Companies that produce the same goods consistently and have routine operations use a functional organizational structure because its rigid structure provides predictable stability.
An organization can adapt to any structure it requires. If the business mainly handles projects, it will choose a projectized structure. While an organization dealing with operations will stick with a functional structure.
Your working style accommodates your organizational structure, defining your role and responsibilities and shaping the work culture. This culture includes the work environment, reporting system, hierarchy, etc.
Every organizational structure has a different system.
In a projectized organizational structure, team members report to the project manager. Likewise, employees report to a functional manager in a functional organizational structure. In a matrix organizational structure, it varies.
I have covered the matrix and projectized structures in other blog posts. For now, let’s focus on the functional organizational structure.
Functional Organizational Structure
The PMBOK Guide defines functional organizational structure as “An organizational structure in which staff is grouped by areas of specialization, and the project manager has limited authority to assign work and apply resources.”
A functional structure divides the organization into departments based on their functions. Each is headed by a functional manager, and employees are grouped according to their roles. Functional managers typically have experience in the roles they supervise, ensuring that employees are using their skills effectively. A functional structure that maximizes department expertise helps companies achieve their business objectives.
Under a functional organizational structure, employees are classified according to their function in an organizational chart. This chart shows the role hierarchy (e.g., president, vice president, finance, sales, customer service, administration, etc.).
Each department has a head responsible for it, helping the organization control the consistency and quality of its performance. These department heads are skilled, experienced in the same work, and perform at a high level; accordingly, productivity is exceptional in a functional structure.
Functional departments are sometimes referred to as “silos.” This means each department is vertical and disconnected from the others, and communication flows straight up through the department heads to top management.
Here, all authority remains with the functional manager. Usually, a project manager has a minimal or even non-existent role in functional organizations. Project managers will need the functional manager’s approval to use resources and may operate as a coordinator or an expediter.
The functional organization structure works well in businesses dealing with operations, like manufacturing industries.
The strengths of functional organizational structures are specialization and efficiency.
Small companies with a limited number of products use this structure. Their employees are highly skilled due to repetitive work, which means they feature high efficiency and superior performance.
Since employees are grouped according to their skills and experience, they gain more knowledge and expertise and become specialists, making them highly efficient and productive. They will perform quickly, with less chance of error, and their output will be high quality.
The key weakness of functional structure is insufficient cooperation among different departments and management problems.
Although each department is efficient and productive, the lack of coordination among functional units or departments slows productivity. They often inadvertently compete with each other, putting their department’s interests above the organization’s.
This causes low employee morale, affecting the productivity level, which can fall behind the target.
Communication in functional organizations is formal and mostly from top to bottom. The top management makes decisions and informs the lower-level employees. They often change procedures and modify the work environment without taking input from employees on the ground.
This negatively affects the morale of the employees and lowers efficiency, ultimately setting back innovation.
Advantages of the Functional Organizational Structure
The following are several benefits of the functional organizational structure:
- Employees are grouped by their knowledge and skills, allowing them to achieve high performance.
- Their roles and responsibilities are fixed, facilitating easy accountability for the work.
- The hierarchy is clear and transparent. This reduces the number of communication channels.
- Communication is frictionless within the department.
- Work is not duplicated, as all departments have defined responsibilities.
- Employees feel secure; they perform well without fear or uncertainty.
- Because of job security, employees tend to be loyal to the organization.
- Employees have a clear career growth path.
- Cooperation is excellent within the department.
Disadvantages of the Functional Organizational Structure
The following are a few disadvantages of the functional organizational structure:
- Employees may feel bored because of repetitive work. This monotony causes a loss of enthusiasm.
- Conflicts may arise if the performance appraisal system is not properly managed.
- A highly skilled employee costs more.
- Departments develop an insular, self-interested mentality. Functional managers pay more attention to their own departments and ignore others’ interests.
- Communication is weak among the departments. This causes poor inter-department coordination, affecting flexibility and innovation.
- A lack of teamwork among different departments slows innovation.
- Employees may have little concern or curiosity about events outside their group.
- The rigid functional structure makes adapting to changes difficult and slow.
- Decision-making is sluggish due to the bureaucratic hierarchy.
- Functional managers can make decisions without consulting team members. This is not good for company morale.
- Personal bias may affect employee morale. For example, an employee may feel demoralized when a low-performing employee is promoted over them.
- As the organization grows larger, managing functional areas becomes challenging. Each department may start behaving like a small company, i.e., the “silo” effect.
- Functional departments may be more committed to departmental goals rather than organizational goals.
- Employees do not learn new skills, and their roles don’t often change, causing stagnation.
Examples of Functional Organizational Structure
Small organizations dealing with production can be similar to a functional structure.
However, as they grow, they will need elements of a projectized structure.
For example:
- Research-based projects to launch a new product
- Projects to improve their product or operations
- Projects to construct new production facilities
Summary
The functional organizational structure helps organizations run their businesses, especially those involved with ongoing operations. Employees feel secure, perform well, and are highly skilled here. Project managers typically do not have any role in a functional organization. They will have a very limited role and no authority if they do exist. In a functional organization, employees’ roles are static, and they report to the functional manager.
