Question

‘Organisation's decision to opt for Functional Structure or Divisional Structure will vary with the nature and type of activities performed by it.'…

Accepted Answer

Difference between ‘Functional Structure’ and ‘Divisional Structure’: Basis Functional Structure Divisional Structure --- --- --- (i) Formation Formation is based on functions. Formation is based on product lines and is supported by functions. (ii) Specialisation It leads to functional specialisation. It leads to product specialisation. (iii) Responsibility In this, it is difficult to fix responsibility on a department. In this, it is easy to fix responsibility for performance. (iv) Cost In this structure, the functions are not duplicated and hence it is economical. In this structure, there is duplication of resources in various departments, hence it is costly. (v) Managerial Development It is difficult to achieve managerial development as each functional manager has to report to the top management. It is easier to achieve managerial development as autonomy and chance to perform multiple functions are available. (vi) Coordination Coordination is difficult for a multiproduct company Coordination is easy because all functions related to a particular product are integrated in one department. B OR Importance of Decentralisation 1) Develops initiative among subordinates. 2) Develops managerial talent for the future. 3) Quick decision making. 4) Relief to top management. 5) Facilitates growth. 6) Better control. B

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Basis	Functional Structure	Divisional Structure
(i) Formation	Formation is based on functions.	Formation is based on product lines and is supported by functions.
(ii) Specialisation	It leads to functional specialisation.	It leads to product specialisation.
(iii) Responsibility	In this, it is difficult to fix responsibility on a department.	In this, it is easy to fix responsibility for performance.
(iv) Cost	In this structure, the functions are not duplicated and hence it is economical.	In this structure, there is duplication of resources in various departments, hence it is costly.
(v) Managerial Development	It is difficult to achieve managerial development as each functional manager has to report to the top management.	It is easier to achieve managerial development as autonomy and chance to perform multiple functions are available.
(vi) Coordination	Coordination is difficult for a multiproduct company	Coordination is easy because all functions related to a particular product are integrated in one department.