Functional Organizational Structure- Advantages and Disadvantages

functional organizational structure

Any organization needs a definite arrangement for its functioning. If not properly organized, a workplace can turn into chaos and not provide the profit according to the potential of its workers. Hence, there are so many ways to organize a company to earn the maximum profit. In this article, we will be discussing a specific type of organizational structure called the functional organizational structure. 

Every organizational structure has its advantages and disadvantages. Here we will be discussing the positives and negatives of this organizational structure and how it affects a company. We will also discuss the importance of communication among the departments in a company to benefit its smooth functioning. 

What is Functional Organizational Structure? 

The functional organizational structure belongs to a class of common organizational structures that are used to organize workers. In functional type, the workers are organized based on their specialized functional areas. Their specific skills and knowledge will be used to categorize an organization. These specialized units of each organization report to a single higher authority which is the management. 

The various groups of functional structures can be:

  • Information Technology.
  • Marketing. 
  • Sales.
  • Development.
  • Research.
  • Finance. 

Each one of the functional groups carries out individual aspects of the organization. They function independently and have their reporting units. These are organized in a vertical management system and due to these reasons, these units are called silos. Usually, the workers in specific units communicate within themselves and inter-unit communication is carried on by the team leaders. The functional organizational structure is an established way of conducting business and can earn great profits for the company. 

Advantages of the Functional Organizational Structure 

When employees with similar skills and knowledge work together, it increases efficiency. Thus, there are many advantages to the functional organizational structure. Here are some major advantages of this structure:

  • Specialization: As each department consists of people specialized in their respective fields, the unit itself will have all the expertise they might need. Hence, they can completely focus on their area of work. 
  • Stability: The roles and responsibilities of the workers don’t change frequently. Hence, people can do what they are good at and little time is spent learning new things.  
  • Productivity: As the staff is skilled in their assigned tasks, productivity increases. More skilled workers are better than more unskilled hard workers. 
  • Accountability: Since there is a clear structure of management, people know who to approach instead of having several people to answer to. This stabilizes communication and reduces confusion. 
  • Loyalty: As the workers belong to a unit, it naturally becomes a community and they will be most loyal to their unit and maybe the whole organization. 
  • Confidence: People feel confident in their work as they are experts in their field. 
  • Morale and work ethic: There will be an increase in the morale and work ethic of the employees as there is increased job security in this structure.
  • Clarity: The employees know their role and other’s roles properly. This reduces workplace conflict and confusion. 
  •  Training of new employees: The new employees feel that they are a part of the community and they can be trained properly. The functional organization structure provides the perfect platform for their training by bringing together the best talents in specific fields. They can learn theoretical concepts as well as real-life applications. 

Disadvantages of the functional organizational structure 

Even though this structure benefits an organization in many ways, it also has its downsides. There are many ways in which this structure can affect an organization negatively. Here are some disadvantages of the functional organizational structure. 

  • Inter-departmental communication: The vertical structure arrangement can make a team hesitant to communicate with other teams. This will destroy the overall dynamics of a company. If the head of the department only focuses on his team and doesn’t communicate with other departments, an interdepartmental conflict can arise.  
  • Repetition: Repeating the same tasks, again and again, might make the workers bored and they might lose their enthusiasm over time. 
  • Disruptions in promotions: If promotions are not done well and a lower-achieving employee is promoted over a hard-working employee, it may cause issues within them. 
  • Lack of coordination: If the employees and the managers of a team are only loyal to their department, then there will be no coordination among the departments. 
  • Decision making: The managers may make decisions without consulting their workers. This can lead to many problems within the department. 
  • Autocracy: A department can be so self-oriented and push its goals above others’. This can bring a crisis to an organization and no blame can be put on a single worker as everyone is an expert and a product malfunction cannot be pinned on a particular department. 
  • Tunnel vision: Each department may be perceiving the organization in its way and not as a whole. This may cause issues in the overall running of the company. 

How to resolve the issues with functional organizational structure?

As we have discussed already, there are positives and negatives to the functional organizational structure. Some things can be done to resolve the problems that can be caused due to this structure. 

The major step in this is to promote interdepartmental communications. Even though the team leader or the department manager takes care of all the communications among departments, it is good to have direct contact with the employees. This will increase their total perception of the company and benefit the organization as a whole. 

Involving the staff in decision-making and providing diverse tasks to the workers sometimes can increase their efficiency. They can take some time to learn new things and always be comfortable with what they are good at. 


In this article, we saw the importance of functional organizational structure and how it can benefit a company. We have also seen some downsides of this approach due to the lack of interdepartmental communication and diversity. Communication and wide perception are necessary for any successful organization. Hence, instead of forcing the workers to indulge only in their shell of expertise, encourage them to take new responsibilities and include them in the general decision-making. It can make a difference by giving a strong message that the organization as a whole is a team and not just the departments. This sense of development builds loyalty towards the coworkers as well as the company. 

Frequently asked questions

  1. Who is best suited for functional organizational structure?

Larger companies can use this structure for the proper orientation of their business. Smaller companies might not need this structure as it can be constraining for them. For a project that needs research and information such as that, this organizational structure is the best. 

  1. What are the different types of organizational structures?

Some of the different types of organizational structures are:

  • Hierarchical organizational structure. 
  • Horizontal or flat organizational structure. 
  • Functional organizational structure. 
  • Divisional organizational structure. 
  • Team-based organizational structure. 
  • Matrix organizational structure. 
  • Network organizational structure. 
  • Line organizational structure.
  • Circular organizational structure.
  • Process-based organizational structure.
  1. What are other alternatives to functional organizational structure?

For smaller companies, a functional organizational structure may not be the best way to increase efficiency. They can try project management organizational structure or flat organizational structure. According to the business, matrix organizational structure or decentralized organizational structure may also be suitable. 

Functional Organizational Structure- Advantages and Disadvantages

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