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An organization with a functional structure is divided based on functional areas, such as IT, finance, or marketing.
Explain the functional structure within the larger context of organizational structures in general
A functionalorganization is a common type of organizational structure in which the organization is divided into smaller groups based on specialized functional areas, such as IT, finance, or marketing.
Functional departmentalization arguably allows for greater operational efficiency because employees with shared skills and knowledge are grouped together by function.
A disadvantage of this type of structure is that the different functional groups may not communicate with one another, potentially decreasing flexibility and innovation. A recent trend aimed at combating this disadvantage is the use of teams that cross traditional departmental lines.
An organization can be arranged according to a variety of structures, which determine how the organization will operate and perform. In a functional structure, a common configuration, an organization is divided into smaller groups by areas of specialty (such as IT, finance, operations, and marketing). Some refer to these functional areas as "silos"—entities that are vertical and disconnected from each other. Correspondingly, the company's top management team typically consists of several functional heads (such as the chief financial officer and the chief operating officer). Communication generally occurs within each functional department and is transmitted across departments through the department heads.
Functional departments arguably permit greater operational efficiency because employees with shared skills and knowledge are grouped together by functions performed. Each group of specialists can therefore operate independently with management acting as the point of cross-communication between functional areas. This arrangement allows for increased specialization.
Disadvantages of a Functional Structure
A disadvantage of this structure is that the different functional groups may not communicate with one another, potentially decreasing flexibility and innovation. Functional structures may also be susceptible to tunnel vision, with each function perceiving the organization only from within the frame of its own operation. Recent trends that aim to combat these disadvantages include the use of teams that cross traditional departmental lines and the promotion of cross-functional communication.
Functional structures appear in a variety of organizations across many industries. They may be most effective within large corporations that produce relatively homogeneous goods. Smaller companies that require more adaptability and creativity may feel confined by the communicative and creative silos functional structures tend to produce.
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Small companies focusing on niche markets, Large companies producing high quantities of standardized goods at a low price, Large companies seeking diversity in product offering to capture broader demographics, or Small companies seeking differentiation