What Is the Relationship Between Organizational Functions & Organizational Structure?
Your business's functions are the things it does – production, sales, marketing, research and
billing, for example. The organizational structure defines the relationship and interactions
between the parts of your business, and identifies how the chain of command runs through the
different levels.
The relationship between organizational functions and structure is like a flow chart. You can set
up your business structure around your organizational functions, but even if you don't, function
and structure will influence each other.
Functional Structure Separates Departments
Most businesses adopt a functional organizational structure with a chain of command. In other
words, different functions go into separate departments that report to department managers, who
then report to someone higher up. If you adopt a functional structure, it has the advantage of
clear lines of authority, with key decision-makers in each department who set the overall mission
and tasks.
The structure allows each employee to concentrate on her particular mission. A functional
structure for an organization is not without its drawbacks, however. You can end up with
departments that don't talk to each other or cooperate well. A customer may get bounced from
department to department if his problem doesn't relate to one particular function.
Divisional Structure Has Many Branches
A divisional organizational structure spreads functions across different branches: If you have
different product lines, the division for each product line has its own functional groups such as
marketing, R&D, sales and accounting. The advantage of this approach is that each division of
the company has the personnel to carry out all necessary functions. In essence, each division can
carry out its business operations more or less autonomously.
The drawback is that with employees in each division performing identical functions, you could
end up with a lot of redundancy and inefficiency. For instance, managing five human resource
operations, rather than a single, centralized operation, means duplication of functions,
managements systems, policy development and so on.
Matrix Structure Provides Flexibility
Using a matrix structure in your business can give you greater flexibility in business functions
than a more hierarchical organization. In a matrix structure, each employee works in a function-
based department, such as marketing or finance, but they can be assigned to projects under
different managers and teamed with employees who have different functions. This structure
adapts organizational function to changing organizational needs. The drawback is that the chain
of command in a matrix may become cloudy and conflicted.
Visualize With Organizational Charts
If you or your staff have trouble visualizing a proposed structure, you can use an organizational
chart to see it clearly. The New York and Erie Railroad developed the first organizational charts
in the 19th century as a way to improve management efficiency. A chart shows the lines of
authority and control running between different departments and levels of management. A well-
designed chart will make it easy to see who makes decisions, who reports to whom and how your
organization divides up its operating functions.
Concepts of Organizational Structure
A sole proprietor with one or two employees doesn't need an organizational structure. The more
complex the business, the more important the structure becomes – it determines who wields
authority and who has responsibility for particular projects or goals. There's no single ideal
organizational structure; use whatever concepts of organization work best for your company. The
process of organizational structure determination begins with familiarizing yourself with existing
structures.
Functional Structures
Basing your structure on employee functions is an simple concept for organizing the company.
Different functions such as marketing, finance, human resources and Internet Technology each
have their own department and each department focuses exclusively on that function. The
drawback is that a department may fixate on its own function, its own budget and its own goals
with no thought for the company as a whole. Even when problems require solutions from
multiple departments, they may not cooperate.
Divisional Structure
Divisions are mini-companies built around particular products or regions. A car company could
have one division for SUVs, one for luxury cars, and another for economy vehicles, for example.
Each division contains all the functions necessary to handle business for that region or product
line. Because everyone in the division shares a common goal, such as boosting sales for their
products, there's more cross-function cooperation, according to Lumen Learning.). The downside
is that every division duplicates the same functions – sales, marketing and manufacturing –
which is often wasteful.
Process Structure
The process structure divides up the organization around processes, such as research,
manufacturing and sales. Unlike a purely functional structure, a process-based organization
considers how the different processes relate to each other and the customer. The sales process
doesn't begin until the manufacturing process produces something to sell; manufacturing, in turn,
waits on research and development to create the product. Process-based structures are geared to
satisfying the customer – the end result of all the processes – but they only work if managers
understand how the different processes interact.
Matrix Structure
The matrix structure is often overlaid on top of a company's functional structure to tackle
projects that involve multiple departments. Project managers recruit staff for their teams from
different departments so that all the necessary functions work on it together. This offers
companies flexibility and a better use of resources than a purely functional model, according to
Indeed. The downside is that authority and the chain of command become more confused, as
team members answer to both the project manager and their department supervisor.
Organizational concepts in management shift with the development of a company as well, so it is
possible that what might work for your company at some point will not always work. Reevaluate
as your company evolves and revisit your structure accordingly.
