Each is headed by a functional manager, and employees are grouped according to their roles. The PMBOK Guide defines functional organizational structure as “An organizational structure in which staff is grouped by areas of specialization, and the project manager has limited authority to assign work and apply resources.”Ī functional structure divides the organization into departments based on their functions. For now, let’s focus on the functional organizational structure. I have covered the matrix and projectized structures in other blog posts. In a matrix organizational structure, it varies. Likewise, employees report to a functional manager in a functional organizational structure. In a projectized organizational structure, team members report to the project manager. This culture includes the work environment, reporting system, hierarchy, etc.Įvery organizational structure has a different system. Your working style accommodates your organizational structure, defining your role and responsibilities and shaping the work culture. While an organization dealing with operations will stick with a functional structure. If the business mainly handles projects, it will choose a projectized structure. In course of time, such a manager may gain power and in a bid to assert his independence may ignore organizational interests.Companies that produce the same goods consistently and have routine operations use a functional organizational structure because its rigid structure provides predictable stability.Īn organization can adapt to any structure it requires. It provides managers with the authority to supervise all activities related to a particular division.It may lead to increase in costs since there may be a duplication of activities across product divisions with separate set of similar functions increases expenditure.Conflict may arise among different divisions with reference to allocation of funds and further a particular division may seek to maximize its profits at the cost of other divisions.It facilitates expansion and growth as new divisions can be added without interrupting the existing operations by merely adding another divisional head and staff for the new product line.It promotes flexibility and initiative because each division functions as an autonomous unit which leads to faster decision making.Divisional heads are accountable for profits, as revenues and costs related to different departments can be easily identified and assigned to them.Product specialization helps in development of various skills in divisional head and prepares him for higher positions.Organization grows and needs to add more employees.For enterprises producing large variety of products.Each unit has a divisional manager responsible for performance and who has authority over the unit. This comprises of separate business units or divisions. In this structure activities are grouped on the basis of products. Lead to inflexibility as people same skills and knowledge may develop narrow perspective.Conflict of interestsarises when the interests of two or more departments are not compatible.Lead to problems in coordination as information has to exchange across different departments.Places less emphasis on overall enterprise objectives than the objectives pursued by functional head.Ensures that different functions get due attention. Leads to minimal duplication of efforts and results in economies of scale & lower cost.Increase managerial and operational efficiency and results in increased profit.Leads to occupational specialization and promotes efficiency.Operations require a high degree of specialization.When the size of organization is large,.In functional structure jobs of similar nature are grouped and organized as separate departments on the basis of their functions.
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