Everything You Need to Know About Functional Organizations




During your PMP exam prep, you will come across multiple definitions of different types of organizations. We want to make sure you have this topic covered, since more than a few questions in your PMP exam will be based on this subject. Let’s start with the basic definition of a functional organization.

What Is A Functional Organization?

The term ‘functional’ is used to describe a structure that is used to organize workers into groups based on their specific knowledge and skill set.

It is a hierarchal structure which has the roles from president to sales, finance, employees assigned to specific services or products to customer service personnel. Functional organizations have specialized units that answer to one single authority which in most cases is known as top management.

Each functional unit handles a single aspect for a service or product such as:

  • Marketing
  • Development
  • Information Technology
  • Support etc.

These functional units are also knows as silos because of their independent functionality and the vertical management hierarchal structure. Workers within the functional departments communicate exclusively with each other, and in turn the department heads are the ones that communicate the necessities to each other. For an environment that has continuous operations, this structure works quite well. The goal of a functional organization is to create a single space where every human and information resource necessary is present.

The reason that a number of PMP exam questions are focused on functional organizations is that this is the structure being used by the most successful organizations around the world (including QuickStart). New organizations and startups adopt this structure to have a good flow of communication throughout their day to day dealings.

Advantages of Functional Organizations

  • Employees that are similarly skilled when grouped together can make production much more efficient than when it comes to working individually. The quality of the products go up and in time of a problem, they can work together to find solutions much faster.
  • Most roles and tasks remain the same, so most time is spent productively and this system produces crystal clear accountability.
  • The hierarchy is quite clear and understandable which is why there is no confusion when it comes to communication. The employees know they have to report to one manager instead of a number of heads.
  • Employees can work more comfortably knowing that they are gaining experience in a single field every day. This way their loyalty to the department they work for increases and in turn for the organization as well.
  • A clear goal path is set for them which keeps their morale high and them motivated.
  • Functional organizations is also a good learning environment for new employees where they can learn and grow with the organization everyday as they work in the department with other peers.

Disadvantages of Functional Organizations

In your PMP certification exam, you may see questions about the dark side of the functional organization structure, so let’s make sure you are prepared to answer. It is true that the functional organization structure is the most common business place structure around the world, but there are some negative things about it that should be taken into account so you may see if it is best suited for the kind of business you are running or not.

  • There is a possibility that if the employees are assigned a similar task every day, they might get bored and eventually lose the motivation to work well.
  • Promotions are a tricky business in this sort of an environment because all the employees in the same department expect to be promoted, but sadly there is room for only one, and the others get demoralized by this.
  • Department heads if not communicating well with each other will cause the organization to not function properly along with tasks getting delayed and product quality going down.
  • Employees and managers are mostly busy with their own teams, which is why coordination between departments becomes a bit difficult in some cases.

The functional organization structure is something that can be extremely advantageous for a company, but if not properly executed, can spell disaster for it. People doing their PMP exam prep should be able to identify all these points in case they are faced with a question regarding functional organizations. If somebody has worked in an organization themselves, they would be quite familiar with the structure as well, but it never hurts to be a little extra prepared.

About The Author
Dennis
Enterprise Account Executive

Tim Dieterich

Tim is an IT Education Consultant who works with SMBs, enterprise, and government organizations. He helps them achieve IT business objectives through comprehensive multi-mode learning. He assists clients and organizations by making recommendations and providing education for Information Technology, Project Management, Process Improvement, Soft Skills, and more.