What is Functional Organizational Structure

As the term depicts, the functional organizational structure is a type of organizational structure that groups the employees based on their roles, skills, and specialty. Under this organizational structure, different departments are established and each department head is responsible to manage the performance of employees in the department. Moreover, each employee reports directly to the departmental head or manager in the specific functional area. Thus, top-level managers centrally coordinate and manage the different departments. Hence, the use of this organizational structure helps to ensure a higher degree of specialization. The different functions in the organization can include production, marketing, research, IT, human resource, etc.

Functional structure

The use of this organizational structure is mainly suitable for the organization that is centralized i.e. majority of decisions are taken at the top level and a degree of specialization is needed in the organizational products and services.

Advantages of Functional Organizational Structure

Till now, you must have got the idea that the functional organizational structure includes structuring organizational processes in a manner that ensures grouping of employees with similar skills and knowledge together. Some of the advantages of the functional organizational structure are discussed as follows-

  • Improved productivity- The functional organizational structure helps to enhance the productivity of the organization as the individuals in the functional organizational structure having specialized skills are grouped which helps them to work quickly and efficiently. Moreover, all the employees are engaged in performing only the tasks in which they are proficient which also helps in ensuring higher productivity.

  • Enhance employee skills- The employees in the functional organizational structure work under experienced managers which helps to enhance the skills and abilities of the employees. Moreover, the employees working in teams also get the opportunity to learn from the soft skills and abilities of other employees.

  • Clarity- The functional organizational structure also helps to ensure greater clarity in the organizational operations as each departmental head is held responsible for managing the performance of the employees in the same department. Moreover, the collaboration of the employees with similar skill sets also helps to improve the work effectiveness of the employees and clarity of operations.

Disadvantages of Functional Organizational Structure

You must be thinking that the functional organizational structure is suitable for all organizations. However, this is not true in all cases. The functional organizational structure also suffers from various disadvantages which are discussed as follows-

  • Hindered decision making- We all know that the organizations in the current times thrive to maintain flexibility in the organizations. However, we need to consider that the employees working under the functional organizational structure are required to seek approval for various decisions from the management which increases the chance of delays in the decision making.

  • Communication barriers- In the functional organizational structure, there is limited communication in the cross-functional departments which can also cause problems in innovation in the organization. For instance, the marketing department may fail to communicate the product needs of the customers to the production department due to a lack of interdepartmental communication in the functional organizational structure which can then lead to the inability of the organization to effectively meet the customer needs.

  • Silos within an organization- The organizational silos can be defined as the business units or divisions operating independently. The chance of silos in the organization operating under the functional organizational structure is very high as each functional department may operate independently under the functional organizational structure.

  • Unhealthy competition- You may be surprised by the fact that the functional organizational structure can cause unhealthy competition within the organization as each department may have its own goals and may work towards achieving the department-specific goals. This can prompt competition between the departments and can deviate the organizational operations from the organizational goals.

Example of Functional Organizational Structure

The best example of the functional organizational structure is that of Apple as Apple does not divide its operations based on the product line but instead focuses on various functions like marketing, retail, engineering, and operations. The company employs a unitary organizational form where the operations are organized around the areas of expertise rather than the different types of products. This helps Apple to maintain specialization in its product and ensure manufacturing of higher quality products and services. The different areas of expertise of Apple include product marketing, operations, hardware engineering, software engineering, hardware Technologies, etc. The organizational structure of Apple is further represented as follows-

Apple Organizational structure

The organizational structure of Apple represents that the operations of Apple are organized in different departments based on the functions and each department has its role and responsibility. For instance, the marketing department of Apple is responsible to identify the customer needs and identify the products that can best meet the market needs of the customers. The designing team at Apple is held responsible for crafting the appearance of the Apple products like the Apple Macintosh computer line. The software engineering department is held responsible for developing the operating system OS and other software products such as iWork.

Jeff Williams, Chief Operating Officer is responsible for managing the performance of departments. The different departments of Apple include Marketing, engineering, finance and admin, and operations. Moreover, each department is further headed by the upper management team and vice presidents who then supervise the performance of employees. Thus, the functional organizational structure helps the organization to effectively manage the organizational operations in different departments and areas of expertise along with effective task allocation, coordination, and supervision. The individual divisions departments under the expertise-focused hierarchy system of Apple also enjoy autonomy in various decisions and processes which further enable them to perform effectively and help Apple to achieve a market-leading position for its products.


What types of industries or sectors commonly adopt a Functional Organizational Structure?

Industries that rely on specialized expertise, such as manufacturing, healthcare, and professional services, often adopt a Functional Organizational Structure.

How does a Functional Organizational Structure differ from other organizational structures like Matrix or Divisional?

A Functional Organizational Structure groups employees based on their specialized functions, while a Matrix Structure combines functional and project-based teams. A Divisional Structure groups employees by products, regions, or customer segments.