Functional Organizational Structure Introduction – Advantages and Disadvantages

Functional Organizational Structure Introduction – Advantages and Disadvantages

When referring to the 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. The sub-division type of organizational structure seems to be the most common organizational structures that many companies have applied.

construction company org chart

What Are the Advantages of Functional Organizational Structure?

To make a stronger framework, it is important to understand the advantages of the 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 in order to be specialists. The continuing development of employees’ skills will increase their working productivity and efficiency, thus improve sales. What’s more, employees will be strongly motivated to develop their careers in line with the hierarchy pathway in their organizational structure.

Functional Organizational Structure Introduction - Advantages and Disadvantages

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 different functions since functional units are not always accountable to each other. The viewpoints of one individual division sometimes maybe narrow. As a result, single division trends to only concern about their own duties and tasks. Moreover, due to the standardized ways of operation, the organization might be rigid, hence not so flexible or adaptable to fit into the dynamic environment.

What Kind of Organization Is Suitable for Functional Structure?

  • Startups that focus on a single product or service.
  • Works better in a stable environment where your business doesn’t need much change or update.


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