Benefits & Disadvantages of a Functional Organizational Structure
Benefits & Disadvantages of a Functional Organizational Structure
The functional organizational structure groups employees according to broad business activities, resulting in departments such as finance, marketing and production. These departments might be further divided, depending on a company's size and needs. Departmental managers supervise a wide base of employees below them. These managers are in turn supervised by more-powerful managers, who answer to one powerful boss, perhaps a CEO, owner or president. The resulting hierarchy has a vertical thrust, is shaped like a triangle and features clear authority lines and departmental boundaries. This affords companies both benefits and disadvantages.
Economies
One main benefit of the functional organizational structure derives from grouping like jobs together. Equipment and personnel aren't repeated across different departments, which saves a business money. The scope of activities within a department is larger than it would be if it were spread across a company, allowing for greater expertise and specialization. This, in turn, leads to "economies of scale," which refers to efficiency and productivity increases as operational scope increases.
Management
Functional organization makes for clear lines of communication, lines between departments and jobs, and the line that is the chain of command. The advantage of these clear-cut delineations lies smoother management. People understand boundaries, who answers to whom and who takes the blame or credit for results. Decision-making is centralized, both for departments and for the organization as a whole. This unity of command structure fosters a sense of direction and coordination, especially within functional areas.
Isolation
Though the functional organizational structure gives employees a sense of belonging within each departmental area, the structure creates space between departments. Communication between them suffers, and with it goes easy coordination
The functional organizational structure groups employees according to broad business activities, resulting in departments such as finance, marketing and production. These departments might be further divided, depending on a company's size and needs. Departmental managers supervise a wide base of employees below them. These managers are in turn supervised by more-powerful managers, who answer to one powerful boss, perhaps a CEO, owner or president. The resulting hierarchy has a vertical thrust, is shaped like a triangle and features clear authority lines and departmental boundaries. This affords companies both benefits and disadvantages.
Economies
One main benefit of the functional organizational structure derives from grouping like jobs together. Equipment and personnel aren't repeated across different departments, which saves a business money. The scope of activities within a department is larger than it would be if it were spread across a company, allowing for greater expertise and specialization. This, in turn, leads to "economies of scale," which refers to efficiency and productivity increases as operational scope increases.
Management
Functional organization makes for clear lines of communication, lines between departments and jobs, and the line that is the chain of command. The advantage of these clear-cut delineations lies smoother management. People understand boundaries, who answers to whom and who takes the blame or credit for results. Decision-making is centralized, both for departments and for the organization as a whole. This unity of command structure fosters a sense of direction and coordination, especially within functional areas.
Isolation
Though the functional organizational structure gives employees a sense of belonging within each departmental area, the structure creates space between departments. Communication between them suffers, and with it goes easy coordination