What is a Functional Organizational Structure?




In one of my previous blog post what is Organizational Structure in Project Management? We discussed that every organization is organized in a way that supports in the success of portfolios, programs and projects. In this blog, we’ll have a look into Functional Organization Structure, functional organizational structure chart in project management.

Table of Contents

  1. Define Functional Organization Structure
  2. Advantages of the Functional Organization Structure
  3. Disadvantages of the Functional Organization Structure
  4. Who Is Best Suited for a Functional Organizational Structure?
  5. Conclusion



Every company needs an organizational structure; it basically defines the hierarchy of the company. In simple words, it defines who works for whom and who reports to whom.

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Without this structure, there would be chaos and inefficiency. Now one of the most common forms of formal organization is the functional organizational structure.

Define Functional Organization Structure

A functional organization structure is a hierarchical type of organization structure wherein people are grouped as per their area of specialization. These people are supervised by a functional manager who has expertise in the same field, which helps him to effectively utilize the skills of employees, which ultimately helps him in achieving the organization’s business objectives.



In this kind of organization structure, people are classified according to the function they perform in the organization. The organization chart for a functional organization structure shows different departments viz. finance department, sales department, customer service department, administration department, etc.


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Each department will have its own department head, and he will be responsible for the performance of his section. This helps the organization control the quality and uniformity of performance.

These different departments are sometimes referred to as “silos”. This means the system is vertical and disconnected. The communication flows through the department heads to the top management.



Here all authority (i.e. budget allocation, resource allocation, decision making, etc.) stays with the functional manager. Usually the position of the project manager does not exist in this type of organization structure. Even if this position exists, the role of the project manager will be very limited and he will need permission from the functional manager to fulfill his requirements. The project manager may have the title of a coordinator or an expediter.

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The functional organization structure is suitable for an organization which has ongoing operations and produces some standard products or goods, such as manufacturing and production industries.

Advantages of the Functional Organization Structure

There are many benefits of implementing Functional Organizational Structure. Let’s see it below:



  • Employees are grouped as per their knowledge and skills, which helps achieve the highest degree of performance.
  • Employees are very skilled and efficient because they are experienced in the same work and hence they perform very well.
  • Their role and responsibility is fixed, which facilitates easy accountability for the work.
  • The hierarchy is very clear, and employees don’t have to report to multiple bosses. Each employee reports to his functional manager, which reduces the communication channels.
  • There is no duplication of work because each department and each employee has a fixed job responsibility.
  • Employees feel secure, and therefore they perform well without any fear.
  • Since there is a sense of job security, employees tend to be loyal to the organization.
  • Employees have a clear career growth path.
  • Within the department, cooperation and communication is excellent.

Disadvantages of the Functional Organization Structure

The following are a few disadvantages of the functional organization structure:



  • Employees may feel bored due to the monotonous, repeated type of work and may become lazy.
  • If the performance appraisal system is not managed properly, conflicts may arise. For example, an employee may feel demoralized when a lower performing employee is promoted.
  • The departments have a self-centered mentality. The functional manager pays more attention to only his department; he usually doesn’t care about other departments.
  • Communication is not good among the departments, which causes poor inter-department coordination. This decreases flexibility and innovation. Moreover, there is a lack of teamwork among different departments.
  • Employees may have little concerns and knowledge about anything happening outside their departments. This causes obstacles in communication and cooperation.
  • The functional structure is rigid, and therefore is slow to adapt to changes.
  • Due to bureaucratic hierarchy, delays happen in decision making.
  • Generally the functional manager makes decisions autocratically without consulting the team members; hence it may not always work in favor of the organization.
  • When the organization becomes larger, functional areas can become difficult to manage due to their size. Each department will start behaving like a small company with its own facilities, culture and management style.
  • Functional departments may be distracted by their own goals, and focus on them rather than the organization’s goal.

Who Is Best Suited for a Functional Organizational Structure?



Larger companies are better suited to use the functional organizational structure, especially ones that produce just a few types of goods or services. Smaller companies may not need the structure or may find it too constraining. For projects in which the depth of knowledge is more important than the breadth of information, a functional organizational structure is appropriate. For instance, a fundamental research and development program is well-suited to a functional organizational structure since the project can capitalize on the expertise of the department.


In this blog post, we have understood Functional Organizational Structure,  functional organizational structure chart in image in project management ensuring all your doubts are cleared and questions are answered.





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About Satyendra Mishra

Microsoft certified, motivated, energetic and accomplished SharePoint Consultant and Architect with 13+ years of work experience in Management, Architecture, Analytics, Development and Maintenance. He has been fortunate to be a part of over 20+ Web/Mobile/Software SharePoint and .Net projects delivery with various companies across different industry sectors. This has provided him a valuable insight and experience especially in successful implementation of technology solutions. Having very strong System Architecture, Technological, Management & Analytical Skills, Knowledge of Office 365, SharePoint, .Net, JavaScript, React, Angular, Azure, SQL. In 2016, he decided to start sharing the knowledge back to society in the form for content writing and blogging.
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