Types of organizational structure

A. Functional Structure
When the activities or jobs are grouped keeping in mind the functions to be performed then it is called functional structure. These functions are organized in to separate departments. For example, in a manufacturing concern division of work into key functions will include production, purchase, marketing, and personnel.












Advantages
1. Specialisation: Activities are grouped according to functions to be performed. Similar tasks are placed under one department. This leads to efficiency and specialization.
2. Easy supervision: Since the tasks to be done in one department are of similar nature, it becomes easy for the supervisor to guide and supervise the employees performing the jobs.
3. Easy coordination: Similarity of tasks being performed help in promoting control and coordination within the departments
4. Increases managerial efficiency: Managers in each department are performing the jobs again and again. This makes them specialized and increases their efficiency.
5. Effective training: Training of employees become easy as focus is only on a limited range of skills.
6. Decreased cost: Minimum duplication of efforts and economies of scale results in lower cost.

Disadvantages
1. The departments become specialized in their own way and fail to see the prospects of the whole organization. Thus it becomes difficult to achieve organizational goals.
2. The departmental heads start thinking their departments to be functional empires. This leads to conflicts among various departments.
3. When the departments become large it becomes difficult to coordinate.
4. Even when the organizational goals are not achieved it becomes difficult to fix responsibility as all the departments are interrelated.
5. Employees and managers are trained for only one function i.e. the department to which they belong. This develops inflexibility in them as they have difficulty in appreciating others point of view.

Suitability
Functional structure is suitable where:
1. The size of the business unit is large.
2. Specialization is required.
3. Decentralization of authority is needed.
4. Only one product is sold.