Functional Structure

Divisional Structure


Formation is based on functions.

Formation is based on product lines and is supported by functions.


There is functional specialization.

There is product specialization.


In this case it is difficult to fix responsibility on a department.

It is easy to fix responsibility for performance.

Managerial Development

Difficult, as each functional manager has to report to the top management.

Easier, autonomy as well as the chance to perform multiple functions helps in managerial development.


Functions are not duplicated hence economical.

Duplication of resources in various departments, hence costly.


Difficult for a multi-product company.

Easy, because all functions related to a particular product are integrated in one department.



Formal organization

Informal organization


Structure of authority relationships is created by the management.

Network of social relationships arising out of interaction among employees.


It arises as a result of company rules and policies.

Arises as a result of social interaction.


It arises by virtue of position in management.

Arises out of personal qualities.


It is directed by rules laid down by the management.

There is no set behavior pattern.

Flow of Communication

Communication takes place through the scalar chain.

Flow of communication is not through a planned route. It can take place in any direction.


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