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    Functional Vs Divisional Structure PDF
    (369 votes, average 3.63 out of 5)
    Written by Ashim Gupta   
    Sunday, 20 September 2009 06:06

    Functional Vs Divisional Structure

    Product vs. Functional Management

    It is important to comprehend the role and difference of a functional leadership and product leadership, the role of project and program management within the framework of organization structure.

    Product Leadership: A product has several components, the inner components that craft the product, the external components like sales, marketing, inventory, procurement, customer service etc. The product leadership defines the features and functionalities of the product, the roadmap and timelines of the product delivery & its deployment. Product leadership needs to be very well connected to their customers, since customers directly influence the requirements for the product.

    Functional Leadership: ?Functional leaders are specialists that have high technical knowledge of their area; they are the architects who design their functional component of the product. They use their technical competency and experience to solve non-trivial problem, they are responsible for coaching and mentoring the younger staff in the organization. ?Functional leaders take the product vision and requirements from the product leaders, perform feasibility study and take the responsibility of mobilizing their technical core teams.?

    Program Management: The functional design is divided into smaller projects; each project produces a deliverable that is integrated into the final product. The program management is analogous to product management, it need to track the progress of each functional unit, manage any risk that might arise due to functional interdependencies and manage customer communications.

    Project Management: It is the most atomic level of management; it involves managing resources, setting project goals, changing scope, setting deadlines, tracking project progress and raising risks when they occur. Project management is a process that is rooted in all management and leadership functions to the extent that it is inevitable.
    Product Functional Management
    Both product and functional leadership is related through program and project management. The management aspect can either be integral part of both product & functional or can be a separate entity. The functional leader might also be managing the projects under his team or there can be a designated project manager to do so. When there is a separate project manager position, the role for functional leader is limited to technically leading the subordinates and is disjointed from management functions. Similar is true for product manager, hence in the product/functional management illustration, all the components and their interactions are shown separately.

    Functional Structure

    In a functional structure, teams or groups are created based on common functions in a bottom-up manner. The result is a set of functional units such as engineering, marketing, finance, human resource etc. that are controlled and coordinated from the top level management. Functional structure are the most common type of structural design and have evolved from the concept of high specialization, high control framework of manufacturing organizations tuned towards high efficiency. Functional management is more technical oriented and less product or business oriented, while they are skilled in taking decisions in their functional areas, they are weak in the areas of product business plans, market study and product release management. If the organization does have multiple product lines, then the functional hierarchy at lowest level does get divided along product lines, thereby creating deeper hierarchies.

    Functional Structure of an Organization

    Strengths of functional structure

    Functional structures are typically highly hierarchical; hence they inherit the properties of hierarchical structure.

    1. Maximizes Functional Performance: All the human knowledge, skills & infrastructure required for a particular functional activity are consolidated in a single sub-organization, this facilitates sharing of valuable expertise by superiors with their subordinates. ?The functional units are managed by leaders who have in-depth knowledge and experience; they are able to control the unit very effectively. Hence it harvests the potential of the unit without duplication of scarce resources, maximizing their utilization.
    2. Cultivates Specialists: This type of structure promotes career development of individuals aspiring to be technical specialists of their field in large organizations. If the organization has properly crafted performance management that promotes the visibility of individual skills, functional structure makes it easier to coach other and climb the hierarchical ladder.

    Weakness of functional structure

    1. Restrictive Organizational View: Each functional unit has expertise in its own field, but lacks broader awareness about the organizations objectives or even the products. The responsibility of successfully integrating the organization lies with few top level executives, at the same time, the organizational structure limits the capabilities of the functional managers to occupy top management positions. Thus, even though such organizations might be effective initially, being controlled by few founding members, its long term efficiency is doubtful.
    2. Slow Response: Functional units cannot respond to fast changes in customer demands or the product since only the top level management has broad knowledge and the decision making authority.?? The management also performs the role of coordinating tasks across functional units, thus unless a complete plan of action is not formulated by the managements, little progress can be made in individual functional units.
    3. Poor Accountability: Due to weak link between product and functional units, it is hard to correlate profits of individual products to the budget and spending of individual units. The units that offer support to other functional units, like human resource or IT department, do not contribute directly to the revenue, yet they are essential components that helps in running the organization smoothly.

