What is meant by ‘Functional Structure’ of an organisation? Explain any two advantages and two limitations of it.

Meaning of Functional Organisation: To divide the whole enterprise according to the major functions (such as production, marketing, finance, personnel, etc.) to be performed by it, is known as functional organisation structure.

Advantages of Functional Organisation: The following are the advantages of functional organisation structure:

(i) Benefits of Specialisation: The whole company is divided into many departments on the basis of major activities to be performed. Each department is headed by an expert manager. This results in more and better work being accomplished in much lesser time. Hence, the benefits of specialisation become available.

(ii) Coordination is Established: All the persons working within a department are specialists of their respective jobs. It makes the coordination easier at department level.

Limitations of Functional Organisation: The following are the limitations of functional organisation structure:

(i) Ignorance of Organisational Objectives: Each departmental head works according to his sweet will. They always give more weight to their departmental objectives. Hence, overall organisational objectives suffer. For example, to establish its image, the production department may produce quality product ignoring the fact that market trend is of accepting medium quality product.

(ii) Difficulty in Inter-departmental Coordination: All departmental heads may work as per their own wish. No doubt this facilitates coordination within the department but it makes inter-departmental coordination difficult.