Functional Structure

An company with a functional structure is divided based upon functional areas, such together IT, finance, or marketing.

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Learning Objectives

Explain the sensible structure within the bigger context of organizational structures in general

Key Takeaways

Key PointsA functional company is a common kind of organizational structure in which the company is separated into smaller groups based on devoted functional areas, such together IT, finance, or marketing.Functional departmentalization arguably permits for higher operational efficiency because employees with shared skills and expertise are grouped with each other by function.A disadvantage that this kind of structure is the the various functional groups may not communicate with one another, perhaps decreasing flexibility and also innovation. A current trend aimed at combating this disadvantage is the usage of teams that cross classic departmental lines.Key Termssilo: In business, a unit or department within which communication and also collaboration wake up vertically, with restricted cooperation external the unit.departmentalization: The organization of something into groups according come function, geographic location, etc.

Overview that the functional Structure

An organization deserve to be arranged according to a range of structures, i m sorry determine just how the company will operate and perform. In a useful structure, a usual configuration, an organization is split into smaller teams by locations of specialty (such as IT, finance, operations, and marketing). Some describe these functional areas as ” silos “—entities that are vertical and also disconnected from each other. Correspondingly, the company’s top management team frequently consists that several sensible heads (such together the cook financial officer and the chief operation officer). Communication generally occurs within each functional department and is sent throughout departments v the department heads.

Functional structure at FedEx: This business chart reflects a large functional structure at FedEx. Each different functions (e.g., HR, finance, marketing) is controlled from the height down via sensible heads (the CFO, the CIO, various VPs, etc.).

Advantages of a functional Structure

Functional departments arguably permit higher operational efficiency because employees through shared skills and knowledge are grouped with each other by features performed. Each group of professionals can thus operate independently with administration acting together the point of cross-communication in between functional areas. This arrangement permits for enhanced specialization.

Disadvantages of a functional Structure

A disadvantage of this structure is that the different functional groups may not communicate with one another, perhaps decreasing flexibility and innovation. Useful structures may also be prone to tunnel vision, with each duty perceiving the organization only from in ~ the structure of its very own operation. Current trends that aim come combat these disadvantages incorporate the use of groups that cross traditional departmental lines and also the promo of cross-functional communication.

Functional structures appear in a selection of organizations throughout many industries. They may be most effective within large corporations the produce relatively homogeneous goods. Smaller companies that require an ext adaptability and also creativity may feel limit by the communicative and an imaginative silos sensible structures have tendency to produce.

Divisional Structure

Divisional structures group various organizational functions into product or regional divisions.

Learning Objectives

Describe the simple premise behind divisional structures within the general framework of business structure

Key Takeaways

Key PointsThe divisional framework is a kind of organizational structure that groups each organizational function into a division. These divisions can correspond to either products or geographies.Each department contains all the important resources and functions within it to support that product heat or geography (for example, its very own finance, IT, and marketing departments).A multidivisional type (or “M-form”) is a legal structure in i m sorry one parent agency owns subsidiary companies, every of which offers the parental company’s brand and name.The divisional framework is useful since failure that one department doesn’t directly threaten the various other divisions. In the multidivisional structure, the subsidiaries advantage from the use of the brand and capital the the parental company.Disadvantages of divisional framework can incorporate operational inefficiencies indigenous separating dedicated function. Because that the multidivisional structure, defect can encompass increased accountancy and taxes.Key Termsparent company: An entity that own or controls an additional entity.division: A section of a large company.subsidiary: A firm owned by a parent company or holding company.

Divisional structure Overview

Organizations have the right to be structured in assorted ways, with each structure determining the manner in which the organization operates and performs. A divisional organization teams each organizational role into a division.


Divisional Strategies

Each department within this structure have the right to correspond to either assets or geographies the the organization. Each department contains every the necessary resources and also functions in ~ it to assistance that details product heat or geography (for example, its very own finance, IT, and also marketing departments). Product and also geographic divisional structures may be characterized as follows:

Product departmentalization : A divisional structure arranged by product departmentalization means that the various activities related to the product or company are under the government of one manager. If the division builds luxury sedans or SUVs, because that example, the SUV division will have actually its own sales, engineering, and also marketing departments unique from those departments in ~ the deluxe sedan division.Geographic departmentalization: geographical departmentalization involves grouping activities based top top geography, such as an Asia/Pacific or Latin American division. Geographic departmentalization is particularly important if tastes and brand responses differ throughout regions, as it enables for adaptability in product offerings and also marketing methods (an strategy known as localization).

