Under functional organizational structure, employees are grouped based on their roles and functions, resulting in functional units such as marketing, HR, finance, etc. Generally, the heads of these specialized units will report to the top management of the company. According to the company’s size, the functional units might be further divided into smaller units. This kind of organizational structure is one of the most common organizational structures that many companies have applied.
What are the advantages of functional organizational structure?
To make a stronger framework, it is important to understand the advantages of functional organizational structure. A major advantage is that it offers a high level of specialization. This allows employees to develop their individual skills rapidly within the functional units, and there will be more specialists in the company. The continuing development of employees’ skills will increase their working speed and efficiency, thus improve the productivity. What’s more, employees will be strongly motivated to advance their careers from as they move up within the hierarchy in the function unit.
What are the disadvantages of the functional organizational structure?
One of the main disadvantages is that it will lead to poor communication and coordination across functions. As functional units are not accountable to each other, they may have difficulties in cooperation. The viewpoints are narrow and they only concern about their own duties and tasks, and neglect the outside area. Moreover, due to the standardized ways of operation, the organization might be rigid, and not flexible and adaptable enough to fit for dynamic environment.
What kind of organization is suitable for functional structure?
- It’s suitable for smaller companies that focus on single product or service.
- It works better in a stable environment where your business doesn’t need much change or update.