Functional Organizational Structure: Everything You Need To Know

Functional Organizational Structure: Everything You Need To Know
Last Updated: April 2, 2024

Although there are many other forms of organizational structures available, in recent years, there has been a trend among many companies, particularly "modern" start-up enterprises, to choose alternative structures that better suit their operational demands and represent their beliefs. The most prevalent of the three organizational structures most businesses use is a functional organizational structure. Employees in companies structured by function are grouped according to their activities inside the company.

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What is a functional organizational structure?

A functional organisational structure is a corporate structure that organises individuals according to their expertise, skill, or related roles. It is organised into layers of hierarchy that encompass several departments and are led by authorised leaders. Businesses typically utilise functional structures because it groups individuals with a comparable knowledge and, when used in a team setting, helps organisations achieve their goals.


It is a sort of organizational structure in which the organization is divided into smaller units based on specific functional areas such as information technology, finance, human resources, or marketing.


Because individuals with similar abilities and expertise are placed together by function, functional departmentalization may allow for higher operational efficiency. One problem with this arrangement is that the many functional groups may not interact, thereby reducing flexibility and creativity. A new trend aimed at overcoming this disadvantage is the formation of cross-functional teams.


Some people refer to these functional regions as "silos". Similarly, the company's senior management team is often composed of numerous functional heads (such as the chief financial officer and the chief operating officer). Communication takes place inside each functional department and is relayed across departments by the department leaders.


Organizations with extensive operations tend to utilize functional organizational structures. The functional organizational structure connects individuals with comparable and complementary knowledge and abilities. It also helps employees achieve their goals and work together more cohesively.


Typically, functional organizations are divided into expert skill areas like product development, sales, marketing, etc. They can also be divided into categories based on distinct goods, services, and locations, as Amazon and Disney have done. These parts are known as "silos" because they operate independently and have their management structures.

Understanding this structure can significantly help with organizational behaviour as it highlights the critical focus areas, demonstrates how different sections interact and contributes to the company's overall functioning.

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Features of Functional Organization


  1. The organizations entire work is separated into several functions.
  2. An expert performs each function.
  3. The functional head controls his functions actions throughout the organization.
  4. Functional heads have a great deal of autonomy.



Functional Organizational Structure Example

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Benefits of a Functional Structure

There are many advantages of functional organizational structures, and these are explored below:


Better efficiency

Because individuals with common abilities and expertise are grouped by duties performed, functional departments may increase operational efficiency. As a result, each group of specialists may work autonomously, with management serving as the point of contact between functional areas. This configuration allows for more specialization.



The most apparent benefit of a functional organization is that grouping people by specialty assures consistent departmental expertise. This is especially true in large businesses with many functional levels within a department — for example, a specific tech group that follows up on tech issues not handled by the primary telephone tech support group.


Speed of Operation

Another advantage of this type of organizational specialization is operational speed. In general, a senior tech will resolve a support issue faster than someone with less expertise. They're also likely to train new employees more quickly.


Clarity in Operations

Segregating the workforce based on function clarifies organizational accountability and job distribution. This reduces assignment duplication, which wastes time and effort, and makes it simpler for management to send work to appropriate staff.


Workload production

It lightens the load on the senior executives. In the company, there is focused supervision, and each function in charge is only responsible for its functional area.


Professional Development for Executives

A functional manager must be an expert in only one function. Better executive development is facilitated as a result of this.


Expansions Scope

It provides more room for growth than a line organization. It does not have the problem of a few line managers having limited competencies.


Better Control

The functional managers specialized knowledge enables improved control and oversight in the enterprise.


Related: Change management

Disadvantages of Functional Organizational Structures


Teams become siloed when departments are inhabited by people who specialize in certain job areas. Employees in separate teams do not have the chance to interact and share opinions, which can be detrimental to the business' long-term success.


Weakening of Common Bonds

A shared organizational purpose boosts employee morale and performance and is a key predictor of organizational success. When each group of experts in a functional organization is largely isolated, the common link that highlights a single overall organizational objective is nearly always weaker than in an organization where diverse personnel work closely regularly.


