Functional structure

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Company structure 1

The chain of command

Traditionally, organizations have a hierarchical or pyramidal structure, with one person or a group of people at the top, and an increasing number of people below them at each level. This is sometimes called line structure. There is a clear chain of command running down the pyramid. All the people in the organization know what decisions they are able to make, who their line manager (or boss) is (to whom they report), and who their immediate subordinates are (over whom they have line authority, and can give instructions to).

Functional structure

Yet the activities of most organizations are too complicated to be organized in a single hierarchy. Most large manufacturing companies, for example, have a functional structure, including, specialized production, finance, marketing, sales, and human resources departments. This means, for instance, that the production and marketing departments cannot take financial decisions without consulting the finance department. Large organizations are often further divided into separate operating divisions.

A disadvantage of functional organization is that people are often more concerned with the success of their own department than that of the company as a whole, so there are permanent conflicts between departments over what the objectives are.

Text 2

Company structure 2

Functional structure

Yet the activities of most organizations are too complicated to be organized in a single hierarchy. Most large manufacturing companies, for example, have a functional structure, including, specialized production, finance, marketing, sales, and human resources departments. This means, for instance, that the production and marketing departments cannot take financial decisions without consulting the finance department. Large organizations are often further divided into separate operating divisions.

A disadvantage of functional organization is that people are often more concerned with the success of their own department than that of the company as a whole, so there are permanent conflicts between departments over what the objectives are.