Functional organization is a type of organizational structure that uses the principle of specialization based on function or role. In a functional organization, decisions are decentralized, and issues are delegated to specialized persons or units, leaving them the responsibility of implementing, evaluating, or controlling the given procedures or goals.
Features of a functional organization include:
- The entire organizational activities are divided into specific functions such as operations, finance, marketing, and personal relations.
- Each functional area is put under the charge of functional specialists, and they have the authority to make all decisions regarding the function whenever the function is performed throughout the enterprise.
- The principle of unity of command does not apply to such an organization as it is present in line organization.
- The functional organizational structure helps organizations run their business and earn a profit by grouping employees based on their skills and expertise.
Advantages of a functional organization include:
- It provides a clear hierarchy and minimizes confusion among employees who may be unsure who they are to report to.
- It is an efficient way to run a business.
- Training is easier as it focuses on a limited set of skills.
- Coordination is established as all the employees working within a department are specialists in that area.
- Skill growth is enhanced as knowledge is easily passed along by experienced managers to their team members.
- It allows employees to develop their individual skills rapidly as they consistently complete the same tasks and functions in their individual departments.
Disadvantages of a functional organization include:
- It can lead to a lack of communication and coordination between departments.
- It can create a narrow focus on individual functions, leading to a lack of innovation and creativity.
- It can result in a lack of accountability and responsibility for overall company performance.
- It may not be suitable for smaller companies or projects where the breadth of information is more important than the depth of knowledge.
