Q.Sunita opened her travel agency named 'Sunita Travels' in July, 2023. She created separate departments for reservations, hotel bookings, online queries and payment handling. Which organisation structure is used by Sunita : (A) Functional structure (B) Divisional structure (C) Informal structure (D) Vertical structure

Functional Structure Suitability – A First Look

Imagine you are organising a large family wedding. You could divide the work in two very different ways. One way is to put all the food-related tasks under one person (the caterer), all the decoration tasks under another, all the transport under a third, and so on. That is grouping by function — each person handles one kind of work for the entire event. The other way is to split the wedding into separate "mini-weddings": one team handles everything for the bride's side (food, decoration, transport for those guests), and another team handles everything for the groom's side. That is grouping by product or region.

Functional structure is the first approach: an organisation is divided into departments based on specialised functions — marketing, finance, production, human resources, and so on. Every function serves the entire organisation.

When does functional structure suit an organisation?

The suitability of functional structure depends on three main conditions, as the NCERT textbook explains.

First, the size of the organisation. Functional structure works well for small to medium-sized organisations. When the organisation is small, having a few specialised departments keeps things simple and efficient. The CEO or general manager can coordinate between departments without too much trouble. But as the organisation grows very large, functional structure starts to creak — the marketing department becomes huge, communication between departments becomes slow, and decision-making gets delayed because everything has to go up and down the hierarchy.

Second, the nature of products or services. Functional structure is ideal when the organisation produces only one product or a few closely related products. Think of a company that makes only one type of soap. All production knowledge, all marketing effort, all financial planning can be concentrated in their respective departments. But if the same company starts making soap, toothpaste, shampoo, and packaged foods — very different products — then a single production department handling all of them becomes unwieldy. Each product has different raw materials, different production processes, different customer segments. In such cases, a divisional structure (grouping by product) becomes more suitable.

Third, the stability of the environment. Functional structure suits organisations operating in a stable and predictable environment. When customer preferences change slowly, technology is stable, and competition is not too intense, functional departments can focus on perfecting their specialised work. But in a rapidly changing environment — say, a tech company where products become obsolete every year — functional structure is too rigid. Decisions take too long because they must pass through multiple functional heads.

Advantages that make it suitable

When the conditions above are met, functional structure offers clear benefits:

• Specialisation — Each department becomes expert in its own area. The finance team knows finance deeply, the marketing team knows marketing deeply. This leads to higher efficiency and better quality of work.
• Clear career paths — Employees can see a clear ladder within their function. A junior accountant can become senior accountant, then assistant finance manager, then finance manager. This motivates employees and reduces turnover.
• Easier training and supervision — Since everyone in a department does similar work, training new employees is straightforward. The manager supervises work they themselves understand well.
• Economies of scale — Resources are not duplicated. One production facility serves the entire organisation, one marketing team handles all products. This saves costs.

Limitations that make it unsuitable in other cases

The same features that make functional structure suitable in some situations become drawbacks in others:

• Coordination problems — Each department focuses on its own goals. The production department wants long production runs to reduce costs; the marketing department wants frequent changes to meet customer demands. These conflicts slow down the organisation.
• Slow decision-making — A decision that affects multiple functions must travel up to the top manager. This is fine in a small organisation but becomes a bottleneck in a large one.
• Limited view of overall goals — Employees identify with their department, not with the organisation as a whole. A marketing person thinks "marketing first" rather than "company first." …