Functional authority occupies a mid-way position between line and staff authority. It is a means of putting the specialists in top positions throughout the enterprise. It confers upon the holder a limited power of command over the people of other departments concerning their function. Functional authority remains confined to functional guidance of different departments. It helps in maintaining ability and uniformity of the performance of functional areas throughout the organisation.

It was F.W. Taylor who evolved functional organisation for planning and controlling manufacturing operations on the basis of specialisation. But, in practice, functionalisation is restricted to the top levels of the organisation structure and is not carried down to the lowest level in the organisation as recommended by Taylor

Merits of functional organisation:

  1. Specialisation: Functional organisation helps in achieving the benefits of specialisation of work. Every functional in charge is an expert in his area and can help the subordinate to perform better in his area.
  2. Executive development: A functional manager is required to have expertise in one function only. This makes it easy to develop executive.
  3. Reduction of work-load: Functional organisation reduces the burden on the top executives. There is point supervision in the organisation. Every functional incharge looks after his functional area only.
  4. Scope for expansion: Functional organisation offers a greater scope for expansion as compared to line organisation. It does not face the problem of limited capabilities of a few line managers
  5. Better control: The expert knowledge of the functional manager also facilitates better control and supervision in the organisation

Demerits of functional organisation :

  1. Double command: Functional organisation violates the principles of unity of command since a person is accountable to a number of bosses.
  2. Complexity: The operation of a functional organisation is too complicated to be easily understood by the workers. Workers are supervised by a number of bosses. This creates confusion in the organisation.
  3. Problems of succession: Functional organisation develops specialists rather than generalists. This may create a problem in the succession of top executive positions.
  4. Limited perspective: A functional manager tends to create boundaries around himself and thinks only in terms of his own departments rather than the whole enterprise. This results in loss of overall perspective in dealing with business problems.
  5. Delay in decision making: There is generally lack of coordination among the functional executives and delay in decision making when a decision problem requires the involvement of more than one specialist.
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