The following points highlight the difference between a functional structure and a divisional structure.
| Basis of Difference |
Functional structure |
Divisional structure |
| Creation |
These are created on the basis of functions. |
These are created on the basis of product-lines along with the functions. |
| Costs |
It is economical as duplication of work is minimised. |
It is costly as there is higher rate of duplication of work and resources between various departments. |
| Decision Making |
Decision making is centralised as the decisions are taken by the coordinating head for various departments. |
Decision making is decentralised as each division of the product line have their own decision making authority. |
| Duplication of work |
Due to functional specialisation overlapping of work is minimised. |
Due to each product department having the same functions, overlapping of work is increased. |
| Suitability |
More suitable for companies who focuses on ‘operational specialisation’. |
More suitable for multi-product companies focussing on ‘differentiated products’. |
| Functional Hierarchy |
Horizontal functional hierarchy is formed while the departments are devised on the basis of key operations. |
Vertical functional hierarchy is formed while devising the departments on the basis of product-line categories. |
| Management |
Management is difficult as each work has to report to a coordinating head at the top level of management. |
Management is easier as different line of department is formed for each product. |
