Formal Organization – Functional Organization

There are majorly five main types of formal organizational structures – line, functional, line and staff, project management and matrix. Each of these has their own advantages and drawbacks. Today we will learn a little more about the functional organizational structure.

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Functional Organizational Structure

Every company needs an organizational structure, it basically defines the hierarchy of the company. In simple words, it defines who works for whom and who reports to who.

Without this structure, there would be chaos and inefficiency. Now one of the most common forms of formal organization is the functional organizational structure.

In a functional organization structure, the entire organization is divided into smaller groups or departments based on specialized functions.

So for example in such an arrangement there will be a finance department, an IT department, marketing department etc. This allows for greater cohesiveness and efficiency in the work of the employees.

Since the work is divided into smaller sectors, so is the management. The management is also sub-divided according to the type of work being done.

So every department has their own head or executive. And the reporting structure can also differ from department to department.

Browse more Topics under Organizing

• Concept and Importance of Organizing
• Authority and Responsibility
• Principles and Barriers of Delegation
• Centralization and Decentralization
• Formal Organization- Line Organization
• Formal Organization- Line and Staff Organization
• Formal Organization- Project Management Organization
• Formal Organization- Matrix Organization
• Informal Organization
• Structure of Organization

Advantages of Functional Organizational Structure

• The executive or the team leader has the knowledge and experience of that particular field. For example, the person heading the IT department will have the education and skill necessary to shoulder this responsibility and successfully run his team.
• Because the employee has expertise in that particular field, the work is more efficient and precise. There are fewer mistakes. This also helps with the motivation of the employees of the company.
• Since all team members come from similar backgrounds it allows them to share ideas and come up with solutions. There is a sharing of knowledge, which is always beneficial.
• The employees also having a clear idea of the hierarchy of the firm. They need not report or answer to several managers.
• Also, the employees feel secure in their work. They see that their work and efforts is not going unnoticed. This sense of security helps them perform better.

Disadvantages of Functional Organizational Structure

• The work can be quite one dimensional. After a while, the employees may start feeling monotony or boredom. The lack of new challenges can make them unenthusiastic for the job at hand.
• In this structure, the manager must take care of the appraisal system. If the correct approach is not taken then conflicts may arise between the employees regarding promotions or appraisals.
• Also, this form of organization requires a high degree of specialization which is difficult to establish
• If there is a necessary change of personnel it can disrupt the whole system and its balance. Also, it is quite a rigid structure, not leaving a lot of scope for adaptation.
• In Functional Organizational Structure, the employees never gain any knowledge or skills outside their own department. This can cause difficulties in inter-departmental communication.

Solved Example for You

Q: This is the ideal structure for a ____

1. Small organization
2. MNC
3. Big Organization
4. None of the above

Ans: The correct answer is A. Functional Organizational Structure is perfect for a small organization. If there is only one product or service then the performance is maximized by co-operation and supervision. In a larger organization managing becomes difficult due to the size of the departments.