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The Benefits and Disadvantages of Functional Organizational Structure

functional structure

In a functional organizational structure, employees become specialists in a particular area of expertise. This requires a performance management system that encourages individual skills development and promotion. Specialization encourages in-depth knowledge and skill development in employees, which helps the organization achieve its goals. For instance, employees who are involved in customer service will be better suited to manage customer service problems.

Organizational structure

Organizational structure is the structure used to organize employees according to their skills, knowledge, and expertise. It helps the company run more efficiently and provides a clear hierarchy. The structure also helps in minimizing employee confusion. However, the functional structure can also result in unenthusiastic employees and lack of communication between departments.

While running a business, you must delegate certain tasks to other people. However, you should maintain final approval power. If you’re in a larger corporation, you may have to hire employees with full approval powers. Hence, understanding the responsibilities of the different people in your organization is essential. Organizational structure is important for a company because it helps you implement efficient decision-making processes.

On the other hand, a functional structure is rigid and difficult to implement. It involves several specialists and is difficult to integrate them. It can also slow down the decision-making process. This can hinder the progress of time-sensitive projects. Moreover, the employees in one department may not understand the objectives of the other departments.

The advantages of functional structure are that it allows employees to specialize in a certain field. Besides, this type of structure also requires a performance management system that fosters the development and promotion of individual skills. Specialization helps employees gain in-depth knowledge and skills, which are beneficial for the company’s success.

The optimal organizational structure depends on the nature and culture of the company. There are entire fields of research devoted to these questions, and senior executives should take these factors into account when making a decision. A company’s goals and industry are just a few of the many factors that must be considered.

Traditionally, organizations operate by creating a divisional or functional structure. This structure involves a number of departments with managers leading each one. Each division has its own marketing and sales team. This structure allows employees to have complete control of their resources. It can also discourage interaction between departments. This type of organizational structure is most common in large organizations.

Functional structure allows organizations to integrate specialists more effectively. The separation of specialists makes it difficult for teams to work together. This type of structure is also less psychologically demanding.


A functional structure is an organizational layout wherein employees are allocated according to their skills and areas of expertise. Many large companies opt for this type of structure as it allows departments to function independently and prevents bottlenecks in the company. It can also improve the overall efficiency of employees by tapping into their strengths. In a functional structure, employees are assigned to projects that are most likely to benefit them.

The benefit of a functional structure is that it promotes cross-functional communication, which enables cross-functional teams to work more efficiently and effectively. It also helps a company achieve business goals. However, it is difficult to implement. There are some challenges associated with functional structures. A matrix structure is a hybrid between a functional structure and a divisional structure. Having a matrix structure, for example, means that resources are shared across several product lines, but it requires a lot of coordination. Another disadvantage of this structure is that it creates a lot of stress and conflict.

As an organization grows, functional structures become less flexible. A lack of communication between functional units can lead to limited flexibility and inflexibility. Furthermore, a lack of coordination can inhibit innovation. As a result, employees may not be able to make timely and effective decisions. This may lead to wasted time and late project completion.

In the functional structure, the company’s employees report to functional heads who oversee them. Often, the functional heads report directly to the company’s top management. The functional structure of a business helps achieve greater operational efficiencies, although it can also have disadvantages. For example, a department that oversees customer service, for example, is likely to have less autonomy than a department with a matrix structure.

Besides ensuring continuity, a functional structure also helps to share specialist knowledge. By creating a functional system, project teams can more effectively utilize the expertise of each other. In addition, the functional structure creates a more secure career path for employees. It also ensures that individual expertise can be used on many projects and tasks, which leads to greater flexibility.


One of the major drawbacks of a functional structure is that it leads to division of responsibilities and reduced coordination. While this can be an advantage for efficiency and economies of scale, it can also lead to a lack of cohesiveness within the organization. As a result, the work of the various departments may get duplicative, and employees can become bored and dissatisfied with their jobs.

Another disadvantage of a functional structure is the lack of communication between departments. Because employees are assigned to particular areas of expertise, there is little room for confusion or communication. A functional structure is more efficient in running a company, but it can also lead to a lack of enthusiasm within the workplace.

A functional structure also reduces flexibility and innovation. Because employees are only assigned to one function, they only have knowledge of that area. In addition, it creates a narrowness, which may hamper coordination and cooperation. Furthermore, employees would focus on their respective departments, which can slow response times.

Another disadvantage of a functional structure is that it requires more management skills than a flat organization. It requires more people to manage, which is expensive. Also, it requires an adequate number of qualified managers for each division. Furthermore, the divisional head may not have a full understanding of the organisation’s needs, so their priorities may not align with those of the organisation.

In the end, a functional structure has a few advantages. It helps organizations achieve business goals by dividing employees into departments based on their areas of expertise. However, it is also prone to conflicts and ineffective coordination among departments. In addition, a functional structure often limits the authority of the project manager, which limits his or her ability to make decisions.

Customer-based structure

In organizations that sell a wide range of products or services in many different geographical areas, a customer-based functional structure may make sense. The structure enables employees to specialize in a particular type of customer, which is especially helpful in health care, where customers are typically very different than other types of consumers. For example, a hospital’s customer center director may report directly to the chief medical officer, while the CEO of the company oversees all of the customer-centered operations. While this structure can be slow to implement strategic changes, it is a good fit for companies that offer tailored products or services.

A customer-based functional structure is similar to the one used in the television show The Office, except that it divides the company into different departments, which work together to complete specific tasks. The employees within a given department, which is organized by skills and experience, become experts in their field, which improves their efficiency and productivity. The downside to a customer-based functional structure is that it can result in insufficient cooperation among departments, which may hinder the achievement of the company’s larger goals.

In addition to customer-based functional structures, companies may opt to organize themselves by type. For example, a food company might use a product organizational structure, in which each product line is led by a chief commanding executive. This type of structure is typically only suited for large organizations, and it can lead to accidental duplication of resources. Further, it can also lead to poor communication and discourage interaction between different departments.

Another type of customer-based functional structure is the process-based structure. Process-based structures allow for greater speed, and they are ideal for industries that change rapidly. However, this type of structure can also create unnecessary barriers between process groups, which can make communication and hand-off work difficult. A customer-based functional structure combines customer-facing functions such as customer-facing sales and marketing.

Lastly, organizations that use a customer-based functional structure may be more profitable. In 2008, Anthem, a health-care firm, used a customer-centric structure to respond to new customer demands. After implementing the change, it grew 36% and increased its return on assets. This structure is still a major benefit for the company.


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