Difference between Functional Structure and Divisional Structure

The structure under which jobs of similar nature are grouped under one department is known as Functional Structure. All the departments report to one coordinating head or executive. For example, all work related to production will come under the production department. Such type of structure is suitable for organizations that have diversified activities. It aims at promoting specialization as each partner has to perform work according to their skills, specialization, and knowledge.

The structure under which jobs related to one product are grouped under one department is known as Divisional Structure. Such a type of structure is suitable for organizations that have more than one category of products to offer. The organization is divided into separate units or divisions, and each division is managed by a divisional manager. For example, if an organization has four divisions, then each department will have a separate department for production, marketing, finance, etc.

Difference between Functional Structure and Divisional Structure:

Basis	Functional Structure	Divisional Structure
Meaning	Functional structure refers to grouping of jobs of similar nature under one department.	Divisional structure refers to grouping of jobs related to one product under one department.
Formation	It is formed on the basis of function.	It is formed on the basis of product.
Specialization	It leads to functional specialization.	It leads to product specialization.
Responsibility	Fixing responsibility for a particular department is difficult.	Fixing responsibility for a particular department is easy.
Managerial Development	Managers become specialized in one function only, so there is less chance for overall managerial development.	Multiple functions are performed by the managers which make managerial development easy.
Cost	It is economical as there is no duplication of work.	It is not economical as all the resources are required by each department.
Coordination	In the case of a multi-product company, coordination is difficult.	Coordination is easy as all the functions related to a particular product are integrated into a single department.
Suitability	It is suitable for such organizations which have a single product or small number of products.	It is suitable for organizations which have varieties of products.

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