Does your organization use a functional organizational structure? If yes, please share your experience in the comments section.
This is an important topic for the PMP exam. You will see quite a few questions on this topic in your exam.
I am Mohammad Fahad Usmani, B.E. PMP, PMI-RMP. I have been blogging on project management topics since 2011. To date, thousands of professionals have passed the PMP exam using my resources.
By looking into its advantages and disadvantages, is it considered a good structure? I am confused bcz disadvantages are more listed then advantages
Please can you brief me the link between a firm functional organizational structure and it’s organizational culture
Hello Andrews,
The term “firm functional organizational structure” is not available in the PMBOK Guide.
helpful information thanks verymuch
You are welcome Haggai.
Thank you it helped a lot
You are welcome Kikie.
please put referenses
Okay, will do it.
thanks Fahad
You are welcome Sichone.
Thank you so much for your explanation , it is understandable
You are welcome kerene.
Am I correct in saying the Foschini Group falls under functional specialisation
Not sure about them but mostly big organizations use matrix structure.
Thanks but in this a point of suitability will
also to add
I did not understand you Richals.
Woow thanx for the information its what I was looking for all along
You are welcome Nakizito.
Awesome post. i liked it!!!
Thanks Godfrey for your comment.
It is helpful.
Thanks Alex.
Thnkx bt can you help me on my assessment? Aworker is allowed to plan and organised his/her own work
Sorry Nombulelo due to time constraint, I cannot help you in your assessment.
Hi. I like your work. A very helpful explanation I should state. Keep it up!
Thank Bonnie.
Thanks Bonnie.
I believe this is one of the most significant information for me. And i’m satisfied studying your article. However wanna commentary on some common things, The site style is wonderful, the articles is really great : D. Just right process, cheers
Is this suitable for large enterprises……
Depends on type of work an organization is managing.
thank you
You are welcome Tahseen.
plz who discovered the functional organisation structure?
I searched it and could not find it. Anyway it is a good thing to know the origin of this concept.
Fredrick W. Taylor.
:)
pls he can one answer this question. pick any organization of ur choice and draw out the organization structure and Wat are the main function of organization chart?
It shows hierarchy.
very good, when was this published please?
It was published in August 2012.
I liked the way in which you’ve explained. It was really helpful for me.
Thanks Barkha for your comment.
Like the post,thanks for sharing
You are welcome Arnold.
hanks very much, i found ur notes understandable, comparing to my lectures one. Thanks a lot.
You are welcome Nasser.
nasser in advantages of a functional structure is it correct according to your understanding if i say it promotes in depth functional expertise
This help me out a lot in fact it answered me all the questions i was in doubt. For the assignment I’m doing i need the date you posted basically the reference of this.
I am glad Muminur that you find my blog post useful.
when was this article published
In August, 2012.
Corrected.
Can we answer this Q. As answer A
A project coordinator is having trouble securing programmers for her project. Every time she asks her boss to give a resource to the project he says that they are too busy to help out with her project. Which type of organization is she working in?
Select one:
a. Functional
b. Weak Matrix
c. Strong Matrix
d. Projectized
A and B both can be the answer. It is not very clear from the given description.
Hi Fahad,
Thanks for the great article! Just one confusion from exams perspective when they say the organization is functional, should it be assumed that no project manager will be there, or should we assume that there may be a project manager?
Regards
Pawan Rai
If there is a project manager, it will have a very limited or no authority.
How do you overcome disadvantages of functional organizational structure?what organisation structure do you adopt for cost effectiveness and enhancing productivity?
These problems are difficult to manage. If team team members are getting bored, you can transfer them into another department, if the appraisal system is not effective, you can tweak it, etc.
Which is influenced by the level of scientific and technological development in society that impact on the success of an organisation .can you please help Sir my textbook is no specific.ThAnks alot
Sir can you please help me out with method study activities or symbols in work study I am totally confused
Can you be little more specific?
Never mind that. Don’t you have some information on ” when and why will you use flow process chart : Equipment type.
Or notes on flow process chart types my textbook is confusing me.
Thank you
Usually the big organization uses a matrix structure. Small company’s can be more close to projected or functional.
Hello: Helpful blog. Will you provide names of companies that fit into the different organizational structure categories you describe? Thank you.
very helpful notes now i clearly understand this topic. jazak ALLAH
Thanks Fari for your comment.
VERY HELPFUL BLOG.KEEP UP THE GOOD WORK
Thanks Sadia for your comment.
Hi, i wanted to ask,
If a business has now grown too large to manage centrally, because this shop has six shops across three states & each shop has a manager and several staff, is it suitable to advice this shop a functional structure or hybrid?
p/s: This shop sells clothing retail business as a sole trader.
Thank you!
What do you mean when you say “hybrid”?
