Organizational Structure refers to a system describing an organisation’s hierarchy within which all the managerial tasks are performed. It represents the authority-activity relationship in an organization. The two most commonly used structures of the organization are functional structure and divisional structure. The functional organisational structure is one where employees are grouped together, according to their area of specialisation.
On the other hand, divisional organisation structure refers to the structure wherein the organisational functions are grouped together, into divisions, depending on product, service, market or geographies. Take a glance at this article to know the difference between functional and divisional structure.
Content: Functional Structure Vs Divisional Structure
|Basis for Comparison||Functional Structure||Divisional Structure|
|Meaning||Functional Structure is one in which the reporting relationships of the organization are bifurcated according to their functional area.||An organizational structure wherein the organizational functions are classified into divisions as per product or service lines , market, is called Divisional Structure.|
|Basis||Functional areas||Specialized divisions|
|Responsibility||Difficult to fix responsibility on a particular department.||Easy to fix responsibility for performance.|
|Autonomy of decisions||Managers do not have autonomy of decisions.||Managers have autonomy of decisions.|
|Cost||Economical, as the functions are not repeated.||Expensive as it involves repeatation of resources.|
|Appropriate for||Small and simple organizations.||Large and dynamic organizations.|
Definition of Functional Structure
The functional structure is one such structure, in which the activities of similar nature are grouped together, i.e. the activities belonging a particular function are taken together as a separate department. These independent departments have their own functions to perform and objectives to pursue. For instance, there are autonomous departments for marketing, production, purchase, human resource, research and development, etc. in an organisation.
In a functional organisational structure, each department is supervised by a functional head called as the department manager. The manager would be an expert in the respective field, and he will be held responsible for the performance of his department. Moreover, the functional heads of all the departments report directly to the top management of the organisation.
Definition of Divisional Structure
Divisional Structure is defined as an organisational structure that clubs together various functions on the basis of product lines and regional divisions. Further, each division of the organisation has its own essential resources and functions like production, marketing, purchase, human resource, etc. In this type of organisational structure, the divisions are headed by the general manager who controls the regular business activities. The general manager is accountable to the top management of the organisation for the performance of their division.
Divisional Structure is applied to those organisation which are large and have more than one product line to continue. Suppose an organisation produces and sells four products, A, B, C, D. All these products are organised into separate departments and operated as individual units which are supported by functions.
Key Differences Between Functional and Divisional Structure
The difference between functional and divisional structure can be drawn clearly on the following grounds:
- The functional structure is described as an organisational structure wherein; the employees are classified on the basis of their area of specialisation. An organisational structure so designed that it is bifurcated into semi-autonomous divisions on the basis of product, service, market, etc., is known as the divisional structure.
- In the functional structure, the specialisation is based on functions. On the other hand, divisional structure, the specialisation depends on product lines.
- In the functional structure, it is really difficult to fix responsibility, i.e. Suppose a product does not perform well in the market, then it is difficult to identify, that which department (production, sales, finance, etc.) of the organisation is not doing well. As opposed to, the divisional structure where it is easy to fix responsibility, as every product of the organisation has separate departments.
- Managerial development is not easy in functional structure due to the absence of autonomy of decisions, as the decisions are guided by top management. As against this, divisional structure there exists autonomy of decisions. Hence managerial development is easier.
- The cost involved in functional organisation structure is comparatively less as the functions are not repeated. Unlike, the divisional organisational structure wherein there is the repetition of resources, and so it is costly.
- The functional structure is best suited to those organisation which is small and simple. As compared to divisional structure, which is appropriate for those organisations, that are large and dynamic.
As every coin has two sides, similarly both the organisational structure has their own merits and demerits. Therefore, it is a bit difficult to say, that which one is better than the other in a particular condition, but on the basis of their suitability, it can be concluded that which one is good for a particular organisation.