If you’ve had a job, you likely worked in a functional organizational structure.The functional structure is based on an organization being divided up into smaller groups with specific tasks or roles. Coordination — The Essence of Management, 1. the knowledge of how to handle sales, marketing, finance, human resource etc. Suitability: (a) This type of organisational structure is suitable where the size of operation is very … Students who are in Class 12th or preparing for any exam which is based on Class 12 Business Studies can refer NCERT Book for their preparation. The Functional Organization Structure can be successfully applied in many areas. Advantages of Functional Organizational Structure The employees are made into groups according to their skills, and thus the overall effectiveness and efficiency of the tasks increase. A Functional Structure is a structure of an organization under which the similar kinds of activities or functions are grouped together to form a department. It is the most logical, time proven form of organisation structure. It not only helps in coordination of different activities of the business but also helps in correlation of people, resources and work. When she specifies the roles, duties and responsibilities of each person, it becomes a organizational structure. The functional structure has both advantages and disadvantages. 1. Improves specialisation: when an organization is divided based on the functions then a department will perform single type of function and thus their efficiency and quality will increase because of the improved experience which they will get because of repetitive work. That is the reason, a good organizational structure is important. Kiran will be responsible for dealing with the customers. Because resources specialized in one area, report to the same manager who knows the domain or area as well. Also, the conflict can arise due to difference in allocation of funds for different departments. Employees and department managers are skilled because they are experienced in the same field of business. There are five important advantages of the functional structure. The main difference between functional and divisional structure is that in functional organization is described as an organizational structure wherein, the employees are classified on the basis of their area of specialization. Improved profits: the profits are bound to increase when there is improved workings in an organization because of departmentalisation and increased operational and managerial efficiency. Reduces duplication: when there are separate departments for different kinds of activities and there are sub sections under a particular department then it leads to economies of scale because the duplication of activities is reduces as there is no overlapping of similar kinds of activities. Home » Business Studies Class 12 » Organizational Structure. An organizational structure, so designed that it is bifurcated into semi-autonomous divisions on the basis of product, service, market etc, is known as divisional structure. As, each and every person should have their personal goals aligned with the organizational goals so that it does not creates conflicts and chaos. As, in the divisional structure, the divisions are made based on the different kinds of products which the company is offering. Secondly, by creating specific task, the efficiency of the labor needed to accomplish, the task increases. She specifies that Rahul will be in close connection with the supplier and order the goods whenever necessary. Speaking of a multinational organization, accounting activities from all the regional offices and the headquarters would be handled by one accounting department. Divisional structure prevents organizations from getting the most out of economies of scale. It is structure which brings together the resources i.e. Performance & security by Cloudflare, Please complete the security check to access. 3. Advantages of Functional Structure: When the specialists are grouped together than it would result in the economies of scale and it definitely minimizes the duplication of equipment. In functional structure jobs of similar nature are grouped and organized as separate departments on the basis of their functions. An expert can manage each department. The functional structure gives you the least power as a project manager, but offers plenty of other advantages: It works well for small teams and small projects because the function has full control over the team members and other resources required. 4. It does not give importance to psychological and social need of employees. However, functions in each division may be different based on the suitability and need. © 2020, Arinjay Academy. All rights reserved. Employees are possible to become experts. ... actions get delayed in formal structure. Specialization. Functional Organization Structure Main Advantages: Offers a high level of specialization. Digital NCERT Books Class 12 Business Studies pdf are always handy to use when you do not have access to a physical copy. As the size and complexity of a business increases the organizational structure becomes more important. The full-stewardship principle lies at the heart of the functional organization structure. Please enable Cookies and reload the page. Roles and tasks do not change very much so there is little time spent learning, and accountability is clear. Advantages of functional structure. Another way to prevent getting this page in the future is to use Privacy Pass. Manish will look after the cash and online payments and other accounts work. Everyone will report back to Radha. If you are at an office or shared network, you can ask the network administrator to run a scan across the network looking for misconfigured or infected devices. (a) Advantages. The