A Functional structure entails organising and grouping together activities of similar nature. That is, under functional organisation activities or work of similar nature are grouped together. Each group functions as a separate department and specialises in its work. For example, an organisation can have departments such as production, human resource, finance, marketing, etc. Each department in turn report to one coordinating head. Functional structure is usually suitable for large organisations who deal with number of varying functions requiring high degree of specialisation. The following points highlight the suitability of functional structure.
i. Large Size: A large size organisation can function smoothly, if the work is divided into various departments. Departmentalisation in large organisation improves managerial efficiency and the degree of control. Thereby, the work proceeds smoothly.
ii. Varying Functions: Dealing with diverse varying functions simultaneously requires high degree of coordination so as to improve efficiency. By a clear division of activities in various departments, a functional structure promotes coordination among the various functions and thereby, ensures smooth functioning.
iii. Requirement of Specialisation: Varying functions in an organisation can be performed better if dealt with specialisation. With departmentalisation, each department can function independently and specialise in their respective functions.
