Functional organisation is that organisation in which the whole enterprise is divided according to the major activities performed by it

Functional organisation refers to the grouping of activities within an organization based on their functions or specialized areas. In this type of organization, activities are divided into different departments or units based on the functions they perform. Each department is responsible for carrying out specific functions or tasks related to its area of expertise.

Functional organization is commonly used in large organizations where different departments or units specialize in specific functions such as finance, marketing, human resources, operations, and so on. This allows for a more focused approach and expertise in each area, leading to improved efficiency and effectiveness in carrying out tasks.

The following are the key features of functional organization:

1. Departmentalization: Activities are grouped into different departments based on their functions. For example, all finance-related activities are grouped together in the finance department, while marketing activities are grouped in the marketing department.

2. Specialization: Each department or unit specializes in a specific function or area of expertise. This allows employees to develop specialized skills and knowledge in their respective areas.

3. Clear reporting lines: In a functional organization, employees report to their respective department heads or managers. This ensures clear communication and accountability within each department.

4. Coordination: Although activities are divided into different departments, coordination and collaboration between departments are essential for the smooth functioning of the organization. This is typically achieved through cross-functional teams or regular meetings between department heads.

5. Centralized decision-making: In a functional organization, decision-making is typically centralized at the top management level. Department heads provide recommendations and input, but the final decision rests with the top management.

Overall, functional organization allows for specialization, clear reporting lines, and efficient allocation of resources. However, it can also lead to silos and lack of coordination between departments if not managed properly. Therefore, effective communication and coordination mechanisms are crucial to ensure the success of a functional organization.