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Functional Organisation Structure Functional organisation structure is the which where “authority rests with the functional heads; the structure is sectioned by departmental groups.” -Teams in Engineering Education Arizona University It is a kind of Formal Organisation whose structure is based on organising resources to perform specialized tasks or activities in order to attain the goals of organisation.
This structure emerges from the idea that the organisation must perform certain functions in order to carry on it’s operations. Functional structure is created by grouping the activities on the basis of functions required for the achievement of organisational objectives. For this purpose all the functions required are classified as shown below:-
The basic or major functions are those which are essential for the organisation. Consider , the following examples, Movie-making : The key person is the castingdirector. The concept of casting extends not only to the actors, but also to choosing the array of technical and support people. These decisions are critical to the success of the movie. Everyone has a unique and special personality. It is the job of the casting director to coordinate these personalities in such a fashion that everyone can function together. Such decisions can make or break the movie.
Manufacturing Organisation : Production and Marketing are basic functions when departments are created on the basis of functions and a manager feels that his span of management is too wide to manage effectively , which normally happens in a large organisation. Several departments are created on the basis of dividing basic function into sub-functions. Eg. Marketing can be sub-divided as shown ,
Apart from basic and secondary functions , departments are also created to take advantages of specialization & to support basic and secondary activities. Such departments may be finance , accounting , personal , industrial relations , legal etc.
Characteristics of Functional Organisation
Organisation chart of functional structure. Courtesy : The Internet.
Suitability of Functional Structure
The establishment of a functional structure is necessary when a small organisation grows & it’s business activities become more complex.
In such a case more formalized and systematic approach is required to handle situations.
However , the top management will continue to control decisions involving strategies & co-ordination.
The benefits provided by a functional structure to an organisation :
Results in high degree of specialisation.
Brings order and clarity.
Promotes professional achievement.
Proper usage of organisational resources.
Higher control and coordination of functions.
Problems arising in Functional Structure. Sometimes the relative advantages may lead to certain disadvantages. For example ,
Control & Co-ordination may overload the manager.
Specialization may lead to goal displacement.
Therefore , if there is too much emphasis on any aspect it may lead to dysfunctional behaviour of that aspect. The Functional Structure isn’t suitable to an organisation that involves diversification.
Now the question that might be arising in your mind is WHY it isn’t suitable? The reasons are likewise :-
Responsibility for ultimate performance cannot be fixed in functional structure because no one is responsible for product cost and profit. Each department focuses on it’s contribution to the product but not entire product.
Slow decision making process because the problem requiring decision has to go through various departments.
Strengths & Weaknesses of Functional Organisation Structure
Allows Economies of scale within functional dept..
Enables in depth knowledge & skill development.
Enables organization to accomplish functional goals.
Best for one or few products.
Slow response time to environmental changes.
Problem in decision-making.
Poor co-ordination among dept..
Restricted view of organization goals.
“what is the right organization structure ? Decision tree analysis provides the answer” Organisational dynamics – Robert Duncan
Advantages & Disadvantages Advantages
Use of Home Unit.
Keeps staff located in their units.
Poor response time.
Client is NOT the focus.
Tendency to sub-optimize.
Low staff motivation.
Courtesy : The Internet.
Product/Market Organisation Many markets are classified on the basis of product and trading relationships.The level of market organisation is largely determined by the new imperatives of the rising level of economic development. In the non-monetised barter economy there is, perhaps, no necessity of modern market-organisation as such. The "money economy" grows with the separation of production, consumption and distribution. In the exchange economy there is structured processes of production, distribution and delivery. The article of interdependence is fairly high. All economic activities get increasingly market-determined and market-oriented.
It may also be noted that the generation of "marketable surplus" (commercial surplus) marks a fountainhead of the development of market organisation. Greater the marketable surplus higher the market organisation. The changing composition of the marketable surplus is another added impetus. Diversification is really inspiring. The rising market-interaction becomes a fertile ground for higher per capita income (greater purchasing power), faster change in the composition of output and taste and preference of the consumers. Because, Supply acts on Demand.
Factors that strengthen market organisation
Services rendered in a market organisation Primary services
Activities related to market that influence market/product organisation. Market Player Depending on Market Information Market Developer Market Changer Others
Market Organisation Chart Courtesy : The Internet.
Credits The Internet. Market Organisation by Weisbuch, Gerard, Alan Kirman, and Dorothea K. Herreiner , University of Bonn , Germany.
Thank You! Presented by : Ashutosh Mishra MBA – 1st. sem