The organizational structure of a company is its organization with separate divisions and their interrelations, which are determined by the goals set for the company and its divisions and the distribution of functions among them.
The organizational structure provides for the distribution of functions and decision-making authority between the company's senior executives who are responsible for the work of the structural units that make up the organization of the company.
The problem of improving the organizational structure of management involves:
the specification of the functions of the departments;
the definition of the rights and duties of the manager and employee;
the elimination of multistage, duplication of functions and information flows.
The main objective here is to improve the management efficiency. The organizational structure is aimed primarily at establishing clear interrelations between individual departments of the company. The distribution of the rights and responsibilities among them is also of great importance. It implements various requirements for the improvement of management systems, which are expressed in certain principles.
The basis for the emergence and functioning of a particular type of organizational management structure in an enterprise, as well as the key to increasing productivity, is the horizontal division of labor, in which the entire amount of work is broken up into components.
What is a Functional Organization Structure?
The functional structure of management is a structure formed by the main activities of the organization, where the units are combined into blocks. For most medium and large businesses and organizations, the main approach to the formation of units is the functional one. The functions, in this case, are the main activities, for example, production, finance, sales, etc. The blocks of units are formed by the functions – production, managerial, social units.
These are the broad areas of activity, or functions that are available at each enterprise to ensure the achievement of its objectives. If the size of the entire organization or its department is large, then the main functional departments can, in turn, be divided into smaller functional units. The main idea here is to make the maximum use of the advantages of specialization and not to overload the leading. It should be made with certain care to avoid such a department setting its own goals above the overall objectives of the entire enterprise.
The crux of the matter is that the performance of individual functions on specific issues is entrusted to the specialists. Every authority (or executor) is specialized in performing the certain types of management activities.
In the organization, as a rule, specialists of the same area of expertise are united in specialized structural units (departments). Thus, the overall task of managing an organization is divided, starting with the average level, according to a functional criterion. Hence the name - the functional organization structure. Instead of universal managers who must understand and perform all management functions, here appears a staff of specialists with high competence in their field who are responsible for a certain direction (for example, planning and forecasting).
The functional structure implements the principle of separation and consolidation of management functions between structural divisions. Functional organization structure provides the subordination of each linear subdivision of the lower level to several top-level managers who implement the management functions. It creates an apparatus of specialists who are responsible only for a certain section of work.
The full-stewardship principle lies at the heart of the functional organization structure. Performing the instructions of the authorities within its competence is mandatory for all the units.
Advantages and Disadvantages of the Functional Organization Structure
The Functional Organization Structure can be successfully applied in many areas. The benefits of the functional organization structure made it spread widely in the contemporary management. Here are some examples of the most typical fields where the functional structure is used:
- Narrow-specific enterprises
- Scientific-research organizations
- Niche businesses
- Design-and-engineering organizations
- Large specialized enterprises
- Single-product enterprises
Obviously, this type of structure has a lot of benefits, as well as some disadvantages.
Strength and Weakness of the Functional Organization Structure?
As you could probably guess, the key point that makes Functional Organization Structure work successfully is its strong specialization. It stimulates business and professional specialization, reduces duplication of efforts and consumption of material resources in functional areas. The specialization also improves coordination of activities.
It has a lot of advantages!
- high competence of specialists who are responsible for the implementation of specific functions;
- reduction of the risk of wrong decisions;
- use of consultations of experienced specialists to improve the work;
- the decrease in demand of generalists;
- high coordination capabilities;
- the release of line managers from the solution of many special issues and the expansion of their capabilities for the operational management of production;
- the simplicity of formation and implementation of single innovation policy;
- the high professional credibility of the specialists;
- elimination of duplication in the performance of management functions.
Weakness: Management Issues
Having numerous advantages, the specialization of functional departments is often an obstacle to the successful operation of the enterprise, since it makes it difficult to coordinate managerial influences.
So let’s have a look at the disadvantages it may have:
- the complexity of monitoring the progress of the process as a whole and on individual projects;
- difficulties in maintaining a permanent relationship between various functional services;
- relatively rigid organizational form, barely reacting to changes;
- long decision-making procedure;
- reduction of personal responsibility for the final result;
- lack of mutual understanding and unity of action between functional services;
- excessive interest in the implementation of the goals and objectives of certain units