Functional Structures

When looking at the subject of organisational structures, functional structures are usually the first formal structures owners introduce in to their businesses, having started as entrepreneurial  structures.

What is a functional structure?

This type of structure is common in organisations that have outgrown the entrepreneurial structure and now organise the business on a functional basis.

• It is most appropriate to small companies which have few products and locations and which exist in a relatively stable environment.
• For example a business making one type of electrical component for use in a car manufacturing company.

Advantages & disadvantages of functional structures

Advantages

• This organisational structure relates to an organisation which has outgrown the entrepreneurial stage. Rather than duplicating roles in different parts of the company, similar activities are grouped together so leading to:
• lower costs
• standardisation of output/systems, etc.
• people with similar skills being grouped together and so not feeling isolated.
• Due to the larger size of the organisation and the grouping into functions, there is a career path for employees - they can work their way up through the function.

Disadvantages

• Managers of the functions may try to make decisions to increase their own power/be in the best interest of their function rather that work in the best interest of the company overall, leading to empire building and conflicts between the functions.
• Due to the longer chain of command, decisions will be made more slowly.
• This style of structure is not suited to an organisation which is rapidly growing and diversifying - the specialists in for example the production function would not be able to cope with making gas fires and radios.

Other types of structures

Some organisations out-grow a functional structure evolving into one of the following:

• Divisional structures 
• Matrix structures 

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Tags:	functional;organisational structure