It’s not every day that we visit banks these days, which is why when we do, it becomes difficult to figure out which counter to go to. Banks usually have several independent departments responsible for different functions.  

This kind of distribution of responsibilities is seen in a functional organization. Read on to see what it entails and how it impacts businesses.

What Is A Functional Organizational Structure?

Did you know that there is a strong correlation between your working style and the organizational structure? An effective organizational structure helps define your roles and responsibilities, providing you with a framework of activities and goals. Without a structure in place, there will be ambiguity and inefficiency. 

There are five types of organizational structures and a functional management structure is one of the most popular ones.

As the name suggests, a functional organization is one that divides an organization into different departments, based on their functions. In other words, a functional organizational structure refers to a system of grouping employees by skill sets, related roles and expertise. It structures each department vertically, creating a hierarchical system. As every department focuses on a particular function, people often end up working in silos.

Here are some of the features of a functional organizational structure:

  • Organizational activities are split up into various functions like finance, human resources and marketing

  • Each functional area is led by someone in authority (like a manager or a leader) who is the decision-maker

  • There is no unity of command, which means employees of all departments aren’t responsible to one person-in-charge

How Does A Functional Organization Look Like?

A functional organization chart is a visual representation that shows how various teams and their respective functions are divided. It uses a top-down approach where executives and senior management personnel are placed on the top, followed by middle and junior management. You’ll find this traditional business structure in the majority of organizations. The hierarchy is helpful in maintaining the quality and uniformity of performance across all levels of management, minimizing confusion and enhancing productivity.

Here’s how a basic functional organization chart looks like.

Is A Functional Organizational Structure Needed?

Now that you know how a functional organization looks like, you’re probably wondering if it is relevant in today’s fast-paced world. A functional structure is ideal for an organization where the depth of knowledge is more crucial than the breadth of information (for example, large businesses). Let’s explore the two sides of a functional organizational structure and assess the extent to which it can benefit a business.

  1. The Sunny Side

  • As everyone is grouped according to their knowledge and skills, every department is accountable for its responsibilities.

  • Everybody is well aware of their roles—minimizing confusion and allowing them to work efficiently, leading to increased productivity.

  • The clear and well-established hierarchy reduces the need for additional communication channels.

  • By working in a particular department, every individual gets an opportunity to improve their depth of knowledge and skills; this lays down a clear career path.

  • Proper boundaries facilitate the smooth functioning of business operations, reducing any duplication of activities.

  1. The Dark Side

  • Employees are likely to feel bored and unproductive because of the lack of variety of responsibilities; it may lead to quicker burnout.

  • There is limited scope for cross-functional teamwork as managers often focus on their own departments; it creates a self-centered mentality.

  • It weakens communication among departments, leading to inflexibility and poor coordination.

  • Departments are likely to focus more on their team goals, rather than the organization’s goals.

  • A hierarchical structure gives managers and decision-makers ample power; functional managers can make decisions without consulting their teams.


If you’re wondering how to make the best use of a functional organizational structure, gain a deeper understanding of your workplace. Harappa Education’s Navigating Workplaces course will help you deep-dive into your organization’s culture. The Power Structures framework, in particular, will teach you about the different kinds of powers that people hold in your organization. Identify the influencers and decision-makers and get skilled at effective collaboration today!  

Explore topics such as Delegation of AuthorityPrinciples of DelegationProcess of Delegation & Types of Delegation from Harappa Diaries and streamline your tasks at work for increased productivity.

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