Operating a successful business usually involves some form of organizational structure. A functional structure is one type of organizational structure that helps companies manage employees and meet their business goals.
In this article, we discuss what a functional organizational structure is, discuss its advantages and disadvantages, plus learn about other organizational structures in business.
What is meant by functional structure?
A functional organizational structure is a business structure that groups employees based on specialization, skills, or related roles. It is based on hierarchical levels that include different departments, under the direction of designated leaders.
Businesses generally operate under a functional structure because it groups people with similar knowledge, and when used in a team environment, helps the company achieve their goals.
Advantages of Using a Functional Organizational Structure
There are many advantages to using a functional structure in your business. Among them are:
Increased productivity
People in a functional structure setting have specialized skills that allow them to work more quickly and efficiently than those who may not be familiar with particular work processes, leading to greater productivity.
In addition, their level of self-confidence allows them to complete tasks with minimal supervision. Employees in this hierarchical system exhibit high levels of productivity and often receive promotions to other positions.
Skills development
Companies that follow a functional organizational structure have many departments that are made up of small teams. Within each team, experienced managers have the opportunity to teach their team members the same skills they have, resulting in an enhanced skill set for all involved.
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Soft (interpersonal) and hard (technical) skills can develop over time as people work together to find unique solutions and overcome work-related challenges.
Clarity
When companies bring together people from the same specialization, it creates a clear environment. Whenever someone in the company needs high-level information related to marketing, human resources, customer service, or operations, they know where to go.
This also applies to people outside the company, who can contact the company with specific requests. And, the hierarchical nature of the functional structure clarifies the specific roles and responsibilities of each person within a department.
Minimize operating costs
Organizational structure helps businesses save money in many ways. By organizing employees according to business functions, departments can reduce the chances of multiple departments completing similar work.
Assigning tasks to individuals with the right skills also saves money because the work is done more efficiently.
Functional organizational structures work best for large companies that employ many people in similar roles. When departments have employees organized based on their appropriate skills and functions in the company, business owners have more time to focus on their big-picture goals while department heads manage their team’s goals.
In smaller companies, there may not be enough employees with related skills to justify grouping them into separate departments.
Impeded decision making
For companies that thrive on greater flexibility and creativity, a functional organizational structure can impact their ability to operate efficiently.
This type of formal organizational structure typically requires employees to seek approval from management and other authority figures before sweden phone number buy database making decisions. When management is not available for feedback during time-sensitive projects, it can hinder the team’s overall progress.
Managers who understand these challenges can avoid work-related delays by communicating well with their team members.
Inter-departmental competition
When employees within each department work together, they begin to operate as a team with a focus on achieving a specific goal. This goal-oriented mindset, while usually positive, can foster competition between departments.
To maintain a harmonious work environment, managers must work to communicate effectively with other department leaders and respect the CEO’s priorities regarding the company’s needs.
The role of a functional manager might be to help team members understand work priorities and review tasks that have been completed. The role of a product manager is to set the company’s direction regarding product offerings. A matrix structure creates cross-functional teams for specific projects.
Flat
A flat structure is the opposite of a hierarchy, as it lacks seniority, titles, and specific job descriptions. Employees in a flat structure are free to contribute phone number au to the work as needed.
It is common for startups and small businesses to operate under a flat structure, although companies often move to some form of hierarchy as they grow.
Flatarchy
Companies operating under a hybrid flatarchy structure practice elements of both hierarchical and flat structures. While they have linear authority and dedicated teams, they also allow for innovative idea sharing.
When businesses develop new products and services, they typically seek guidance from multiple departments within the organization while maintaining a hierarchical structure.
Division
Divisional structures work well with large companies that span a wide geographic area. Businesses divide employees into divisions that are related to specific products, markets, or services. Within each division, there may be functional units consisting of departments such as marketing and operations. National and global chain stores and subsidiaries typically operate on a divisional structure.
Conclusion
That’s a complete discussion of functional structures and other organizational structures. Every organization is different and there is no perfect organizational structure, but one of the types of organizational structures above may not be the best for your company.
In addition to implementing an organizational structure, one way to manage a company to continue to grow is by managing financial and accounting processes effectively. Managing a company’s finances also requires coordination between all divisions.
