Question

Six Mark Question:
A truck manufacturing company has its registered office in Delhi and manufacturing unit in Chennai. The company manufactures different types of trucks. Its marketing division is located at Noida.
Suggest a suitable organisational structure for this company giving reason in support of your answer. Also explain any five advantages of this structure of organising.

Answer 1

A functional organization structure is a hierarchical organization structure wherein people are grouped as per their area of specialization. These people are supervised by a functional manager with expertise in the same field. This expertise helps him effectively utilize the skills of employees, which ultimately helps organizations in achieving its business objectives.

In this kind of organization structure, people are classified according to the function they perform within the organization. The organizational chart for a functional organization structure shows the president, vice president, finance department, sales department, customer service, administration, etc.

Each department will have a department head who will be responsible for the performance of his section. This helps the organization control the quality and uniformity of performance.

These different departments are sometimes referred to as “silos”. This means the system is vertical and disconnected. The communication flows through the department heads to the top management.

Here, all authority (i.e. budget allocation, resource allocation, decision making, etc.) stays with the functional manager. Usually, the position of the project manager does not exist in this type of organization structure. Even if this position exists, the role of the project manager will be very limited and he will need permission from the functional manager to fulfil his requirements. The project manager may have the title of a coordinator or an expediter.

The functional organization structure is suitable for an organization which has ongoing operations and produces standard products or goods, such as manufacturing industries.

Advantages of the Functional Organization Structure

The following are a few benefits of the functional organization structure:

1 Employees are grouped by their knowledge and skills, which helps achieve the highest degree of performance.

2 Employees are very skilled. Efficiency is gained because they are experienced in the same work and they perform very well.

3 Their roles and responsibilities are fixed, which facilitates easy accountability for the work.

4 The hierarchy is very clear and employees don’t have to report to multiple supervisors. Each employee reports to his or her functional manager, which reduces the number of communication channels.

5 There is no duplication of work because each department and each employee has a fixed job responsibility.

6 Employees feel secure, and therefore, they perform well without fear.

Since there is a sense of job security, employees tend to be loyal to the organization.

7 Employees have a clear career growth path.

8 Cooperation and communication are excellent within the department.