A typical legal structure known as the multidivisional type (or “M-form”) additionally uses the divisional structure. In this form, one parent agency owns subsidiary companies, each of which offers its brand and also name. The whole organization is ultimately controlled by central management; however, many decisions space left to autonomous divisions. This service structure is frequently found in suppliers that run worldwide—for example, Virgin group is the parent company of Virgin Mobile and Virgin Records.

Advantages that a Divisional Structure

As through all business structure types, the divisional structure uses distinct advantages and disadvantages. Generally speaking, divisions work finest for service providers with large variance in product offerings or regions of geographic operation. The divisional structure deserve to be useful since it affords the firm greater to work flexibility. In addition, the failure of one department does not directly threaten the other divisions. In the multidivisional structure, subsidiaries advantage from the usage of the brand and also capital the the parental company.

Disadvantages of a Divisional Structure

Some flaw of this structure include operational inefficiencies from separating committed functions—for example, finance personnel in one division do not connect with those in an additional division. Disadvantages of the multidivisional framework can encompass increased audit and tax implications.

Matrix Structure

The matrix framework is a form of business structure in which individuals are grouped via 2 operational frames.

Learning Objectives

Illustrate the method two various operational perspectives can be crossed in a matrix framework to theorem a company

Key Takeaways

Key PointsThe matrix framework is a kind of business structure in which people are grouped at the same time by two different operational perspectives.Matrix structures room inherently complex and versatile, do them much more appropriate for large companies operating across different industries or geographic regions.Proponents imply that matrix management is much more dynamic than functional management in the it enables team members come share information much more readily across task boundaries; that also allows for specialization that can increase depth of knowledge.A disadvantage the the matrix structure is the increased complexity in the chain of command, which can lead to a higher manager-to-worker ratio and also contribute to conflicting loyalties among employees.Key Termsmatrix: A two-dimensional array.

Overview of the matrix Structure

Organizations deserve to be structured in assorted ways, and the structure of an company determines how it operates and also performs. The matrix structure is a kind of business structure in which people are grouped by two different operational perspectives simultaneously; this structure has both advantages and disadvantages however is generally best employed by companies big enough to justification the raised complexity.


In matrix management, the company is grouped by any type of two perspectives the agency deems most appropriate. Common organizational perspectives include duty and product, duty and region, or an ar and product. In an organization grouped by role and product, because that example, each product line will have actually management that coincides to each function. If the organization has three functions and three products, the matrix framework will have actually nine (3 imes 3) potential managerial interactions. This instance illustrates just how inherently facility matrix structures room in comparison come other, more linear structures.

Advantages the a matrix Structure

Proponents of procession management imply that this structure permits team members to share information more readily throughout task boundaries, against the “silo” critique of useful management. Matrix structures also enable for expertise that can both increase depth the knowledge and assign people according to task needs.

Disadvantages that a procession Structure

A disadvantage of the matrix structure is the increased intricacy in the chain that command once employees are assigned come both functional and also project managers. This rise in intricacy can an outcome in a greater manager-to-worker ratio, which deserve to in turn increase costs or bring about conflicting employee loyalties. It can likewise create a gridlock in decision do if a manager top top one end of the matrix disagrees with an additional manager. Blurred government in a matrix framework can result in diminished agility in decision making and also conflict resolution.

Matrix frameworks should typically only be offered when the operational complexity of the organization demands it. A company that operates in assorted regions with various commodities may require interaction in between product development teams and also geographic marketing specialists—suggesting a matrix may be applicable. Normally speaking, larger companies with a require for a good deal the cross-departmental communication advantage most from this model.

Team-Based Structure

The team framework is a newer, less hierarchical organizational structure in which people are grouped into teams.

