Types of Organisation structures - Functional and Divisional Structures

Organisation structure is a framework within which managerial and operating tasks are performed. It can be categorised into functional structure, divisional structure, line organisation, line and staff organisation and committee organisation.
Functional structure refers to an organisational design that groups similar or related jobs together. Features of functional structure:
•    division of work into  specialised functions,
•    different specialists handle different functions,
•    functional expert has authority to command persons and there are two types of managers available, etc.
Benefits received from using functional structure are occupational specialisation, effective control and coordination, promotion of organisational growth, increase in managerial efficiency, etc. Various disadvantages of functional structure include lesser emphasis on overall enterprise objectives, problem in coordination among different departments, etc. Causes conflict of interests between enterprise’s departments and causes inflexibility among managers. Functional structure is suitable for business enterprises with large operational size, diversified activities and operations requiring high degree of specialisation.
Divisional structure refers to an organisational design in which whole enterprise is divided on the basis of major products manufactured by it. Benefits received from using divisional structure:
•    product specialisation,
•    wider span of management,
•    flexibility and initiative,
•    growth and expansion, etc.
Various disadvantages of divisional structure are conflicts among departments, increases costs, etc. Divisional structure is suitable for business enterprises are manufacturing a large variety of products and enterprises growing tremendously and in need of more employees and departments


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  • Q1

    Explain four disadvantages of functional organisational structure.


    Disadvantages of functional organisational structure:

    1. Ignorance of organisational objectives: Departments become specialised in their own way. They fail to see the prospects of whole organisation.
    2. Difficulty in inter departmental coordination: All the departmental heads work as per thier own choice and concentrates only on their department which makes interdepartmental coordination difficult.
    3. Conflict of interest: Every departmental head wants to become a functional empire. Each of them demands maximum resources for their department which results in conflict of interest.
    4. Obstacle in development: Employees become specialised only in one part of whole work so it is the hurdle in complete development.

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  • Q2

    In what kind of organisation is functional structure more suitable and why ?


    Functional structure is more suitable in stable environment where technical efficiency and quality are important.
    Functional structure ensures specialisation and division of work. Every enterprise has to perform a number of basic functions viz., production, marketing, personnel and finance. Each function requires different skill and knowledge. Functional structure fosters in depth skill, specialisation and development.

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  • Q3

    Distinguish between functional structure and divisional structure. (Any three)


    Distinction between functional structure and division structure :

    Basis of Distinction

    Functional Structure

    Divisional Structure


    Functional Structure recognises each major function as a separate department.

    Functional Structure recognises each product line as a separate department.


    Functional structure ensures occupational specialisation.

    Functional structure ensures product specialisation.


    It is economical in terms of cost.

    It is expensive in terms of cost.

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  • Q4

    A shoe company has the following main jobs:

    (a) Manufacturing (b) Finance (c) Marketing (d) Personnel (e) Research and development

    Which organisational structure will you prefer for this type of a company and why?


    This shoe manufacturing company should have functional organisational structure as this enterprise is divided according to the major functions to be performed like manufacturing, finance, marketing, etc.

    The company should prefer this type of organisational structure due to the following reasons:

    1. Benefits of specialisation: As the company is divided into many departments on the basis of major activities to be performed. This will result in better work in less time and hence specialisation can be achieved.
    2. Better coordination: As all the persons working within the department will be specialists of their respective jobs, it will make coordination easier at department level.
    3. Increases managerial efficiency: It will increase the managerial efficiency as the same work will be performed by all time and again.

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  • Q5

    In an electrical goods manufacturing company, there are four main activities, Marketing, Production, Finance and Personnel. The General Manager is planning to structure the organisation. Which type of organisation structure should he adopt and why ? Give two reasons.


    The General Manager of electric goods manufacturing company should adopt functional structure.

    Functional structure has following two advantage :

    1. Under functional structure, each major function of business is organised as a separate department. An expert can manage each department. It ensures efficiency in operations.
    2. Under functional structure, coordination within the department is easier since departmental managers being specialists understand the perfect nature of job involved.

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