What is the Functional Organizational Structure?The functional organizational structure organizes the activities of a business around areas of specialization. For example, there may be a marketing department that focuses solely on marketing activities, a sales department that only engages in sales activities, and an engineering department that only designs products and manufacturing facilities. The functional organizational structure is the dominant mode of organization in larger companies, since these entities deal with such large sales and production volumes that no other form of organizational structure would be nearly as efficient. It is particularly effective in the following situations: Show
In other words, this system works well in a stable environment. Example of the Functional Organization StructureABC International has just passed $10 million in sales, and its president believes that this is a good time to restructure the business to improve efficiencies through job specialization. Accordingly, he clusters employees into the following functional areas:
Advantages of the Functional Organization StructureOf the following advantages, the first one is the most important; the functional structure can introduce a great deal of efficiency into the operations of a business. The advantages are noted below. Increased EfficienciesWhen employees are allowed to focus on one specific functional area to the exclusion of all else, they can achieve significant efficiencies in terms of process flow and management methods. Clear Chain of CommandThere is a very clear chain of command in this structure, so everyone knows which decisions they are allowed to make, and which ones to hand off to their supervisors. Clear Career PathsIt is easier to set up career paths for employees and monitor their progress toward the goals outlined for their functional areas. Enhanced SpecializationA company can use this approach to cultivate a group of extraordinary specialists who can strongly impact the functions of the company. Better TrainingIt is easier to monitor and update the training of employees when they are focused on narrow functional areas. Disadvantages of the Functional Organization StructureDespite the advantages of the functional organizational structure, it can also twist the fundamental process and decision flow within a business, with the following results: Slower GrowthWhen a company is growing rapidly and is therefore continually modifying its operations to meet changing conditions, the functional structure can reduce the speed with which changes are made. This is because requests for decisions must move up the organizational structure to a decision maker, and then back down to the person requesting a decision; if there are multiple levels in the organizational structure, this can take a long time. Longer Queue TimesWhen processes cross the boundaries of multiple functional areas, the queue times added by each area can greatly increase the time required to complete an entire transaction. Unclear ResponsibilityWith so many specialists involved in a process, it is difficult to pin the blame for a specific product or service malfunction on any individual. Functional SilosThere is a tendency toward poor communication across the various functional silos within a business, though this can be mitigated by using cross-functional teams. Unnecessary in Smaller BusinessesThis approach is not needed in small businesses, where employees may be individually responsible for many functions. Narrow Specialist ViewpointWhen everyone in the company is herded into clusters of functional silos, there are few people left who are capable of seeing the total strategic direction of the company, which can result in a very difficult decision-making process. Skip to content
The Four Major Types of Organizational Structures in Business
The types of organizational structures in business are just as important as its products, marketing plan and long-term strategy. Businesses need a sturdy structure to attract and retain talented employees, as well as create a workable organizational hierarchy. Typically, businesses choose from four types of organizational structure. Each comes with its own set of advantages and disadvantages. Choosing the right one for your business is imperative because poor organizational structure leads to confusion among employees, poor decision-making among managers and, ultimately, less than ideal results for a business. Students in Point Park University’s online Bachelor of Arts in Organizational Leadership classes learn about management strategies and approaches to organizational design as part of a curriculum that prepares them for success as business leaders. Picking The Right Organizational StructureWhile there are variations, most companies are created based on one of the following four organizational structures. The goal for business leaders is picking the structure that works best for their particular situation. FunctionalA functional structure is the most traditional approach. It calls for grouping together people who do similar tasks based on their area of specialty. In other words, you’ll find all the accountants in finance and all the marketers in marketing. Managers led each area and report up to a director or executive who may oversee multiple departments. The advantage here is clear: it provides those with similar abilities the ability to easily communicate and work on projects together. That’s also the reason this is the most popular business structure. The disadvantage is that teams may get “siloed,” unaware of what is happening in other areas of a company. DivisionalIn a divisional structure, people are grouped together based on the product or service they provide, not the work they do. For example, a large corporation such as General Electric has divisions for electronics, transportation, and aviation, each with its own team of accountants, marketers, etc. Global corporations may have divisions based on different geographic areas. On a smaller scale, a restaurant that also provides catering services may have separate divisions to oversee weddings, corporate events and business within the main restaurant. MatrixA matrix structure is a hybrid of the functional and divisional structures. It may involve employees reporting to different bosses depending on their current assignment. For example, a software design specialist may report to her boss in IT, but she’s also brought onto specific projects because of her expertise. When that happens, she will report to a different boss as long as that project continues. The disadvantage is that employees may find it confusing to report to multiple bosses. But clear communication on priorities at all levels can eliminate these issues. The matrix structure requires a great deal of planning but can allow for the creation of the best possible teams to tackle the biggest challenges. FlatThe flat structure dispenses with the usual hierarchy of a functional structure, decentralizing management and doing away with the need for middle manager bosses. Employees essentially act as their own boss, giving them the ability to communicate directly with peers on ideas and projects. The advantage is a lot more freedom for employees, which requires a group of self-starters who don’t need managers checking up daily on their work. A flat structure is common in incubators and startups where the focus is on product and services design, not production or top-down management structures. All four types of organizational structures in business can work well in the right situations. While most companies will choose from the functional or divisional approaches, a flat approach is becoming increasingly popular with modern companies. Share This StoryWhat is a functional organizational structure?What Is Functional Structure? A functional structure is a type of business structure that organizes a company into different departments based on areas of expertise. These departments serve as functional units and are overseen by functional managers or department heads.
Which of the following does not relate to organizational structure?This is Expert Verified Answer. (Option 3) Formalization is the correct answer. An organisational structure is a system that defines how specific activities are directed in order to achieve an organization's goals.
What are the 4 types of organizational design?The four types of organizational structures are functional, multi-divisional, flat, and matrix structures. Others include circular, team-based, and network structures.
What are the characteristics of functional organizational structure?A company that has a functional structure tends to have the following three characteristics: a top-down hierarchical structure, department heads who report to senior management and employees who specialize in certain tasks.
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