The Functional Organisation

Principle & Practice of Management

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The Functional Organisation

In the functional organisation, all activities in the enterprise are grouped together according to certain functions like production, marketing, finance and personnel and are put under the charge of different persons. The person-in-charge of a function follows it throughout the organisation and also controls the individuals working in that functional area. This means that if a person performs several functions, he will be under the direct charge of several persons-in-charge of these functions. The functional in charge is an expert in his own field. It is rare to find a pure functional organisation. However, many business enterprises follow a functional plan to some extent to carry out the primary functions.
A functional organisation may be at different levels. At the top level, it leads to a formation of departments each for a common major activity like purchases, sales, production, finance, etc. Each department looks after its function common to all departments.
For example, the question of selection, training, promotion, etc. in a purchase, sales and other departments will be decided by the personnel department. Taylor recommended functional organisation even at the shop level (lowest level). He expressed the view that a foreman should also be assisted by a number of specialists.
The above discussion brings out the following characteristics of functional organisation:
1. The work is divided into specialised functions.
2. The superior specialist commands an authority and therefore gives orders relating to his specific functions throughout the line.
3. The specialist must be consulted before any decision is taken on matters relating to his specialised area.
4. The responsibilities of functional authority are mainly discharged by other executives.
5. It is flat topped organisation in comparison to the line organisation. A specialist can supervise a large number of employees while in the line organisation, a specialist supervises a limited number of subordinates.

functional Organisation


The merits of the functional organisation are as follows:
1. Specialisation: It ensures a greater division of labour and enables the concern to take advantage for specialisation of functions.
2. More efficiency: Efficiency of workers is increased as the workers and other have to perform a limited number of operations and they get suggestions and instructions from specialists.
3. Separation of mental and physical functions: It ensures the separation of mental and physical functions. This ensures better control of the working of the different sections.
4. Economy: Standardisation and specialisation in various fields facilitate production on a large scale resulting in the economy in production.
5. Expansion: It offers a greater scope for expansion as compared to the line organisation. It does not face the problem of limited capabilities of a few line managers. The expert knowledge of the functional managers facilitates better control and supervision in the organisation.


The demerits of the functional organisation are as follows:
1. Confusion: The operation of the functional organisation is too complicated. Workers are supervised by a number of bosses. This results in overlapping of authority and thus creates confusion in the organisation.
2. Lack of co-ordination: Under this, the work is divided into parts and sub-parts. It poses difficulties in coordinating the functioning of different parts. Thus, it is difficult to take quick decisions.
3. Difficulty in fixing responsibility: Because of multiple authority, responsibility for poor performance cannot be fixed easily on a particular person.
4. Conflict: Supervisory staff of equal rank may not always agree on certain issues. Therefore, there may be frequent conflicts which may lead to non-performance.
This type of organisation is suitable for all kinds of enterprises irrespective of their nature or size. But it can be practised more successfully at the higher levels of the organisation than at the lower levels.