What do you mean by 'Functional organization structure' ? Explain any four advantages and four disadvantages of functional organization structure.

Answer – A functional structure groups similar activities into departments such as production, marketing, finance and personnel. It suits enterprises with substantial size, specialised tasks and relatively limited product diversity.

Advantages

• Functional specialisation improves expertise and quality.
• Coordination and control within each department become easier.
• Reduced duplication creates operational economies and lower costs.
• Focused attention improves managerial and operating efficiency.
• Training is easier because the range of skills within a department is defined.

Limitations

• Departments may pursue their own goals at the expense of the enterprise.
• Interdepartmental coordination can be difficult because functions have different priorities.
• Responsibility for the final performance of a product is difficult to fix.
• Narrow functional experience can limit development of general managers.
• Strong departmental interests may cause conflict and make change difficult.