Learning Objectives

Classify team-based frameworks within the bigger context of the most usual organizational structures

Key Takeaways

Key PointsThe team structure in large organizations is a newer kind of organizational structure. A team need to be a group of workers, through complementary skills and synergistic efforts, every working towards a usual goal.An organization may have several teams that can adjust over time. Teams that incorporate members from different functions are well-known as cross- useful teams.Although groups are defined as less hierarchical, they typically still encompass a management structure (or monitoring team).Critics argue the the use of the word “team” to describe modern-day organizational structures is a fad—that some teams space not really groups at all however merely teams of staff.One facet of team-based structures likely to persist unlimited is the integration of team cultures within an broader structure (such together a useful structure with interspersed teams).Key Termssynergistic: Cooperative, working together, interacting, support stimulating.hierarchical: classified or i ordered it according to assorted criteria into successive ranking or grades.

Overview that the Team-Based Structure

Organizations can be structured in miscellaneous ways, and also the structure of an company determines exactly how it operates and also performs. The team framework in large organizations is thought about a newer kind of organization that is much less hierarchical, much less structured, and more fluid than classic structures (such as practical or divisional). A team is a team of employees—ideally v complementary an abilities and synergistic efforts—working towards a typical goal. Groups are created by group employees in a way that generates a selection of expertise and addresses a particular operational component of one organization. These groups can adjust and adapt to fulfill group and organizational objectives.

Some teams endure end time, when others—such as task teams—are disbanded in ~ the project’s end. Groups that encompass members from different functions are recognized as cross-functional teams. Although groups are explained as much less hierarchical, they frequently still encompass a monitoring structure.

Critics argue that the usage of words “team” to describe modern-day organizational frameworks is a fad; follow to them, part teams are not really groups at all however rather groups of staff. The said, team-building is now a frequent practice of numerous organizations and also can include activities such together bonding exercises and also even overnight retreats come foster team cohesion. Come the extent that these exercises are coherent to employees, they can be effective in improving employee an inspiration and company productivity.

Integration with various other Structures

One element of team-based frameworks that will likely persist indefinitely is the integration that team cultures within an more comprehensive structure (e.g., a practical structure with groups interspersed). Together integration permits for the authority and organization the a more concrete framework while in ~ the exact same time catching the cross-functional and also projected-oriented benefits of teams.

For example, imagine Proctor and Gamble brings with each other a group of employee from finance, marketing, and research and development—all representing various geographic regions. This newly developed team is tasked through the project of developing a to wash detergent that is convenient, economic, and aligned v the company’s manufacturing capabilities. The job team might be allocated a certain variety of hours a month to dedicate to team objectives; however, members of the team space still meant to work within their respective useful departments.

Network Structure

In the network structure, supervisors coordinate and also control relationships through the certain that room both internal and external.

Key Takeaways

Key PointsThe network structure is a newer kind of organizational structure viewed as less hierarchical (i.e., an ext “flat”), much more decentralized, and an ext flexible than various other structures.In a network structure, managers coordinate and control relationship that room both internal and external to the firm.The principle underlying the network framework is the social network—a social framework of interactions. Open up communication and reliable partners (both internally and also externally) are an essential components of society networks.Proponents argue the the network structure is much more agile than other structures. Since it is decentralized, a network organization has actually fewer tiers, a wider span of control, and also a bottom-up circulation of decision making and ideas.A disadvantage of the network structure is the this an ext fluid structure deserve to lead come more facility relations in the organization.Key Termsnetwork: any kind of interconnected team or system.decentralized: Diffuse; having actually no facility or several centers.agile: Apt or prepared to move; nimble; active.

Overview of the Network Structure

An organization can be structured in various ways that determine just how it operates and performs. The network structure is a newer type of organizational structure regularly viewed as less hierarchical (i.e., an ext flat), more decentralized, and much more flexible than various other structures. In this structure, managers coordinate and also control relations that space both internal and also external to the firm.

The concept underlying the network framework is the society network—a social framework of interactions. At the organizational level, society networks can include intra-organizational or inter-organizational ties representing one of two people formal or informal relationships. At the industry level, facility networks have the right to include technical and creation networks the may span several geographical areas and organizations. Indigenous a monitoring perspective, the network structure is unique amongst other business structures that focus on the interior dynamics within the firm.