best app for CBSE students now provides Organizing class 12 Notes Business Studies latest chapter wise notes for quick preparation of CBSE board exams and school based annual examinations. Conflict of interests: conflict of interest will be there within different departments if they do not have clear distinction of responsibilities. • Benefits & Disadvantages of a Functional Organizational Structure. Divisional structure is thus suitable for product specialisation. This structure is flexible because it initiates better and quicker decision making as there is no need to consult other departments for any decision to be taken. The first advantage of functional organization is that it makes the management of specialists easier. The functional structure is one type of organizational structure that helps companies manage employees and meet their business goals. The functional organizational structure groups employees according to broad business activities, resulting in departments such as finance, marketing and production. The employees are a bit satisfied with the functional structure because they can talk with the same language with their peers. In this article, we discuss the advantages and disadvantages of the functional structure, plus learn about other organizational structures in business. Thus, it improves specialisation in particular activity. Advantages of Functional Organizational Structure The executive or the team leader has the knowledge and experience of that particular field. If in future there is any new product which the company decides to add up in the product lines of the company then it will be easier as it will only have to add a separate department for the new product instead of hindering existing structure. Completing the CAPTCHA proves you are a human and gives you temporary access to the web property. Since the hierarchy is simple, employees know the one manager they are to answer to, instead of multiple people. For example: If Radha sets up her own business of electronic goods. Now that we have seen the advantages and disadvantages of the divisional structure, it is … Span of management is a simple tool which helps in determining the number of subordinates which a superior can manage effectively and efficiently. Arjun will look after the after sales services. It is a framework which helps in setting up clear distinction of heads and subordinated. • A functional structure emphasises on specific functions and ensures that different functions get due attention. Proper performance measurement: each department based on the divisions will have clear distinction between the revenue earned, cost incurred and profit earned by them. The functional organizational structure helps in achieving the benefits of specialization of work. Organizational structure is a framework within which the tasks are separated and the managerial and operating tasks are performed by clearly mentioning the flow of authority and responsibility. These activities are divided and can be further divided into sub categories. Firstly, it provides order and accountability to an organization. Every functional in charge is an expert in his area and … The following are some advantages of the functional organization structure: 1. The head will thus be prepared for higher positions. Divisional structure is different from functional structure altogether. Because a functional structure groups people performing similar tasks that require certain skills, more experienced or talented group members serve as examples and mentors to individuals with less experience. You may need to download version 2.0 now from the Chrome Web Store. The advantage of functional structure is that the different functional units of th… There are different kinds of structure adopted by different kinds of business organizations based on the kind of work, area and products they offer. Features of Secondary Market. The duplication of efforts will lead to wastage of efforts and wastage of time and money too. Better training: when there are people in a department performing similar kinds of activities then the training can be easily provided to them based on the work they do. The environment in which the business runs is ever changing and to react to this environment it is important to change accordingly. This benefit of smooth working comes from the proper line of authority and responsibility and clear distinctions made for the job roles of the employees. They may want different things and want to achieve different objectives and thus can hinder each other’s growth. Better control and coordination: as the departments are divided based on the functions and the similar kinds of tasks are performed thus it will give better control of the activities at a single place and thus help in coordinating the similar kinds of activities because people in a particular department will be aware of each other’s job roles and how to perform them. Introduction, Meaning, Importance, Features & Limitations of Planning, 3.2 Maslow’s need hierarchy theory of motivation. It will lead to poor communication and coordination across functional … Tho departments become specialised ill their own way only. Advantages and Disadvantages of the Functional Organization Structure. There may be conflict between the departments because some may perform better and others may not and this will lead to chaos. The team members work with other people in the field and it allows sharing of thoughts and … Organising Important Questions for CBSE Class 12 Business Studies Formal and Informal Organisation. There is easy accountability for each employee and thus employees get their reward through a fair and just practice. Reduced unity of efforts towards organizational goal: different departments will have their own goals and they will focus on achieving them