Functional organization

Also known as: Functional organization

Functional organization is a term used in business administration. In this organizational structure, the tasks below the management level are broken down according to their function (e.g. in administration, sales or production). For example, the accounting is divided into balance sheet and payroll accounting or the customer service is divided into domestic and foreign countries.

Functional organization / functional organization

Definition / explanation

The functional organization is the most widely used form of organizational structure and reflects the top level of the Distribution of tasks reflected in the company. The task of the company management is to coordinate these different areas.

This approach is particularly important for small and medium-sized companies, as the company management no longer has a complete overview when there are more tasks.

A characteristic of the functional organization is the allocation of actually separate task fields, which creates functional areas with their own management level. The breakdown can be based on functional aspects, product or customer aspects. The employees receive their instructions from one person.

Die Funktionalorganisation fördert die Spezialisierung und Division of labor, sie eignet sich für Unternehmen, die sich nicht ständig qualitativ verändern und über ein homogenes Produktprogramm verfügen.


  • better use of resources
  • increased responsiveness
  • high level of expertise
  • direct official channels
  • fast communication and clearly divided work areas


  • little possibility of adapting to changes
  • a high need for coordination
  • possible conflicts of competence
  • the high demand for managerial staff


  • In the case of functional organization, the tasks below the management level are divided according to their function
  • it is the most widely used form of organizational structure
  • the company management has to coordinate the different areas
  • Advantages: e.g. better use of resources and a high level of expertise
  • Disadvantages: eg little possibility of adapting to changes and a high need for coordination
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