Lack of Coordination

In an ideal functional organization, each functional groups activities would require no input from other functional groups; nevertheless, this is not often the case. As communication becomes more prevalent in businesses, isolated groups may underperform or even fail because they lack an institutionally recognized method of expressing requirements and difficulties to other functional groups that may have assisted.


Managers from other functional groups may not reply constructively or promptly in some cases because "its not our problem." The period when collaboration would have been most successful may have gone by the time the necessity for cooperation has been identified.


Territorial Conflicts

Another downside of a functional organization is the likelihood of territorial conflicts, which is strongly tied to the failure of functional groups to cooperate. These arguments might be over objectives, budgetary competitiveness, or any number of other difficulties that arise from a clash of egos that occurs when each department has its separate functional organization or when there is a lack of a strong sense of a single purpose.



Because of its varied intricacies, the functioning of the functional organizational structure is complicated to understand. Workers are taken aback by a slew of directives from various functional heads.


Perspective Is Limited

A functional manager tends to set boundaries around himself and focuses primarily on their department rather than the entire organization.


Decision-Making Delay

There is a widespread lack of coordination among the functional executives, which causes decision-making to be delayed.


Companies should make decisions based on what is most urgently needed. Working with other areas may result in unhealthy rivalry for the functional organization. There may be a misunderstanding about how important some specifics are to the organization. In one case, the marketing department may make a request that is not prioritized to address the worries of the sales department by hiring additional workers.


An organization's organizational structure integrates and connects its many components to work at its best. The chosen structure impacts an organizations ability to achieve its strategy and objectives. To aid in achieving strategic alignment, leadership should be aware of various organizational structures characteristics, benefits, and limits. I hope this article has shown you everything you need to know about functional organizational structures.


What is a functional organizational structure?

A functional organizational structure is one that has hierarchical administration and groups teams according to their specific talents, such as marketing or finance. It is utilized in sizable businesses with distinct functional divisions. 

What is functional organizational structure example?

A huge manufacturing corporation with separate departments for production, finance, marketing, and human resources is an illustration of a functional organizational structure. A functional manager is in charge of directing the work of the team members in each department. Engineers, technicians, and other employees working in the production department, for instance, would be in charge of the manufacturing process. 

What are the characteristics of functional organizational structure?

A functional organizational structure has a clear chain of command within departments, groups people according to their specialized roles or abilities, and has hierarchical management with functional managers in charge of their teams. It frequently uses efficient utilization of specialized resources and standardized processes. Yet, because of hierarchy, it can also result in departmental silos and sluggish decision-making.

What are 4 types of organizational structure?

There are four common types of organizational structure:

  • Functional Structure: Groups employees based on their specialized functions or skills.
  • Divisional Structure: Groups employees based on product, customer, or geographic divisions.
  • Matrix Structure: Combines functional and divisional structures.
  • Flatarchy Structure: Teams or self-managed groups make decisions without a centralized hierarchy.

Other less common types include network, hybrid, and circular structures. The type of structure chosen depends on the company's size, industry, goals, and culture.

What is benefit of functional structure?

A functional organization has the advantage of enabling the effective utilization of specialized resources and abilities. Grouping workers according to their areas of expertise can boost productivity and performance. Also, it enables the standardized use of processes and procedures within each department, which can increase productivity and reduce costs. 

What is the importance of functional organization?

The ability of a functional organization to effectively use specialized resources and abilities is crucial. Organizations can boost performance and efficiency by organizing workers into groups according to their areas of expertise. Also, this organizational structure enables departments to standardize their processes and procedures, increasing efficiency and reducing costs. It is easier to communicate and make decisions when there are clear lines of authority and accountability, which boosts organizational effectiveness. Due to the need for specialization and standardization within functional areas, functional organization is a frequently utilized structure in bigger organizations.


Fadzai Danha is a consultant at Industrial Psychology Consultants (Pvt) Ltd a management and human resources consulting firm. Phone +263 242 481946-48/481950 or Email: or visit our website at

Fadzai Danha

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