What Is a Functional Organizational Structure?

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  • Written By: M. McGee
  • Edited By: Lauren Fritsky
  • Last Modified Date: 13 October 2019
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A functional organizational structure is a method of organizing a company based on the department a person or group belongs too. This is one of the big three organizational structures, the other two being simple and divisional structures. With a functional organizational structure, a business possesses vertical hierarchy and horizontal levels. One person is typically in charge, followed by the heads of the various departments. Under them are progressively lower layers of hierarchy. The departments are vertical under their department head, but horizontal with other divisions in the company.

Within a business, an organizational structure allows people to know exactly who is in charge of whom and what any given person’s responsibilities are. This clear delineation of tasks allows large groups of people to interact with one another without having to worry about positions and rank. There are three main methods of organizing businesses.

A simple organizational structure is common in small businesses without a lot of workers. A single person is at the top with a single person or small group under him or her. This second level is the managers for the organization and they are all roughly equal in power. Occasionally, there is a group of assistant managers that come next, but a simple structure will often go straight to the last level, common workers. Everybody else in the organization is in a single group and no one has any more or less power than any other.


Divisional organizational structures are broken up based on the projects the people are working on. Once again, a single person runs the business, followed by a level of project heads. These people organize and structure corporate projects. Under them are successively lower groups all working on the same project. At any given layer, there may be a group consisting of an engineer, a marketer and technical writer. There is no lateral correlation between different project groups.

The functional organizational structure breaks things up by department rather than task. Under the head of the group are people that oversee one area alone. For example, the Vice President of Marketing only worries about marketing concerns and all the levels below him only perform marketing. Unlike a divisional organization, a functional organizational structure does have lateral relationships. A department three steps down from the head of marketing is roughly the same level as one three steps down from the head of research and development.

The advantage of a functional organizational structure over the others basically comes from pooling talent in one place. For instance, with all the marketing people in one area, the department can brainstorm to come up with ideas the individuals may not have on its own. This also ends up being the chief disadvantage. Since only one group is in any department, its knowledge of the others is limited.


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