There may be conflict between the departments because some may perform better and others may not and this will lead to chaos. Divisional structure prevents organizations from getting the most out of economies of scale. Here you can read Chapter 5 of Class 12 Business Studies NCERT Book. Completing the CAPTCHA proves you are a human and gives you temporary access to the web property. Everyone will report back to Radha. It does not give importance to psychological and social need of employees. Now that we have seen the advantages and disadvantages of the divisional structure, it is … (a) Advantages. the knowledge of how to handle sales, marketing, finance, human resource etc. It is the most logical, time proven form of organisation structure. A functional structure emphasises on specific functions and ensures that different functions get due attention. A Functional Structure is a structure of an organization under which the similar kinds of activities or functions are grouped together to form a department. Improves specialisation: when an organization is divided based on the functions then a department will perform single type of function and thus their efficiency and quality will increase because of the improved experience which they will get because of repetitive work. Specialization. As a single division does not produce enough to take great benefits out of the economies of scale. When she specifies the roles, duties and responsibilities of each person, it becomes a organizational structure. Advantages of Functional Structure: When the specialists are grouped together than it would result in the economies of scale and it definitely minimizes the duplication of equipment. For example: consider a mobile manufacturing company, the company if takes up a functional structure as an organizational structure will have manufacturing department, marketing and sales department, finance department and personnel department. Improves specialisation: when an organization is divided based on the functions then a department will perform single type of function and thus their efficiency and quality will increase because of the improved experience which they will get because of repetitive work. The main difference between functional and divisional structure is that in functional organization is described as an organizational structure wherein, the employees are classified on the basis of their area of specialization. Advantages of Functional Organization. Digital NCERT Books Class 12 Business Studies pdf are always handy to use when you do not have access to a physical copy. Functional structure has following advantages: Under functional structure, each major function of business is organised as a separate department. This streamlines communication and reduces confusion among employees. Of the following advantages, the first one is the most important; the functional structure can introduce a great deal of efficiency into the operations of a business. It leads to minimal duplication of effort, which results in economies of sacle and this lowers cost. The functional structure has both advantages and disadvantages. Features of Secondary Market. There are different kinds of structure adopted by different kinds of business organizations based on the kind of work, area and products they offer. Divisional structure is thus suitable for product specialisation. Roles and tasks do not change very much so there is little time spent learning, and accountability is clear. This helps to prevent duplication of work. If you’ve had a job, you likely worked in a functional organizational structure.The functional structure is based on an organization being divided up into smaller groups with specific tasks or roles. In functional structure jobs of similar nature are grouped and organized as separate departments on the basis of their functions. Staff working skills can be … There is easy accountability for each employee and thus employees get their reward through a fair and just practice. Attention will be given to mainly the activity they perform and thus leading to development of personnel. Another way to prevent getting this page in the future is to use Privacy Pass. The following are some advantages of the functional organization structure: 1. Span of management is a simple tool which helps in determining the number of subordinates which a superior can manage effectively and efficiently. For example, a company could have a group working in information technology, another in marketing and another in finance.Each department has a manager or director who answers to an executive a level up in the hierarchy who may … Advantages of functional structure. You may need to download version 2.0 now from the Chrome Web Store. This increases the performance of the team. (adsbygoogle = window.adsbygoogle || []).push({}); While this example is taken for a small scale business and there are lot many other activities which need to be performed in a business. It will lead to poor communication and coordination across functional … These divisions have its separate functions therein. This will act as a good performance measurer and thus corrective measures can be taken for the divisional department which does not performs well. Advantages of Functional Organizational Structure The employees are made into groups according to their skills, and thus the overall effectiveness and efficiency of the tasks increase. It is a framework which helps in setting up clear distinction of heads and subordinated. The functional organizational structure helps in achieving the benefits of specialization of work. Advantages of Functional Structure. It not only helps in coordination of different activities of the business but also helps in correlation of people, resources and work. These will be considered divisions and these divisions will further have marketing department, production department, finance department etc. Reduced unity of efforts towards organizational goal: different departments will have their own goals and they will focus on achieving them and this may become hindrance for the organizational goal. Home » Business Studies Class 12 » Organizational Structure. When employees who have similar skills and experiences are grouped together, it makes production more efficient and of a higher quality. © 2020, Arinjay Academy. Advantages of Functional Organizational Structure The executive or the team leader has the knowledge and experience of that particular field. manufactured by it, is known as divisional organisation structure. Coordination — The Essence of Management, 1. Also, the conflict can arise due to difference in