    Most effective

    1. Small/medium size or few products: Functional units are effective when the organization has only few products or is small in size; the drawback of limited view of the entire organization gets negligible. One way to test it is to try to restructure the organization from a hierarchical to horizontal, if the resulting structure is not too different, it implies that organization is inherently lacking a horizontal dimension.
    2. Stable External Environment: Functional units are effective when the organization has routine technologies and there is less probability of emergence of competitive technology that is radically different.

    Product Divisional Structure

    In a divisional structure, the teams are organized in set of divisions, where each division corresponds to the end product or services provided by the organization. Each division has its own set of functional units like research, manufacturing, marketing etc and is completely self-contained. A divisional structure is less hierarchical than functional; it is formed by decomposing the functional structure along the product lines. Unlike functional management, the divisional management is more skilled along product business and lesser in core technical competencies.Product Divisional Structure of an Organization

    Strengths of divisional structure

    1. Clear Accountability: Structuring along the product lines provides clear correlation between the expense and profit of the individual divisions. The business objectives of the division can be formulated more objectively and the expectations can be better agreed.
    2. Departmental Coordination: An objective accountability leads to better cohesion within the boundaries of the department; it creates a win-win situation where teams have mutual benefit in collaborating with each other.
    3. Broader skills development: Active collaborations between different specializations provide employees with opportunities for learning new skills beyond their own area of expertise. It is easier to comprehend the dynamics of a product and therefore is best suited for nurturing general managers in an organization.
    4. Unstable Environment: Since each division is product based and self-reliant, it can respond much quickly to changes in the external environment.

    Weakness of divisional structure

    1. Resource Duplication: In order to make each division independent, some of the resources which could have been shared are rather duplicated. Specialists with particular domain knowledge cannot be shared across divisional boundaries.
    2. Inhibits career growth of Specialists: While divisional structures are good for nurturing top level managers, they are bad for technical specialists. Technical people feel alienated from their peers in other divisions and have poor exposure to the developments across the organizations.?
    3. Divisional Affiliations: The employees feel more affiliated towards their own department and would still lack the sense of being part of a larger organization, they might know their own purpose but might not understand how they might related to organization’s objectives.
    4. Difficult Product Integration: When an organization produces multiple products which might be used together or are part of a larger product, the integration task becomes challenging since there is little coordination between the divisions. The product management task across different division requires regular sync-ups but the structure inherently provides little motivation for the product managers to seek this larger goal. Each divisional manager is more concerned about delivering his product and would view the integration as not part of his job or the problem.

    Most Effective Conditions

    1. Very Large Corporations: The divisional structure is most effective for large corporations that have indeed multiple products that are poorly interrelated.
    2. Competitive Environment: The ability to respond rapidly to the external changes makes divisional structure best suited for highly competitive external environment.
    Comments (75)
    • Yasir Rehmat  - Organization theory
      Please inform me
      When is a functional structure preferable to divisional structure. ?
      Pls short reply .
    • Josey
      very helpful to me in doing my research business project .. :lol:
    • Nikethana R Nair  - Very Ellaborative
      :D Easy, Simple & Understandable. It really helped me in completing my assignment.
      Thank you so much.....
      8)
    • Anonymous  - Very ellaborative
      :D Very Informative. Simple notes & easy understandable.
    • shelly
      this is good l really like the information
    • LunarZ
      It is helpful for my assignment about divisional structure. Thank you very much!
      But I think it will be better if contain the improvement of the two structure.
    • Dave Wooden  - Functional Vs Divisional Structure
      You are my inhalation, I own few blogs and occasionally run out from brand :).
      “Actions lie louder than words.” by Carolyn Wells.



      http://www.WHSoOIFTLJ.com/WHSoOIFTLJ
    • ra
      dear Sir/madam

      good information

      thanks

      send me this information
    • Tiguh Aragaw
      I really thank your greater input to my understanding regarding in designing
      suitable organization.

