Organisations and management accounting
Organisations and management accounting

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Organisations and management accounting

3.1 Functional structure

As you can see from Figure 4, in a functional structure people are grouped according to the type of job they do.

Described image
Figure 4 A functional structure

This structure may be appropriate when people within functional departments need to communicate regularly with each other. For example, in a marketing department, the marketing director will coordinate the activities of marketing specialists in fields such as promotion, advertising, product design, market research, and packaging. Although there is a need for communication with all the other parts of the company, the bulk of the information exchange and communication is likely to be within the functional areas, so it makes sense to group these people together.

Functional structures, however, can have disadvantages.

  • Career paths tend to develop through functions and this can reduce managers’ awareness of other issues facing the organisation. The organisation will not develop many generalists this way (e.g., people who know about marketing and operations or finance and HR). This will expose the organisation to significant risks, as managers will not have an overview of its operations.
  • Staff may work for the benefit of their department and not the organisation as a whole.
  • Many members of staff may never meet an external customer and may not therefore have a customer service orientation.
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