A network company sounds complex, however it is at its main point a an easy concept. Take, because that example, a T-shirt style company. Due to the fact that the company leaders are largely interested in design, they may not want to get too heavily associated in either production or retail; however, both aspects of the organization are crucial to complete their operations. To maintain manage of their product, they may rent retail room through their network and purchase manufacturing capabilities from a range of partner institutions that have their own production facilities. If the core firm focuses greatly on creating products and also tracking finances, this network that partnerships enables it to it is in much more than simply a architecture operation.

Like other organizational structures, the network structure has actually its benefits and that is disadvantages.

Advantages the a Network Structure

Proponents argue that the network framework is much more agile compared to other structures (such as practical areas, divisions, or even some teams). Interaction is much less siloed and flows freely, possibly opening up more opportunities because that innovation. Because the network structure is decentralized, it has actually fewer tiers in its business makeup, a broader span the control, and a bottom-up flow of decision making and ideas.

Disadvantages of a Network Structure

On the other hand, this more fluid structure have the right to lead to a more complicated set of relationships in the organization. For example, currently of accountability might be much less clear, and also reliance on exterior vendors have the right to be fairly high. These perhaps unpredictable variables essentially reduce the main point company’s regulate over its work success.

Modular Structure

In the modular structure, one organization focuses on developing dedicated and relatively autonomous strategic organization units.

Learning Objectives

Define the nature and value that a modular structure in an business framework

Key Takeaways

Key PointsThe modular structure divides the service into small, strictly knit strategic company units ( SBUs ),which emphasis on details elements the the organizational process.Interdependencies between modules has tendency to be weak; however, flexibility is very high.An benefit of the modular structure is the loosely combination structures permit organizations come be much more flexible and also restructure more easily. Because that example, a firm can switch between different providers and also thus respond an ext quickly to different market needs.Increased internalization and more tightly coupled structures deserve to produce better communication and also intellectual residential property gains. Together a result, some argue that the modularity that a firm should be limited to the extent the versatility it affords outcomes in gains.Various levels of modularity room possible; however, a organization must be continuous in the degree of modularity that employs.Key Termsdisaggregation: A division or breaking up right into constituent parts, an especially categories which have actually been lumped together.modular: consisting of separate units, particularly where each unit performs a specified role and might be replaced by a similar unit for the same function, separately of other units.

Overview the the Modular Structure

Organizations have the right to be structured in various methods that determine exactly how the organization operates and performs. The modular structure concentrates on splitting the organization into small, strictly knit strategic service units (SBUs), which emphasis on particular elements the the business process. Interdependence amongst the systems is limited because the emphasis of plenty of SBUs is much more inward 보다 outward and also because loyalty within SBUs often tends to be an extremely strong.

The hatchet modularity is widely offered in researches of technical and business systems. Product equipment are reputed modular once they have the right to be damaged down into a number of components that have the right to then be mixed and matched to connect, interact, or exchange resources. Modularization within organizations leads come the disaggregation that the traditional type of hierarchical governance into fairly small, autonomous organizational units (modules). Although modules space not usually interdependent, the modular company is exceptionally flexible.

For example, a firm that employs contract production rather 보다 in-house production is making use of an organizational component the is much more independent. The firm have the right to switch between different contract manufacturers the perform different functions; the contract manufacturer can an in similar way work for different firms. Another (more within focused) modular model requires the existence of various consumer services i m sorry cater come dramatically different needs or demographics. In ~ GNU Health, for example, the surgical procedure unit may communicate with different departments at various times for different reasons.

Advantages that a Modular Structure

One advantage of the modular framework is that loosely coupled structures can allow organizations to be an ext flexible and also restructure much more easily. Because that example, a firm deserve to switch between different providers and thus respond an ext quickly to different market needs. An company can additionally fill its own corporate needs internally by producing a brand-new modular department, which can operate interdependently through the whole.

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Disadvantages the a Modular Structure

On the other hand, an ext internalization and an ext tightly combination structures can produce far better communication and also intellectual home gains. Together a result, critics of the modular company argue the a firm’s modularity need to be limited to the degree that its functional nature affords gains. Various degrees of modularity are possible but no necessarily valuable if the pros execute not outweigh the cons. Supervisors must closely consider whether or no a modular structure would it is in useful, either totally or partially, because that a offered organization.