The functional organization

functional organization

Every organization works on some basic principles and on a particular structure.

Working according to the principles of this particular organizational structure allows the achievement of a common goal, as well as the growth and development of the organization and the employees that are part of it.

There are different types of organizational structures and the functional organizational structure is one of these. And we will talk about this in this article.

What is a functional organization?

A functional organization is the most common type of organizational structure.

This is the organization divided into smaller groups based on functions such as IT, finance or marketing.

This departmentalization allows greater operational efficiency because the employees have their specific skills and knowledge to share within the group.

These people are supervised by a functional manager, who has experience in the same field.

This experience helps him use employees’ skills effectively, which ultimately helps organizations achieve their business goals.

In a functional organizational structure, the reporting relationships are grouped according to the specialty or functional area.

The purpose of the separation of the areas is has the purpose of letting the individuals deal with and worry about different and specific activities.

Here the authority, regarding for example the allocation of the budget, the allocation of resources, the decision-making process, etc. remains in the hands of the functional manager.

Project Manager vs Functional Manager

Usually, in this type of organization the role of the Project Manager is limited, since he will need the permission of the functional manager to satisfy his requests.

The functional organizational structure is generally suitable for companies producing standard products or goods, such as manufacturing industries.

Let’s consider a company that designs and sells clothing and fashion accessories, for example, and let’s imagine its creative department that carries out the projects.

The creative department will do its specific thing and will not focus on everything. Instead, it will be the task of the accounting and finance department to keep track of the amount spent on design creation and mass production. The sales and marketing department will be responsible for presenting specific plans for the sale of the products and for attracting the consumer, while the human resources department must ensure that the employees work to their maximum potential.

All these activities will be governed by the president and mid-level managers of the organization. More products will lead to the creation of more departments. Each department will have many other functions to perform, but these are the basic functions of each department.
the functional organization

The advantages of a Functional Organization

Every type of organization has its strengths and its shortcomings. Obviously, this also happens in the case of a functional organization. Let’s start from the merits:

  • The team is run by an experienced person with a high skill and ability, who can adequately understand and review the entire job.
  • Team members have the opportunity to work with other people in the same field. This allows the sharing of thoughts and knowledge and allows the learning of new special skills.
  • Team members have the opportunity to make a career and then be promoted within their functional areas. This can be a great reason to stay in the workplace for a long time.
  • Thanks to people’s skills, workers with specialized skills can perform tasks quickly, efficiently and with greater security, while reducing work-related errors.
  • Functional organizations generally represent an optimal type of structure for small businesses focused on the production or supply of individual products or services, because they have the possibility of maximizing performance. Peer cooperation within the different units is encouraged through supervision and coordination. Specialization, therefore, leads to operational efficiencies and improves productivity levels.
  • The hierarchy is obvious and employees must not report to multiple supervisors running the risk of generating confusion. Each employee reports to his functional manager and this reduces the number of communication channels.
  • There is no duplication of work because every department and every employee has a fixed job responsibility.
  • Cooperation and communication are generally excellent within the department.

The shortcomings of a Functional Organization

Let us now examine the shortcomings of this type of organization:

  • In a functional organization the grouping of units is carried out based on their special skills, abilities, tasks or roles. This will allow the entire team to operate correctly. However, business strategies and the level of bureaucracy make it difficult to respond to changes immediately. This is why this type of organization is quite rigid.
  • Another disadvantage of the functional organizational structure is that these functional groups may not be able to communicate more often than scheduled, thus reducing flexibility and innovation.
  • When a company uses this type of structure, people are grouped based on their knowledge and skills. This therefore requires a management system that allows the promotion, development and visibility of individual skills in each functional area.
  • The lack or inefficient horizontal coordination within the department could give rise to management problems. The motivation of the employees is strongly influenced by the lack of innovation and by the narrow visions of the organizational goals. This structure can be rigid and standardized methods and high formalization can hinder or prevent a faster decision-making process.
  • Another weakness of the functional organizational structure may be the lack of coordination of the unit. As a result, although functional units may have a better level of efficiency, they may have difficulty working well together, and cooperation may therefore be compromised. Moreover, some people may be particularly “territorial” and individualistic and may not be willing to cooperate. These unhealthy coordination can lead to delays, unfulfilled commitments, competing interests, waste of time and, in general, delays in completing the project.
  • Employees may feel bored due to the type of monotonous and repetitive work and may lose enthusiasm for the job.
  • Conflicts can arise if the performance appraisal system is not properly managed. For example, an employee can perceive the promotion of a colleague with lower skills as unjust and this could lead to demotivation.
  • A highly qualified employee costs more.
  • Departments have an egocentric mentality. The functional manager pays more attention to his own department and usually does not care about the other.
  • Employees may have little concern and knowledge of events outside of their department. This causes obstacles to communication and cooperation.
  • Generally, the functional manager makes autocratic decisions without consulting his team members. This may not always work for the organization.
  • When the organization gets bigger, functional areas can become difficult to manage due to their size. Each department can begin to behave as a small company with its facilities, its culture and its management style.
  • Functional departments can be distracted by departmental goals and focus on them rather than the organization’s overall goal.


To conclude, it can be said that among the various types of organizational structures a functional organizational structure is more suitable for organizations that do not change their working methods and function too often and where there is no intense competition in the market that could require quick action.

This structure requires a very powerful management, capable of resolving conflicts and internal problems. In essence, a management that allows employees to function as a team, despite the specialized departments working like a “watertight compartment”.

Moreover, it is ideal in a smaller environment where there is only one product or service to offer. For a larger organization, this structure may not be really effective.

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