Functional Organizational Structure: Meaning, Features, and Pros/Cons

What is a Functional Organization?

The functional organization is an organizational structure that divides the entire functions of an organization into major functional groups based on their specialized functions such as Production, Sales, Marketing, HRM, Accounting, Finance, Research & Development department, etc. A particular function is entrusted to a specialist who directs all subordinates in the field of their particular function.

F.W. Taylor opened the idea of the functional organizational structure following the system of functional foremanship. But, in practice, it is bounded to the top level and not executed at the subordinate levels.

In a functional organization, all business activities are divided into a small number of functions, and each function is entrusted to a specialist. Each specialist, to whom a function is entrusted, is known as a functional specialist, and the authority delegated to each specialist is known as a functional authority.

For example, as we early mentioned, an enterprise’s activities are divided into various functions like production, finance, marketing, personnel, etc. In a similar manner, a particular function is entrusted to a functional specialist like a finance function to the finance manager, a marketing function to a marketing manager, and so on. Thus, each department has its own head and every head is assigned the required authority to complete the task.

The main feature of the functional organization is that a functional manager can exercise functional authority not only over his own subordinates but also overall subordinates in all other functional departments. For example, the finance manager has functional authority over all subordinates of the organization when financial matters are dealt with. Similarly, subordinates are accountable to different functional managers for their performance.

For example,

functional organization structure

In a functional organization, functional specialists communicate and interact with each other through the chief executive of the enterprise before coming to a decision. Because there is no right for a functional specialist to give direct instructions to other functional specialists.

Related: Committee Organizational Structure: Definition, Types, and Pros/Cons

Advantages and Disadvantages of Functional Organization

Advantages of Functional Organizational Structure

1. Benefits of Specialists

The functional organization provides the benefit of functional specialization. Every manager is an expert in his own field of knowledge. The expertise of every manager is beneficial to all workers as well as the enterprise.

Functional specialization leads to many advantages like best managerial decisions, minimizing the cost of operation, and increasing efficiency, and productivity of the organization.

2. Increase Efficiency

Every department of the enterprise is in control of a functional specialist. The top-level manager makes decisions by taking suggestions, advice, and guidance from functional specialists. It helps in taking the right decisions.

This leads to an increased working efficiency of both the managers and the subordinates. This facilitates maximizing productivity within minimum cost.

3. Healthy Competition Among Experts

The functional organization encourages healthy competition among functional experts. Here, the management makes the recruitment, selection, appointment, and placement of the managers on the basis of their specialization.

Today in a competitive business environment every manager wants to demonstrate better performance. The spirit of healthy competition brings out efficient executives.

4. Relief To Executives

Here, work is divided on the basis of functional specialization. The managers are not overburdened with the maximum workload as in the case of line organization. Here, every manager has to work in one line of activity where he has a functional specialization.

Also Read: What is a Line Organization? Meaning, Types, Pros, and Cons

5. Mass Production

There is a term for functional specialization and standardization in the operation of organizations. This contributes to developing the working efficiency of both executive and subordinate level members.

The development of efficiency facilitates maximizing the productivity of the enterprise. Thus, an enterprise can involve in mass production and distribution on the basis of requirements.

6. Facilitates Growth and Expansion

The functional organization structure facilitates the growth and expansion of business activities. It creates scope for the existing volume business to grow and also for the expansion of various lines of business.

Each and every executive is an expert in his own sector. The executives can handle their business in an effective manner in accordance with requirements.

7. Suitable For Present Business Environment

The functional organization is suitable for the management of large-scale business activities in the present business environment.

The development of production volume, expansion of markets, customers, technology, government regulation, etc. creates a new and challenging business environment. The functional organization helps to fulfill such types of requirements for the successful operations of the business.

Disadvantages of Functional Organizational Structure

1. Multiple Command System

The lack of unity of command is a major limitation of functional organization structure. The subordinates are always in confusion to obey orders because they receive more than one order at a time. This may create a division of loyalty among subordinates among many functional managers.

Besides, there is more difficulty in fixing the responsibility of jobs. Here, both functional specialists and subordinates do not want to take full responsibility for work because of the violation of the unity of command.

Also Read: What is Chain of Command? Definition, Types, Components, and Importance

2. Lack of Coordination

The department heads are independent to perform their departmental work. There is no provision for formal relationships among departmental specialists. There is a lack of mutual understanding of them.

3. High Administrative Cost

Many functional specialists are appointed in various departments. The functional experts are to be paid more remuneration. So it is almost impossible to maintain cost. Thus, the functional organization needs higher administrative costs.

4. Delay in Decision-Making

Quick decisions and prompt implementation are the most needed of a business firm. However, in a functional organization, there is no possibility of a quick decision. It is essential to take suggestions and guidance from experts and specialists before making a decision. Thus, management has to invest more time to come to the right decision.

5. Spoils Human Relations

In a functional structure, it is more difficult to maintain mutual relations among members of the organization. There is a complexity in the relation of subordinates and superiors which spoils the human relationship in the enterprise.

Due to a lack of unity of command, a subordinate has to work under many executives. In many situations, he receives conflicting instructions from executives which may divide his loyalty. Thus, it is difficult to maintain discipline in the functional organization structure.

Also Read: Human Relations Theory of Management

6. Narrow Outlooks of Specialists

The narrow vision of departmental specialists creates problems in functional organizations to achieve the overall objectives of the organization.

The departmental specialists are more concerned about the efficient functionality of their own department. And, they do not want to cooperate with each other in solving organizational problems. And, that is the reason.

7. Shifting Responsibility

Fixing a definite responsibility for a functional specialist or a subordinate is difficult in this type of organization type of organizational structure. There is a lack of unity of command and everyone wants to shift responsibility for unsatisfactory work to others. Such an environment creates problems in achieving organizational objectives.

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