and this may become hindrance for the organizational goal. To make the annual function of the school successful the principal of the school divided all the … Following are the important advantages of functional organizational structure: 1. The functional structure is an organizational structure that divides its operations into separate departments or units according to the role of each department. If you are on a personal connection, like at home, you can run an anti-virus scan on your device to make sure it is not infected with malware. Advantages of Functional Structure. Due to the similarity in the tasks being performed, it promotes control and coordination within a department. These will be considered divisions and these divisions will further have marketing department, production department, finance department etc. Advantages of Functional Organization. There may be duplication of activities which may raise the cost of the industry. Organizational structure is important because it helps in improving the profitability of the firm. (adsbygoogle = window.adsbygoogle || []).push({}); While this example is taken for a small scale business and there are lot many other activities which need to be performed in a business. (i) Functional Structure When the activities or jobs are grouped keeping in mind the functions or the job then it is called functional structure. Improves specialisation: when an organization is divided based on the functions then a department will perform single type of function and thus their efficiency and quality will increase because of the improved experience which they will get because of repetitive work. This increases the performance of the team. They are-. manufactured by it, is known as divisional organisation structure. When employees who have similar skills and experiences are grouped together, it makes production more efficient and of a higher quality. Performing the instructions of the authorities within its competence is mandatory for all the units. physical, human and financial resources. Attention will be given to mainly the activity they perform and thus leading to development of personnel. Functional structure; Divisional structure; Functional structure. Thus, it can be called multifunctional divisions. Advantages of the Functional Organization Structure. It ensures efficiency in operations. One of the advantages of a functional structure is the positive atmosphere it provides for skill development. Chapter 1 – Nature and Significance of Management. In the functional structure, such as shown in the following Facebook organizational chart, functions are separated into different groups, resulting in some defects.Here are the major disadvantages you must consider: Create Your Own Org Charts! For example the accounting activities of different operations are grouped in on accounting department. The reporting hierarchy is well defined and employees don’t have to report to multiple manag… Each employee has a fixed job definition. Your IP: 165.227.28.180 Of the following advantages, the first one is the most important; the functional structure can introduce a great deal of efficiency into the operations of a business. Advantages of functional structure are: It promotes control and coordination within a department. Advantages of Formal Organisation. This helps to prevent duplication of work. Introduction & Meaning & Importance of Business Environment, 1. Cloudflare Ray ID: 608615713bb76e2a As a single division does not produce enough to take great benefits out of the economies of scale. Unit Number 319, Vipul Trade Centre, Sohna Road, Gurgaon, Sector 49, Gurugram, Haryana 122018, India, Monday – Friday (9:00 a.m. – 6:00 p.m. PST) Saturday, Sunday (Closed), 7. It leads to minimal duplication of effort, which results in economies of sacle and this lowers cost. Inflexibility: as the people working in a department will be given training for that particular area and this will limit the learning of the heads of departments and other employees as they will not get trained in diverse areas. Functional structure has following advantages: Under functional structure, each major function of business is organised as a separate department. Meaning: To divide the whole enterprise according to the major products (such as metal products, plastic products, etc.) There may be more power in hands of the head of divisions because they may get knowledge of every function in their divisional department and they may consider themselves to be of high authority and ignore the responsibilities and ultimately ignore the organizational interest. ... functional organization has both advantages as well disadvantages and any company thinking of adopting this type of structure should carefully analyze both the aspects and then take the decision. Functional structure is suitable when the size of the organization is large with diverse activities to be performed and these activities need specialisation. A good organizational structure will improve the communication line between the people in an organization and helps in better control of the work. Here you can read Chapter 5 of Class 12 Business Studies NCERT Book. This streamlines communication and reduces confusion among employees. For example, the person heading the IT department will have the education and skill necessary to shoulder this … For example, a company could have a group working in information technology, another in marketing and another in finance.Each department has a manager or director who answers to an executive a level up in the hierarchy who may … They will get more attention. Team members report to only one supervisor. Span of management is an important factor which needs to be considered while choosing a structure for the organization. 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