allocation of funds for different departments. The team members work with other people in the field and it allows sharing of thoughts and … Better training: when there are people in a department performing similar kinds of activities then the training can be easily provided to them based on the work they do. The environment in which the business runs is ever changing and to react to this environment it is important to change accordingly. They are-. The functional structure is one type of organizational structure that helps companies manage employees and meet their business goals. If you are on a personal connection, like at home, you can run an anti-virus scan on your device to make sure it is not infected with malware. The employees are a bit satisfied with the functional structure because they can talk with the same language with their peers. Tho departments become specialised ill their own way only. The advantages are: Efficiencies. Divisional structure is different from functional structure altogether. The duplication of efforts will lead to wastage of efforts and wastage of time and money too. If you are at an office or shared network, you can ask the network administrator to run a scan across the network looking for misconfigured or infected devices. physical, human and financial resources. The functional organizational structure groups employees according to broad business activities, resulting in departments such as finance, marketing and production. 2. (i) Functional Structure When the activities or jobs are grouped keeping in mind the functions or the job then it is called functional structure. Functional structure is suitable when the size of the organization is large with diverse activities to be performed and these activities need specialisation. Suitability: When the size of organization is large, Has diversified activities and; Operations require a high degree of specialization. Difference between Mixed Economy and Socialism. The functional structure is an organizational structure that divides its operations into separate departments or units according to the role of each department. Thus, it can be called multifunctional divisions. The first advantage of functional organization is that it makes the management of specialists easier. Improved profits: the profits are bound to increase when there is improved workings in an organization because of departmentalisation and increased operational and managerial efficiency. Please enable Cookies and reload the page. The best app for CBSE students now provides Organizing class 12 Notes Business Studies latest chapter wise notes for quick preparation of CBSE board exams and school based annual examinations. One of the advantages of a functional structure is the positive atmosphere it provides for skill development. If in future there is any new product which the company decides to add up in the product lines of the company then it will be easier as it will only have to add a separate department for the new product instead of hindering existing structure. To make the annual function of the school successful the principal of the school divided all the … Introduction & Meaning & Importance of Business Environment, 1. Inflexibility: as the people working in a department will be given training for that particular area and this will limit the learning of the heads of departments and other employees as they will not get trained in diverse areas. As, each and every person should have their personal goals aligned with the organizational goals so that it does not creates conflicts and chaos. Advantages of Formal Organisation. Following are the important advantages of functional organizational structure: 1. ... functional organization has both advantages as well disadvantages and any company thinking of adopting this type of structure should carefully analyze both the aspects and then take the decision. Secondly, by creating specific task, the efficiency of the labor needed to accomplish, the task increases. However, functions in each division may be different based on the suitability and need. An organization can be arranged acc… For example: If Radha sets up her own business of electronic goods. Performance & security by Cloudflare, Please complete the security check to access. Conflict of interests: conflict of interest will be there within different departments if they do not have clear distinction of responsibilities. This benefit of smooth working comes from the proper line of authority and responsibility and clear distinctions made for the job roles of the employees. Advantages of the Functional Organization Structure. The full-stewardship principle lies at the heart of the functional organization structure. Meaning: To divide the whole enterprise according to the major products (such as metal products, plastic products, etc.) Organizational structure is important because it helps in improving the profitability of the firm. The reporting hierarchy is well defined and employees don’t have to report to multiple manag… Better control and coordination: as the departments are divided based on the functions and the similar kinds of tasks are performed thus it will give better control of the activities at a single place and thus help in coordinating the similar kinds of activities because people in a particular department will be aware of each other’s job roles and how to perform them. Benefits & Disadvantages of a Functional Organizational Structure. Because resources specialized in one area, report to the same manager who knows the domain or area as well. Employees and department managers are skilled because they are experienced in the same field of business. Reduces duplication: when there are separate departments for different kinds of activities and there are sub sections under a particular department then it leads to economies of scale because the duplication of activities is reduces as there is no overlapping of similar kinds of activities. An expert can manage each department. ... actions get delayed in formal structure. The advantages of Functional Organization: The team is managed by an experienced person with a high ability and skills who can adequately understand and review the entire work. Proper performance measurement: each department based on the divisions will have clear distinction between the revenue earned, cost incurred and profit earned by them. Organizational structure is a framework within which the tasks are separated and the managerial and operating tasks are performed by clearly mentioning the flow of authority and responsibility. There may be more power in hands of the head of divisions because they may get knowledge of every function in their divisional department and they may consider themselves to be of high authority and ignore the responsibilities and ultimately ignore the organizational interest. Kiran will be responsible for dealing with the customers. The functional structure gives you the least power as a project manager, but offers plenty of other advantages: It works well for small teams and small projects because the function has full control over the team members and other resources required. Advantages and Disadvantages of the Functional Organization Structure. The Functional Organization Structure can be successfully applied in many areas. Organising Important Questions for CBSE Class 12 Business Studies Formal and Informal Organisation. Introduction, Meaning, Importance, Features & Limitations of Planning, 3.2 Maslow’s need hierarchy theory of motivation. Employees are possible to become experts. 