8 Functional Organizational Structure Advantages and Disadvantages (with Examples)

What are the functional organizational structure advantages and disadvantages?

Every organization has its unique organizational structure, depending on its size, industry, working environment, and business objectives. And the functional organizational structure is just one of the different types of organizational structure we have.

In this post, you’ll learn everything you need to know about what a functional structure is and the advantages and disadvantages of functional Organization.

What is Functional Organizational Structure?

A functional organizational structure is a type of organizational structure whereby employees at a company or organization are divided into different groups based on the work they do and specialize in. So each group is called a department or unit and is run by a boss who ensures things run smoothly. 

That way, workers focus on the tasks they are best at, even as the organization uses its resources wisely. However, this structure also means that only a few people at the top make crucial decisions concerning the company’s affairs.

Remember the last time you visited a hospital?

You’d agree that, like any other big company, a hospital has different groups or teams called departments. And each department has a leader and does a different job.

For example, employees in the finance department count money, make plans for how to use it, and, of course, check if everything is okay with the money. 

While the department called human resources help with hiring people to work at the hospital and take care of things like how the employees get paid and how they can learn new things to do their job better.

You may want to ask, what about the nursing department? Yes, they’re valuable and help take care of patients by giving them medicine (based on doctors’ prescriptions), and making sure they are comfortable. Not only that. This department keeps track of essential information about the hospital’s patients. 

Related: Team Structure in Project management: 3 easy, practical examples

Characteristics of functional organizational structure

Now, you have a clue of what a functional organization structure is. Even though each department does its job, they all work together to ensure the hospital runs well and helps people feel better. That way, everyone can be an expert in what they do and use their resources wisely.

However, below are some characteristics of a functional organizational structure:

1. Specialization

In a functional structure, employees are grouped based on their area of expertise, giving room for specialization as they focus on specific tasks.

2. Hierarchy

Recall one of the 14 principles of management known as the chain of command. In a company where a functional organizational structure is adapted, a chain of command is in place. That’s because each department has a department head responsible for the day-to-day operations and the department’s success.

3. Centralization

Decision-making power is centralized within the higher levels of the organization, typically in the hands of department heads.

4. Efficient resource utilization

Another attribute of a functional organizational structure is the judicious use of resources. And that’s because specialization and focus on specific tasks lead to more efficient use of resources, as employees can work on their areas of expertise.

5. Clear communication channels

Communication in a functional structure is generally hierarchical and flows from top to bottom, with clear lines of authority and reporting relationships.

6. Departmental autonomy

Also, a glaring feature of a functional organizational structure is that each department operates independently to achieve its specific goals and objectives. Yet they also work together to support the overall goals and objectives of the organization.

7. Focus on tasks

The functional structure is task-oriented and focuses on completing specific tasks and achieving specific goals and objectives.

Functional Organizational Structure Advantages and Disadvantages

Undoubtedly, the advantages and disadvantages of functional Organisation are evident in its characteristics as discussed above. 

That said, below are the benefits and drawbacks of a functional structure of an organization. 

The Advantages of a Functional Organizational Structure include:

 

1. Clear division of labor

With a clear division of labor, each person in a company or organization has a particular task to focus on. And that helps them become experts in their field because they are not trying to do many things at the same time. Instead, they are only doing one thing and can put all their effort into doing it well.

In other words, when jobs are divided among employees, it helps them understand what they need to do and what’s expected of them. And also, enable managers to check how things are going with ease because they know who is doing what.

2. Efficient decision-making

One of the merits of adopting a functional organizational structure in a company is that decisions will be made well and quickly. That’s because people are grouped based on what they do best. 

And as a result, everyone with their specialized skills and knowledge contributes meaningfully to the decision-making process.

You’ll agree when people with special skills work together, there’s always room for different ideas and ways of solving problems. And often, leads to better and more informed decisions. Because each person knows their area well, they can make decisions faster without having to do a lot of extra work.

3. Improved coordination

In a functional structure, a company groups different jobs and tasks into units based on what they do. And that makes it easier for the different groups to understand each other and work together.

Consequently, there’s less confusion and fewer mistakes as these different groups work well collectively.

That’s because they know what to do and how it fits into the big picture. As a result, it helps them avoid doing the same thing twice and helps everyone work towards the same goals. As you know, better coordination means better communication and sharing of information. Only then can everyone be on the same page.

4. Better control

As you’ve learned already, in a functional organization, each person has a specific job. And it’s easier for a firm’s manager to see and monitor what’s happening. That way, everyone knows what they’re to do, even as they work together to reach the same goals. In turn, this helps make the organization run smoother and more successful.

Disadvantages of Functional Organizational Structure include: 

 

1. Lack of flexibility

While a functional organizational structure can enhance decision-making, its lack of flexibility can make it hard for a company or organization to change or do new things.

That’s because things are organized in a certain way in a functional organizational structure, making it challenging to wrought changes to that structure. Thus, it can make it somewhat tough for a company to adapt to new situations or take advantage of new opportunities.

For instance, if a new opportunity comes up outside a department’s usual tasks and responsibilities, it can be hard for the organization to respond quickly and effectively. That’s because the functional structure is set up to handle specific tasks and responsibilities. 

2. Lack of cross-functional communication

Since workers are grouped based on their specialized skills, there may be limited communication and collaboration between different departments and functions.

Let’s consider a practical situation. Imagine you work in an office from 9 to 5 as part of your company’s marketing team. And you’re working on a project to advertise a new product, but you find out that the design team changed some things about the product that you didn’t know. 

You’ll agree that could cause problems with your marketing plans. 

Right?

Unfortunately, that reality occurs when different parts of the company don’t talk to each other. And it can lead to friction and confusion and may make it harder to get your work done well. 

But to avoid this, everyone must talk to each other and work together, even though they’re in different departments. That way, everyone is on the same page and working towards a common organizational goal.

3. Reduced motivation

Employees don’t feel as excited and happy about their work when their motivation is down. Sadly, in a functional organizational structure, workers might feel like they are separate from the big goals and plans of the company because they only work on one specific job. 

As a result, that can make them feel bored and not as motivated to work. However, it’s essential for the company to show how everyone’s work is vital and to encourage people to work together and communicate.

4. Increased bureaucracy

Since each part of the company has different jobs and rules in a functional organizational structure, there can be more bureaucracy. And that can make it hard for the company to make decisions quickly and change easily. It can also make people at work frustrated.

Real-life Example of Functional Organizational Structure

It may interest you (to know) that many big companies have functional organization structures. And as such, you can find functional organizational structure in a large multinational corporation such as IBM. 

As a large corporate organization, IBM, has several functional departments, such as finance, human resources, marketing, and research and development. Interestingly, each department has a department manager, saddled with the responsibility of ensuring that the department achieves success in its day-to-day operations (and beyond).

Consequently, take the finance department as an example. It comprises teams responsible for executing tasks like accounting, budgeting, and financial analysis. While in the human resources department, the teams are responsible for functions that revolve around recruiting, employee benefits, and training and development. 

Also, there’s the marketing department, consisting of teams responsible for tasks such as product marketing, advertising, and market research. And to end the list with the research and development department. These teams are responsible for productive activities like product design, engineering, and innovation.

Well, there are other examples of companies in real life that adapt functional organization structures across different industries. That’s from banking and finance to the tech industry, amongst others.