A functional organizational structure is the most common among different organizational structures. It ensures every function in the company is carried out properly without any hindrances. The employees and managers in a functional system are experienced in their fields. Each person has a specific role that contributes to the overall operation of the organization. This article has everything, including the advantages and disadvantages of functional organizational structure.
What is a Functional Organizational Structure?
A functional organization may also be called a departmentalized approach organization.
The functional organization structure comprises different departments based on their function.
Each department has a leader known as the functional or department manager. They are specialized in the relevant field and are usually experienced for decades. The expertise of the functional manager enables them to analyze their team and ensure goal completion. The department manager may follow a leadership style of his choice. Most functional leaders follow autocratic leadership, while now many opt for laissez-faire leadership.
A functional structure example includes different departments in a pharmaceutical company. Each department performs a specific set of tasks and reports to its manager. A pharma company is departmentalized into production, quality control, validation, regulatory affairs, marketing, etc.
Some organizations may follow other structures besides functional organization. Opposed to a functional organizational structure, a project structure constitutes a project manager/leader. A matrix system is a dual-management system where the team members report to a functional and a project manager.
Advantages of Functional Organizational Structure
Employees who work in a department that matches their skill set understand the work more quickly. They perform better than someone with a different educational or experiential background. They do not require all-time supervision and can drive better results. The confidence of people skilled and experienced in a particular domain, enables them to do their best over a short period.
It is no lie that any manager who believes in growth helps you improve your skills. But, do you know who can help more? A manager who has a similar field of work to you will be able to teach you more than someone with different expertise.
Many people with similar knowledge and skills work together in a functional department. However, some have a better skill set and in-depth knowledge of operational aspects that you might not know. Working with such people provides a better opportunity for newcomers to benefit from the seniors’ experience. It not only improves their technical skills but also helps develop soft skills.
A functional system is quite quick as everyone performs specific tasks assigned to them without ambiguity. Every department in the company is associated with a particular set of tasks. The processes are smooth and run swiftly.
When a person in the marketing department needs to talk about his salary issue, he knows who to approach (the finance department). Similarly, when the salespeople from the sales department want to know why production was not up to the projected numbers, they may contact the production officer or manager. This kind of system brings clarity of roles within a company and saves time.
It is easier to expand operations in a functional organizational structure. When growing a functional structure, you only need to add more departments or sub-departments within the system to distribute the workload. Like line and staff organization, it is convenient to expand the functional system. However, an added benefit is that you do not have to worry about more line managers. You can begin by recruiting a manager with the required skill set and build the team gradually.
Managers find it more convenient to manage a team of individuals with a familiar skill set. It lets them analyze the performance of their team members better and control their actions. When a manager is not adept at the work they supervise, they might not be able to judge their teammates’ abilities fully. Departmentalization gives better control to the managers over the functioning of the workers.
Members of a department are more likely to work in place of each other when needed than in project organizational structures. As everyone in that functional unit understands each other’s work, they may replace another member when required. It improves coordination among the team and promotes harmony (especially under an affiliate leader).
Less Operational Costs
A functional organizational system also helps businesses save money besides enabling the team to improve their skills and enhance production. Improved efficiency of the employees leads to a lesser need for supervisors. They save time and enhance production because of their expertise in their field. The functional organizational structure can fit any organization but is more suited to larger enterprises. Small companies usually do not have many employees to group them into different departments.
Being a part of a functional organization system provides job security to the workers. They are difficult to replace as they improve their skills and become experts in their domain. Contrarily, they might not get the right opportunities to focus on their professional growth in a different organizational structure. The sense of job security boosts motivation and heightens their morale. The employee works harder to be the best at their craft.
A functional organizational structure offers better chances at promotions. As people gain more skills, they perform more efficiently. Efficient work and confidence in their skills make them eligible for promotions.
Disadvantages of Functional Organizational Structure
Unlike laissez-faire, which enables the employees to make decisions, a manager makes the final decision in a functional organizational structure. Sometimes, the decisions may require the approval of the higher hierarchy, including the CEO or board members. The absence of any of the decision-makers causes a delay in functioning. It may also lead to a delayed output of crucial matters.
It is no news that the departments of a company often compete with each other. Mostly it is based on performance where one department wants to take the credit for all the hard work. Different departments might build a mindset when incentives are involved in achieving goals. The inter-departmental competition ranges from the worker level to the managerial level. Sometimes, the departments also blame each other for operational issues. For example, the development team might blame the quality assurance department for bugs in software.
As we mentioned, people in a functional organizational system improve their skills through guidance from the leadership. You can benefit from a functional system if your manager is interested in teaching you. However, it is subjective to your team members and managers. When your manager follows a coercive leadership style, they expect you to only focus on the work given.
Besides competition, communication issues may arise between departments. Sometimes a team member expects the other to convey a message to another department. In case they forget, the task remains undone until they inquire about it. This interdepartmental miscommunication and conflict may harm the business. It often leads to major problems as the managers think the other department did it intentionally. This can be improved with proper methodologies.
Monotony can sometimes lead to boredom and reduce enthusiasm among employees. When workers first join a department, they enjoy tasks matching their skills and expertise. Yet, over months or years, they get tired of working in the same environment. A functional organization may not be able to provide a different role as they require specialized persons.
Managers make decisions that they find suitable without considering the impact of their decisions on different departments. Working in one department may lead to a lack of information about other departments if you do not communicate well. It can cause rigidity within the company where changes and flexibility are not welcome.
Some departments in an organization are isolated from others because of their functions. For example, the manufacturing plants of many companies are in distant industrial areas. They do not get to interact with several departments. Sometimes the employees may get tired of working in an isolated place and expect the company to change their role.
Often autocratic leadership rises in functional organizational setups. Today, employees do not appreciate coercive, authoritative leadership that lacks innovation. Some workers might also leave when they think that the environment is too dictating. Employees must be dealt with in a non-dictating way to instill ownership in them.
Employee Retention Costs
Employees sometimes look for better opportunities when they are more skilled. They understand their value in the market and apply to better places for jobs. If you depend highly on them, you must increase their salary and benefits. This eventually leads to added costs in the recruitment process.
The Bottom Line
The advantages and disadvantages of a functional organizational structure go hand in hand. While it improves the employees’ skills, it enables them to look for better job opportunities. It enhances coordination within the departments but also increases interdepartmental competition. It also boosts productivity, offers better control, and eases expansion. However, functional organization disadvantages include monotony, rigidity, interdepartmental communication issues, and employee retention costs.
Matthew is a Co-Founder at BusinessFinanceArticles.org. Matthew was a floor manager at a local restaurant in Wales. He lost his job after the pandemic and took initiative to make a team and start the project.
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