Functional Organization

Functional organization has been divided to put the specialists in the top position throughout the enterprise. This is an organization in which we can define as a system in which functional department are created to deal with the problems of business at various levels. Functional authority remains confined to functional guidance to different departments. This helps in maintaining quality and uniformity of performance of different functions throughout the enterprise.

The concept of Functional organization was suggested by F.W. Taylor who recommended the appointment of specialists at important positions. For example, the functional head and Marketing Director directs the subordinates throughout the organization in his particular area. This means that subordinates receives orders from several specialists, managers working above them.

F.W. Taylor, father of scientific management, developed the concept of functional organisation. He recommended functional organisation even at the shop level where workers have to produce goods. He thought that one foreman could not manage all the aspects of production work for directing a group of employees as they could not have varied knowledge. He suggested the substitution of line authority by functional foremanship at the lower levels of the organisation structure.

Taylor suggested the division of supervisory functions into two groups:

Office specialists and;
Shop specialists

Functional Organization Structure

A functional organization structure is a hierarchical organization structure wherein people are grouped based on their area of specialization. These people are supervised by a functional manager with expertise in the same field. This expertise helps him to effectively utilize the skills of employees, which ultimately helps organizations in achieving its business objectives.

People are classified according to the function they perform within the organization in this kind of organization structure. The organizational chart for a functional organization structure shows the president, vice president, finance department, sales department, customer service, administration, etc.

Each department will have a department head who will be responsible for the performance of his section. This helps the organization control the quality and uniformity of performance. These various departments are sometimes referred to as “silos.” This means the system is vertical and disconnected. The communication flows through the department heads to the top management.

Here, all authority (i.e., budget allocation, resource allocation, decision making, etc.) stays with the functional manager. Usually, the position of the project manager does not exist in this type of organization structure. Even if this position exists, the role of the project manager will be minimal, and he will need permission from the functional manager to fulfill his requirements. The project manager may have the title of a coordinator or an expediter.

The functional organization structure is suitable for an organization which has ongoing operations and produces standard products or goods, such as manufacturing industries.

Features of Functional Organization

The entire organizational activities are divided into specific functions such as operations, finance, marketing and personal relations.
Complex form of administrative organization compared to the other two.
Three authorities exist- Line, staff and function.
Each functional area is put under the charge of functional specialists and he has got the authority to give all decisions regarding the function whenever the function is performed throughout the enterprise.
Principle of unity of command does not apply to such organization as it is present in line organization.

Merits of Functional Organization

Specialization- Better division of labour takes place which results in specialization of function and it’s consequent benefit.
Effective Control- Management control is simplified as the mental functions are separated from manual functions. Checks and balances keep the authority within certain limits. Specialists may be asked to judge the performance of various sections.
Efficiency- Greater efficiency is achieved because of every function performing a limited number of functions.
Economy- Specialization compiled with standardization facilitates maximum production and economical costs.
Expansion- Expert knowledge of functional manager facilitates better control and supervision.

Demerits of Functional Organization

Confusion- The functional system is quite complicated to put into operation, especially when it is carried out at low levels. Therefore, co-ordination becomes difficult.
Lack of Co-ordination- Disciplinary control becomes weak as a worker is commanded not by one person but a large number of people. Thus, there is no unity of command.
Difficulty in fixing responsibility- Because of multiple authority, it is difficult to fix responsibility.
Conflicts- There may be conflicts among the supervisory staff of equal ranks. They may not agree on certain issues.
Costly- Maintenance of specialist’s staff of the highest order is expensive for a concern.