Functional-type Organization Structure

The functional type structure organizes teams of employees based upon the specific jobs within the organization. The employees work in departments based on what they have to do such as marketing department, purchasing department, maintenance department, HR department and finance department. Figure 4.3 depicts the organizational chart of functional-type organization.

A Typical Organizational Chart of Functional-Type Organization

This type of structure is generally used in businesses that are into trading or manufacturing and marketing of standardized products and are usually not inclined towards new products or services unless there is a pressure of competition. For example a standard book publishing company indulges in printing and publishing standard text books for a defined audience either at

the school or college level. School book publishers will not publish college level books unless the economies of scale are focused. Such a publishing house will have different functional departments viz., editing, proof reading, printing, book binding, cover designing, (all in-house jobs), purchasing paper and stationary, marketing, distributing, financing, maintaining payroll to all the staff etc.

In the functional structure, groups consist of employees performing the same function and having the same type of skills, such as software development or software testing. Each group performs its own activities to support the company's business.

Advantages of functional structure

· Specialization: There is a better division of labor resulting in specialization of functions as people are grouped according to capabilities and similarities in positions.

· Economy: Standardization combined with specialization helps in maximizing production.

· Efficiency: Better efficiency is achieved as every employee performs a limited number of specialized functions.

· Up-to-date knowledge: Employees can share and keep up-to-date with the skills and knowledge of their specific discipline.

· Efficient control: Internal control is simplified as manual functions are separated from the mental functions. Checks and control keep the authority within specified limits.

· Expansion: Expert knowledge of functional manager assists in better supervision and control.

Disadvantages of functional structure

· Confusion: This system is quite complex to put into operation, particularly at low levels. There can be delays when one function waits for another function to complete its work. Thus, coordination becomes hard as each function focuses on its own unit and communicates with

the top management.

· Costly: Upkeep of specialist staff at higher hierarchy is costly as varying amount of skills are required at different times.

· No unity of command: Checks and control can become weak as a worker is controlled by a large number of people. Functional authority reduces the line manager’s authority and line workers end up receiving orders from various staff groups. Also operating people receive printed directives from different groups. Hence it destroys the unity of command

and creates problems in discipline.

· Conflicts: There may be disputes between the supervisory staff of different departments as they may not agree on some issues.

· Difficulty in fixing responsibility: As there are multiple authorities, it is hard to fix responsibility.

· Slow process: The hierarchical structure causes problem-resolution and decision-making to be slow.

Let us consider an example of a car manufacturing company. If there is a problem with the clutch system of the car, while the management questions the responsibility of such disqualified output, engineering department blames manufacturing department by considering itself separate from production unit and not directly linked to process cycles. Manufacturing department passes the buck back on engineering department mentioning the flaws in the design that was supplied by engineering branch. In the process, quality control checks gets lost in the riff-Raff and loses control over the whole purpose of assembly line which subsequently slows down the production process.

Examples of functional-type organizations

· Car manufacturing companies

· Electronics manufacturing units

· Brick kilns

· Hospitals

· Hospitality units

Best Regard,

Anil