
• Monitoring the performance becomes difficult.