Product and Process based Functional Organizations

Product Functional Organizations

Product functional organization establishes each product or group of related products as an autonomous unit in the framework of the organization. In product functional organization structure, each product has a separate identity although it functions under the control of the Chief Coordinating Executive.  Each product department has several functions broadly divided into finance, marketing, personnel and production, which are also coordinated with the chiefs of the respective functions.  The main advantage of product functional organization is qualitative production under the supervision of expert personnel to produce a particular product. For instance, a company may be producing modular kitchens, healthcare products, consumer electronics, computers, etc., which are managed by the respective engineering expert in the areas of their product.  Overall control and supervision by higher executives is essential for the maximum utilization of existing resources without incurring wastage.  It means rationalization is exercised with the use of product functional organization.

There may be changes in the structure as per the needs of the company. The authority–responsibility relationship is established according to the structure. A chain of command is developed for each product, based on vertical and horizontal structural relations.  Delegation of authority is exercised for effective functioning at different levels of management.  Product functional organization necessitates finding out the economic viability of each product.  Some of these products are required for image building. There is a need for constant watch and evaluation of the performance of each product.  If the company is producing a large number of products, all the products will not form the product organization, because that would be a very uneconomical organizational part of structure.  The related products are grouped together and managed under the main product organization. Innovation, interdependence, economies of scale and divergent production are feasible under product functionalization.

Process Functional Organizations

Functional organization becomes effective if each process of production is given autonomy and independence.  The nature of production helps decide process organization. For example, a textile company has several departments based on process, namely spinning, weaving, materials management, and so on.  Each department is looked after by the expert of the area.  They are given functional foremanship based on process functional organization.  The office work is separated from shop or plant functions and each of these processes forms the base of the organization.  The Chief Production Manager will coordinate and control their activities to maintain uniformity. The line authority is also maintained in this organization.

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