Functional Structure - Advantages and Disadvantages
Human ResourcesOrganisational Structures

Functional Structure – Advantages and Disadvantages

What is a functional organizational structure?

A typical type of business structure is a functional organizational structure, which divides a company into various divisions according to areas of expertise and groups employees according to specialization, skill, or related roles. It is built on levels of hierarchy with various divisions operating under the control of designated leaders. Functional structures are used frequently in business because they enable teams of people with complementary skills to work together toward shared objectives.

What is a functional organizational structure?

Larger businesses with multiple employees in similar roles usually benefit from the functional organizational structure the most. Business owners have more time to concentrate on their long-term goals when departments have employees organized by their skills and related role in the company. Departmental chiefs can then manage the goals of their teams while freeing up time for themselves. Smaller businesses might not have enough personnel with complementary abilities to warrant separating them into separate departments.

Related: Organizational Structures: Everything you need to know

Example of a functional framework

Here is an illustration of a business with a useful organizing structure:

ABC Company produces baggage and employs almost 500 people. It has implemented a useful organizational system and established several departments, such as:

  • Finance
  • Marketing 
  • Operations management
  • Human resources
  • Information technology
  • Engineering
  • Merchandising
  • Product development
  • Retail

Each department’s staff member reports to their team manager, who in turn reports to their department manager, who in turn reports to the company’s chief executive officer (CEO). As an illustration, the product development design manager who oversees the creation of new baggage designs reports to the product development head manager, who in turn reports to the CEO.

Functional organizational structure

Advantages of a functional structure

A functional structure has several benefits, which are covered in more depth below.

Resource Efficiency: 

One of the main benefits of a functional framework is that it enables resource efficiency. Organizations can make sure that the right people are working on the right duties by organizing their workforce based on each employee’s unique set of skills and expertise. As a result, workers are better able to concentrate on the tasks for which they are most qualified, which can improve productivity.

Clear Career Paths: 

Another benefit of a functional structure is that it gives workers access to clear career paths. Employees in a functional structure can advance from entry-level jobs to more senior roles within their department or function. This can give workers a feeling of direction and purpose, which can be inspiring and aid in talent retention.

Improved Communication: 

Internal communication within a company can be enhanced by a functional framework. Employees are organized according to function, which increases the likelihood that they will have similar aims and objectives. This can improve communication. Functional managers also have a better grasp of the work being done within their departments, which makes it easier for them to communicate with their teams.

Improved Communication


Greater specialization is possible within a company with a functional structure. Employees can gain a thorough grasp of their field of work because they are grouped according to their unique skills and expertise. As a result of being able to use their knowledge to handle challenging problems, employees may produce work of a higher caliber and innovate more.

Cost Savings:

 Lastly, a functional structure can help a company save money. Organizations can streamline their processes and lessen duplication of effort by organizing employees by function. Lower expenses and increased efficiency may follow, which may boost the bottom line.

Related: Functional Organizational structure: Full guide

Disadvantages of a functional structure

While a functional organizational structure has many benefits, it also has some drawbacks that businesses should take into account before implementing it. One or more of a functional structure’s possible drawbacks include the following:


Employees who are too absorbed in their field of knowledge to see the big picture can form a functional structure. Lack of cross-functional collaboration as a consequence may hinder innovation and slow decision-making.

Contact Issues:

A functional structure can enhance departmental contact, but it can also cause communication issues between departments. Delays and bottlenecks may result from slower and less effective departmental communication and collaboration.

Lack of flexibility: 

Compared to other organizational designs, a functional structure may be less flexible. Employees may be less able to adapt to changes in the market or shifts in organizational objectives because they are organized by function. Because of this, it may be challenging for organizations to act swiftly in response to brand-new problems or opportunities.

Limited Opportunity for Career Development:

A functional structure can offer distinct career pathways within departments, but it might not present as many chances for career advancement across departments. By limiting their exposure to new knowledge and experiences, employees may find it more challenging to advance in their jobs.

Potential for Conflict: 

A functional structure can make it possible for divisions to clash. Departmental tensions and disagreements may result from competing objectives or aims. In extreme situations, this can lead to a breakdown in organizational cohesion and a lack of cooperation between divisions.

Related: Matrix organizational Structure


In conclusion, while having a functional structure has many benefits, there are also some possible drawbacks that businesses should be aware of. Organizations can use tactics like cross-functional training, frequent departmental communication, and a strong organizational culture that values cooperation and teamwork to lessen these drawbacks. Organizations can do this to optimize the advantages of a functional structure while minimizing its disadvantages.

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