Functional organisation structure is a structure whereby the departments are created on the basis of functions of the organization such as Production, marketing, finance etc.
Advantages/Merits
a) Specialisation: A functional structure leads to occupational specialization. This promotes efficiency in utilization of manpower as employee performs similar tasks within a department.
b) Efficiency: It helps in increasing managerial and operational efficiency and these results in increased profit.
c) Minimises costs: It leads to minimum duplication of efforts thus lowers cost.
d) Better control and coordination: It promotes control and coordination within a department because of similarity in the tasks being performed.
Disadvantages/Demerits
a) Functional empires: A functional structure places less emphasis on overall organizational objectives than the departmental objectives.
b) Problems in coordination: Pursuing departmental interests at the cost of organizational interests can also hinder the interaction between two or more departments. It may lead to problems in coordination.
c) Conflict of interests: A conflict of interests may arise among departments when the interests of two or more departments are not compatible.
d) Inflexibility: It may lead to inflexibility.