    • suhail  - similarities
      please let me know the similarities for these two type of organizations
    • suhail  - similarities
      Can any one please let me know the the similarities between the functional and
      multi divisional organizational structures
    • Iwajeth  - Thanks
      Thank you so much for a great effort!
    • Anonymous
      very nice information.
      Got a deep knowledge.
      But can u tell me that coating ,slitting and packing wll come under functional
      or divisional structure???????
    • Anonymous  - excellent article
      very informative, I will use some of these concepts in an exec presentation
      requesting organization changes.
    • Juan Salvador M. Locsin


      thank you very much for this wonderful inputs, this will help a lot with
      regarding my report :)
    • hello
      thanks for the article, it was a good read and very informative
    • chikwa
      discuss the merits and demerits of the functional structure and the product
      structure
    • nshana  - How to overcome drawback of divisional organisatio
      Can anyone tell me what are the ways to overcome drawback of divisional
      organisation?
    • Anonymous  - re: More information please
      Nona Dawn Larsen wrote:
      I loved the information provided it is very helpful to a course I am taking. If
      you do not mind could give me you opinion? Which organization is more horizontal
      in structure, the functional or divisional organization? Which do you feel
      works better?
    • Nona Dawn Larsen  - More information please
      I loved the information provided it is very helpful to a course I am taking. If
      you do not mind could give me you opinion? Which organization is more horizontal
      in structure, the functional or divisional organization? Which do you feel
      works better?
    • Anonymous
      Can any one help me with my business project that is

      -(to form a divisional structure for a firm) please pleas help me
    • Anonymous
      informations are clear and useful !!
    • cmel  - dear writer
      it was such a gud thing that we have notes like this in the net.it was very
      handy and easily excessed and also very fast...
      it rily helped me understand the concepts clearly and also broaden my knowledge
      on the topic.
      i wud say a job well done and looking forward for more..
    • Anonymous
      thanx..it really helps me for my assignment..
    • Marian  - Nice
      Thanks alot, information really helpful. Thank You very much. :twisted: :lol:
      :D :)
    • Anonymous
      thank you alot of information given with clarity :D
    • Anonymous
      awesome explanation thanx a lot.......
      use some example too....
    • Jordan Sy  - Thank YOU!
      I must commend the clarity. Very helpful indeed.
    • Anonymous
      really amazing writing :lol:
    • Richard  - BEST
      All the information that I wanted to know.
      THX A LOT..
    • Satish content writer  - U deserve more than what u r praised with.
      Excellent presentation
    • john Livondo Muchera  - deputy director
      thanks.
    • Anonymous  - deputy director -Railway Training Institute -Kenya
      very good and intellegent work. keep it up.
    • Amit kumar  - thanks sir
      Thank you
    • bilal  - Nice effort
      thanks it made me clear......
      i strongly appreciate thankssssssssss :) :lol: :twisted:
    • gajil 9898981289  - vrny nice
      thanx dear and its a good information :)
    • Anonymous
      Please how do one reference your materials if one need to use it.
    • shella mah  - into it
      well i most confess tha was indid a splendid one coming from you

