Boundless: Management: Chapter 2, Section 3, Part 1: Functional Structure”

Read this section. This reading provides an overview of the functional structure common in many organizations. Operations is a function within the organization. It is important to understand the other functional units and how operations fit within the overall structure.

Functional Structure

An organization with a functional structure is divided based on functional areas, such as IT, finance, or marketing.

LEARNING OBJECTIVE

Explain the functional structure within the larger context of organizational structures in general

KEY POINTS

A functional organization is a common type of organizational structure in which the organization is divided into smaller groups based on specialized functional areas, such as IT, finance, or marketing.
Functional departmentalization arguably allows for greater operational efficiency because employees with shared skills and knowledge are grouped together by function.
A disadvantage of this type of structure is that the different functional groups may not communicate with one another, potentially decreasing flexibility and innovation. A recent trend aimed at combating this disadvantage is the use of teams that cross traditional departmental lines.

TERMS

departmentalization: The organization of something into groups according to function, geographic location, etc.
silo: In business, a unit or department within which communication and collaboration occurs vertically, with limited cooperation outside the unit.

FULL TEXT

Overview of the Functional Structure

An organization can be arranged according to a variety of structures, which determine how the organization will operate and perform. In a functional structure, a common configuration, an organization is divided into smaller groups by areas of specialty (such as IT, finance, operations, and marketing). Some refer to these functional areas as “silos”—entities that are vertical and disconnected from each other. Correspondingly, the company’s top management team typically consists of several functional heads (such as the chief financial officer and the chief operating officer). Communication generally occurs within each functional department and is transmitted across departments through the department heads.

Advantages of a Functional Structure

Functional departments arguably permit greater operational efficiency because employees with shared skills and knowledge are grouped together by functions performed. Each group of specialists can therefore operate independently with management acting as the point of cross-communication between functional areas. This arrangement allows for increased specialization.

Disadvantages of a Functional Structure

A disadvantage of this structure is that the different functional groups may not communicate with one another, potentially decreasing flexibility and innovation. Functional structures may also be susceptible to tunnel vision, with each function perceiving the organization only from within the frame of its own operation. Recent trends that aim to combat these disadvantages include the use of teams that cross traditional departmental lines and the promotion of cross-functional communication.

Functional structures appear in a variety of organizations across many industries. They may be most effective within large corporations that produce relatively homogeneous goods. Smaller companies that require more adaptability and creativity may feel confined by the communicative and creative silos functional structures tend to produce.

Unit 1: Operations Management Overview

1.3: The Systems View of Operations Management