In an organizational structure, the term functional structure refers to a type of organization that is based on job functions. This structure can be used for large and complex organizations that need to focus on specific aspects of the business. A functional organizational structure is also referred to as a divisional or departmental organizational structure. In this type of structure, employees are grouped into smaller groups based on their specialized functions or areas of expertise.
The advantages of a functional organizational structure include:
Clear lines of authority: In this type of organization, each department has its own manager who reports to someone higher up in the chain of command. Each manager knows what his or her employees are supposed to be doing and keeps them on track by holding them accountable for their performance.
Specialization: Employees may have specific skills or knowledge that allows them to contribute more effectively to their particular department’s work than they could if they were working across multiple functions at once. For example, an accounting department may need someone with knowledge of accounting software while an engineering department may need someone with experience in structural engineering software.
In addition, having function-specific teams also allows companies to save money by using fewer resources than if they had one team working across multiple functions (for example, one production line).