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Functional Organizational Structure Advantages

What is a Functional Organization Structure
What is a Functional Organization Structure

Functional Organizational Structure – Advantages and Disadvantages

In todays economic environment, organizations must be efficient, flexible, innovative in order to obtain a competitive advantage in the market. Organizational structures define how the tasks are directed and coordinated toward the achievement of organizational objectives. An organization can be established in many different ways, depending on its goals. The structure of an organization demonstrates the system in which it operates. Basically an organization structure shows the allocation of responsibilities of individuals and departments in a hierarchical way. There are many different types of organizational structures used to express reporting lines and roles of the workgroups. In this article we will discuss functional organizational structure and advantages and disadvantages of it compared with other structures.

What is a Functional Organizational Structure ?

A functional organization structure is one of the most common organizational structures which divides the company into depatments such as marketing department, engineering department, sales department, IT department etc.

Employees are supervised by a department manager with expertise in the same field. This expertise supports him to analyze the powers of his personnel and lead them to achieve the goals. Department managers are responsible of the performance of his department. The communication flows through the department heads to the top management.

Employees are classified classified according to the function they perform within the organization.

Functional organizational structure is suitable for smaller companies or the companies that focus on a standard product or service.

If you consider other types of organizational structures, you will see some differences in reporting system. For example in a projectized organization structure you report to the project manager. In a matrix organizational structure, your reporting hierarchy depends on the type of the matrix.

Project Managers Role

In functional organizational structures all the  authority stays with the functional managers. Therefore the role of the project manager is very limited if he exists. A functional organizational structure has a vertical and disconnected structure in which communication flows through the functional managers to the top management.

Advantages of the Functional Organization Structure

The following are some advantages of the functional organization structure:

  • Employees and the department managers are skilled because they are experienced in the same field of business.
  • Employees are grouped by their skills. This increases the performance of the team.
  • The roles and responsibilities are speciffied. Each employee has a fixed job definition. This helps to prevent duplication of work.
  • The reporting hierarchy is well defined and employees don’t have to report to multiple managers. Employees report to their functional managers therefore they don’t have to communicate all issues with other managers.
  • The career paths are clear, the employees may be motivated to advance their careers.
  • Employees can proceed with confidence and with a minimum amount of mistakes.
  • Since there is a sense of job security, employees don’t move to another company.
  • Communication and cooperation within the workgroup is strong.

Disadvantages of the Functional Organization Structure

The following are some disadvantages of the functional organization structure:

  • Employees may get bored because they do the same repetitive type of work all the time.
  • Since the employees are grouped by their knowledge and skills, competition may arise between them.
  • Cooperation and communication between departments and units may be poor. Lack of teamwork and reduced flexibility may cause conflicts between departments and units.
  • If an organization gets larger, it will be difficult to manage and control.
  • Departments may focus on their own goals rather than the organizational goal.
  • Because of the strong hierarchy and delays may occur in decision making.
  • Inside a department, employees know all the things but outside their department, they have limited knowledge which may cause problems.
  • When the employees become expert and more skilled in their departments, they will cost more. A high skilled employee means high cost.
  • Adaptation to changes are difficult in a functional organizational structure because of its rigidity.
  • If the functional manager takes decisions without discussing the issues with his team, the team may be demoralized.

Which Company is Suitable for a Functional Organizational Structure?

The functional organizational structure best suits to the large organizations rather than the ones which produce just a few types of products. Also the functional organizational structure suits best to the projects which require deep knowlege.  For example, expertise of the department is very important for a research and development project. Employees are grouped based on their skills and expertise in the functional organizational structures. Reporting hiearachy is clear in this structure.


Organizational structures define the working styles of the individuals and departments. The type of organization is determinant on your role, career growth path, responsibilities, reporting system and working culture. A functional organization structure is a strong and rigid structure ensures to run the organization’s business effectively. This type of organization is suitable for smaller companies or the companies that focus on a standard product or service. When the company gets larger, a matrix organization structure will be suitable.

The project manager’s role is very limited and department manager’ s role is significant.

Unlike other organizational structures, a functional organizational structure gives a static role. You report to the functional manager in this structure while in other types of structures you may report to multiple managers.

Note that this is one of the most important topics for the PMP Certification Exam. You may encounter a few question related with the topic.

See Also

Matrix Organizational Structure in Project Management 

Types of Organizational Structures

External References

The team friendly organizational structure




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