1. Arjun will look after the after sales services. Speaking of a multinational organization, accounting activities from all the regional offices and the headquarters would be handled by one accounting department. As the size and complexity of a business increases the organizational structure becomes more important. They will get more attention. Learn the concepts of Class 12 Business Studies Organising with Videos and Stories. Specialisation; Easy supervision; Easy co-ordination; It helps in increasing managerial efficiency; Effective training (b) Disadvantages. As, in the divisional structure, the divisions are made based on the different kinds of products which the company is offering. Manish will look after the cash and online payments and other accounts work. In this article, we discuss the advantages and disadvantages of the functional structure, plus learn about other organizational structures in business. The roles and responsibilities are specified. Thus where the company keeps on adding the new products to the product line of the company then this structure is best suitable. For example, the person heading the IT department will have the education and skill necessary to shoulder this … Your IP: 165.227.28.180 Employees are grouped by their skills. That is the reason, a good organizational structure is important. Unit Number 319, Vipul Trade Centre, Sohna Road, Gurgaon, Sector 49, Gurugram, Haryana 122018, India, Monday – Friday (9:00 a.m. – 6:00 p.m. PST) Saturday, Sunday (Closed), 7. Firstly, it provides order and accountability to an organization. Every functional in charge is an expert in his area and … All rights reserved. Each employee has a fixed job definition. For any organization that has a growth prospective cannot leave organizational structure because without it the business will become stagnant and may sometime cease to exist. Functional Organization Structure Main Advantages: Offers a high level of specialization. The head will thus be prepared for higher positions. It is structure which brings together the resources i.e. For example: a company may be manufacturing pens, pencils, notebooks and erasers. There are five important advantages of the functional structure. Due to the similarity in the tasks being performed, it promotes control and coordination within a department. They may want different things and want to achieve different objectives and thus can hinder each other’s growth. Span of management is an important factor which needs to be considered while choosing a structure for the organization. Suitability: (a) This type of organisational structure is suitable where the size of operation is very … Since the hierarchy is simple, employees know the one manager they are to answer to, instead of multiple people. An organizational structure, so designed that it is bifurcated into semi-autonomous divisions on the basis of product, service, market etc, is known as divisional structure. A good organizational structure will improve the communication line between the people in an organization and helps in better control of the work. Thus, it improves specialisation in particular activity. She specifies that Rahul will be in close connection with the supplier and order the goods whenever necessary. For example the accounting activities of different operations are grouped in on accounting department. This structure is flexible because it initiates better and quicker decision making as there is no need to consult other departments for any decision to be taken. Functional organization structure is optimal for small businesses or companies producing standardized goods or services. Team members report to only one supervisor. There may be duplication of activities which may raise the cost of the industry. It ensures efficiency in operations. Development of skills: the divisional department head will have knowledge of each function i.e. • These activities are divided and can be further divided into sub categories. In the functional structure, such as shown in the following Facebook organizational chart, functions are separated into different groups, resulting in some defects.Here are the major disadvantages you must consider: Create Your Own Org Charts! Cloudflare Ray ID: 608615713bb76e2a Functional structure; Divisional structure; Functional structure. The key difference between functional and divisional structure is that functional structure is an organizational structure in which the organization is divided into smaller groups based on specialized functional areas such as production, marketing and sales whereas divisional structure is a type of organizational structure where operations are grouped based on divisions or separate product categories. Students who are in Class 12th or preparing for any exam which is based on Class 12 Business Studies can refer NCERT Book for their preparation. 3. The advantage of functional structure is that the different functional units of th… CBSE class 12 Business Studies Organizing class 12 Notes Business Studies in PDF are available for free download in myCBSEguide mobile app. Chapter 1 – Nature and Significance of Management. Advantages of functional structure are: It promotes control and coordination within a department. Performing the instructions of the authorities within its competence is mandatory for all the units. • 4. Because a functional structure groups people performing similar tasks that require certain skills, more experienced or talented group members serve as examples and mentors to individuals with less experience. • Your IP: 165.227.28.180 • Performance & security by cloudflare, Please complete the security check to access who. 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