What i meant was, is it considered as a hybrid structure? Does my question refer to a functional structure?
Yes, as per my understanding it is a functional structure.
Thanks alot Sir your work is the best and i really liked the advantanges and disadv..appreciate
Thanks Msekeli.
What organizational type would you consider Uber to be then? It definitely has the hierarchy and the organization is broken out into smaller units. However, how would drivers play in to this?
Mostly big organizations follow matrix structure.
Well this actually helped me for understanding organizational structure in a understandable way…
Thank you.
You are welcome Imesh.
This topic along with topic of proectized organizations have been really helpful. Thanks a lot for both these articles. They complement pmbok.
You are welcome Patel.
I have been reading textbooks and ppts given by my professor nothing went into my mind. when I read this article got surprised, it made my work very very easy. Thank you so much..
You are welcome Ambika.
thanks for provide such as sevrice for us i was confused by these question day to day
You are welcome Nasrullah.
Too Thaaaaaaaaaaaaaaaaaanx
Thanks Ahmed.
I like to add some org chart templates for companies, multinational companies, matrix and functional that’s in Creately diagram community.
Thanks Shalin for providing these informational charts.
it is very helpful. keep writing and sharing your knowledge.
Thanks Jordon.
thank you so much now I have understood fuctional stuctures
You are welcome Seize.
Dear Fahad
Is it possible in single organization have multiple Organization structure as follow.
For example A company in business of some consumer durable or medical instrument manufacturing.
then Production department usually follow functional structure, while design or new product development team follow matrix organization.
Please clarify me….
Yes it is possible.
For example a big oil company can have production structure to get the oil from the fields and at the same time projectized structure to develop new oil fields.
I find this post amazing and very clear.It makes strategic Management interesting!
Thanks for your comment Solomon.
its easier to understand as compared to my lecturer’s
I am glad Brenda you liked my blog post.
Thanks a lot for this wonderful breakdown. U just made my presentation on this topic easy. God richly bless u
Thanks Maria for your comment.
Great explanation. The best interpenetration have seen on the topic. Also love those advantages and disadvantages. The most and easiest to understand listed anywhere.
Thanks Hayka for visiting and leaving your comment.
Everything is clear now, on this topic . Thanks a lot . It really helps me!
You are welcome Ceddy.
Thanks for such an elaborate analysis. Really useful for my assignment, by the way can you assist differentiate between functional organisational structures and functional organisational systems. Thanks once again.
Please visit below given page to understand the difference between system and structure.
https://www.marxists.org/reference/archive/spirkin/works/dialectical-materialism/ch02-s07.html
Very clear explanation
thanks
You are welcome Aung.
Really awesome.. Got everything cleared out now..God bless u so much
Thank you Bismark.
It is short and clear topic, i understand it very well
Thanks Khadija for your comment.
So helpful. Thank you so much.
You are welcome Senedu.
so helpful uuuuummmm. danki
You are welcome Mposa.
can i get the examples of industry using functional organizational structure
Production based organizations are having this kind of structure.
Thank you for the article. It helped me get a quick understanding the Org structures and differences.
You are welcome Vidhya.
u hv made my module easy for me thank you guys god bless yah a lot!!!!!
You are welcome Elsie.
Honestly, you are amazing!
You made this into such a simple read :)
Thank you!
Thanks Marcus.
This is wonderful work. I would like to enrol for PMP Certification. Kindly advise me on how to go about it. Thank You!
Please read all FAQs available here:
https://pmstudycircle.com/pmp-faqs/
Thank you for breaking this down. It’s so easy to understand now. What do you know about disciplinary bases for management?
Thanks Omar for your comment.
This page will help you understand disciplinary basis:
http://www.york.ac.uk/admin/hr/resources/policy/disciplinary/
thanks for your article straight forward and easy to understand.
Thanks Gerald for your comment.
Very clear and understandable format
Thanks Deepak.
Very interesting and brief
jazaakalahu khairan
Thanks Al-Hassan for your comment and visit.
Thanks! I had to revisit this topic to complete some other work. I hope to find other useful PM topics explained in like fashion at your blog.
Thanks Keith for your visit.
Thanks alot, this helped me alot in revising for my exams.????
You are welcome Edgar.
Thanks very much, i found ur notes understandable, comparing to my lectures one. Thanks a lot.
Thanks Portia.
Uhm so Sir the best organisational structure is the functional structure?
It depends on your requirements.
Easy to understand than others I’ve ever read…. Thank a lot.
You’re welcome Kenzao!
Many thanks for your efforts and the way you clarify the topic
I love the way you break it down to my own understanding thanks
You are welcome and thanks for visiting my blog.
I had given up on reading the organization structure but you have simplified my work. Now I find your notes more interesting than most of these textbooks I’m using. Thanks and may God bless you
Thank you Levi and I hope you will enjoy the rest of the posts as well.
I do agree being I was lost when asked to select an organizational structure that described Human Resource Development and Training.
I like those advantages and disadvantages given in article.