      BE BLESS :lol: :D
    • Cameron P  - Thanks !
      This was very helpful information, helped heaps with my assignment. Cheers! :D
    • anne
      i really want to thks for the very good notes yu provide for my assignment
    • Zach  - Examples
      Excellent information, really will help me on my upcoming test. Can you provide
      some current examples of each type? Names of Businesses 8)
    • tejas
      very nice n helping info
    • Anonymous  - correct
      :D IME, correct for large corporations and small corporations. Presently work in
      a VERY large corp who has chosen functional. Reasoning: they view themselves as
      a seller of OEM'ed/white labeled products despite the fact they employee 1000's
      in software development. Either structure works; but both take work to make them
      work.
    • Paul Hirbo  - Wonderfu article!
      It is pleasing to read such a precise notes.Thanks alot.
    • syed haq
      I really liked this piece of writing as it brodens one's conceptual ideas on
      ogranizational structures
    • gracije  - THX !
      great article, helped us a lot on our presentation. However, you shouldn't have
      put a copyright on it !! because we live in the Balkans and aren't used to
      obeying rules or having to rewriting anything by ourselves ! we looove the
      option copy-paste :)))))) :lol: :lol: :x :P :twisted: :D :)
    • Anonymous
      Thank you, this help clarify my text. :0
    • Nik F  - Divisional?
      Is this also called Distance Area Teams? I've heard this term today and it was
      hand in hand with a change away from a functional towards a divisional structure
      in our company.
    • Trincomalee Campus of EUSL Fin  - Really an appreciable article
      This will more helpfull in my reseach thank you v much Ashmi Gupta :lol:
    • Rosemarie Ladao
      this article explains completely the concepts of divisional and fuctuonal
      structure thank you so much, :) it can help me a lot for my report.
    • innocent msa poly kenya
      helped me my research thank you
    • mazita ahmad  - good articles
      thanks for articles..these articles are very good and i am very grateful to the
      author of this articles...
    • Anonymous  - re: Simply Fantastic
      :roll:
      Md.Fazel Hussain wrote:
      Really a good article and quite simple to understand even when we read it once
      .It is comprehensive one .Thanks
    • rorisang mabusela
      real good and comprehensive
    • Sam  - More clarificatio- Thru Examples
      Excellent explanation. However, would be more demonstrative if examples are
      used.
      :idea:
    • Anonymous  - re: More clarificatio- Thru Examples
      Sam wrote:
      Excellent explanation. However, would be more demonstrative if examples are
      used.
      :idea:
      Guh Nah

    • stacy ann  - more detailed expalnation
      i need some more detailed information
    • Md.Fazel Hussain  - Simply Fantastic
      Really a good article and quite simple to understand even when we read it once
      .It is comprehensive one .Thanks
    • Lilshanndra Green  - Can I cite your article.
      I have notice your copyright. Since you have done a beautiful job in explaining
      the functional structure and divisional structure,I wou like to cite some of
      your work.Of course, you would get credit regardless. Thanks a lot.



      Lilshanndra Green

      University of Phoenix Online student
    • Anonymous
      very good,this is very clear and helpfull for my exam. :)
    • Aaron  - Assignment
      I was wondering if I could cite some information for the paper I am writing. If
      so I was wondering what year this was posted/written?
      ~Aaron
    • Ashim Gupta  - Do refer to the articles in your work.
      I have enabled display of all article's publishing date, citing the information
      from www.blogsin.com.cn is highly appreciated and recommended.
      Regards
      Ashim Gupta
    • nor aswani mohamad  - great article
      very helpful for my assignment..tq
    • alpesh gadani  - structural management
      I am very happy by getting this article it is helpful for me in preperation of
      assignment

      (Alpesh gadani)
      oclbharuch@gmail.com
    • Neguss  - good but need additional written
      Dear Sir or Madam,

      Warm and respectful greetings to you.The whole written about the functional is
      nice and clear but if you have time would you please send to me e-mail address.
      The question is here below:

      1. Please explain why there will be good cooperation between the offices ( of
      finance,Promotion, Service and Human resources) when using the functional
      structure in the organization

      Hope to hear from you soon.

      Kind Regards,

      Neguss
    • Ashim Gupta  - Clarifications
      Hello Neguss,
      Good coordination in functional structure exists between same functionality of
      different products and not between different functional groups. Whereas,
      divisional structure promotes good coordination between functional groups of
      same product due to common management.
      Functional = specialization
      Divisional = coordination
      Functional = Divisional when product=1

      Regards
      Ashim
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