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Say how the functional organizational structure can cause an obstacle to an efficient running of enterprise processes? How reengineering business processes or having an integrated enterprise system can help resolve the difficulty facing a functional organizational structure?Explanation / Answer
The type of organization dictates your role, responsibilities, working culture, and just about everything else.
In a functional organization, you may have a static role, while in other types of organization structures you may have dynamic roles.
In a functional organization structure, you will report to the functional manager, while in other types of structures, you will report either to the project manager or multiple managers.
In a projectized organization structure, you report to the project manager, whereas in a matrix organization structure, it depends on the type of matrix. Your working style, career growth path, and reporting system are all dictated by it.
Functional Organization Structure
A functional organization structure is a hierarchical organization structure wherein people are grouped as per their area of specialization. These people are supervised by a functional manager with expertise in the same field. This expertise helps him effectively utilize the skills of employees, which ultimately helps organizations in achieving its business objectives.
In this kind of organization structure, people are classified according to the function they perform within the organization. The organizational chart for a functional organization structure shows the president, vice president, finance department, sales department, customer service, administration, etc.
Each department will have its own department head who will be responsible for the performance of his section. This helps the organization control the quality and uniformity of performance.
These different departments are sometimes referred to as “silos”. This means the system is vertical and disconnected. The communication flows through the department heads to the top management.
Here, all authority (i.e. budget allocation, resource allocation, decision making, etc.) stays with the functional manager. Usually, the position of the project manager does not exist in this type of organization structure. Even if this position exists, the role of the project manager will be very limited and he will need permission from the functional manager to fulfil his requirements. The project manager may have the title of a coordinator or an expediter.
The functional organization structure is suitable for an organization which has ongoing operations and produces standard products or goods, such as manufacturing industries.
Advantages of the Functional Organization Structure
The following are a few benefits of the functional organization structure:
Disadvantages of the Functional Organization Structure
The following are a few disadvantages of the functional organization structure:
The globalization of the economy and the liberalization of the trade markets have formulated new conditions in the market place which are characterized by instability and intensive competition in the business environment. Competition is continuously increasing with respect to price, quality and selection, service and promptness of delivery.
Removal of barriers, international cooperation, technological innovations cause competition to intensify. All these changes impose the need for organizational transformation, where the entire processes, organization climate and organization structure are changed. Hammer and Champy provide the following definitions:
An example of a business process: Credit card approval in a bank.
An applicant submits an application. The application is reviewed first to make sure that the form has been completed properly. If not, it is returned for completion. The complete form goes through a verification of information. This is done by ordering a report from a credit company and calling references. Once the information is verified, an evaluation is done. Then, a decision (yes or no) is made. If the decision is negative, an appropriate rejection letter is composed. If the decision is positive, an account is opened, and a card is issued and mailed to the customer. The process, which may take a few weeks due to workload and waiting time for the verifications, is usually done by several individuals.
Business processes are characterized by three elements:
The problematic part of the process is processing. Business process reengineering mainly intervenes in the processing part, which is reengineered in order to become less time and money consuming.