Organization Structure: What is functional departmentalization?

Introduction

What is organizing? Organizing means arranging the activities in such a way that they systematically contribute to enterprise goals. An organization consists of people whose specialized tasks are coordinated to contribute to the organization's goals.

The usual way of depicting an organization is with an organization chart. It shows the structure of the organization; specifically, the title of each manager's position and, by means of connecting lines, who is accountable to whom and who is in charge of what area.

The organization chart also shows the chain of command (sometimes called the scalar chain or the line of authority) between the top of the organization and the lowest positions in the chart. The chain of command represents the path a directive should take in traveling from the president to employees at the bottom of the organization chart or from employees at the bottom to the top of the organization chart (Dessler, p. 120).

At Phoenix Logistics, our organization chart is a creation of functional departmentalization.

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Functional departmentalization means grouping activities around basic functions like manufacturing, sales, and finance (Dessler, p. 122). At our company, each department is organized around a different business functions: sales/marketing, product development, and technical support. In addition, we have a group of supervisors within each department. These supervisors' functions include planning, control, and administration.

At each of the Department Heads, we also have a staff that works in each department, with an Office Supervisor. The basic idea of Phoenix Logistics' functional departmentalization is to group activities around the core functions our company must carry out.

Hence, our core functions are to create, integrate and deliver business-critical transaction management systems and services that enable the energy industry to enhance reliability and profitability in the competitive market place.

Advantages & Disadvantages

Advantages

Organizing departments around functions has several advantages:

1. It is simple, straightforward, and logical; it makes sense to build departments around the basic functions in which the enterprise must engage.

2. Functional organizations usually have single departments for areas like sales, production, and finance that serve all the company's products, rather than duplicate facilities for each product. Because the volume in these departments is relatively high, the firm typically gets increased returns to scale--in other words, employees become more proficient from doing the same job over and over again, and the company can afford larger plants and more efficient equipment. Functional organizations are therefore often associated with efficiency.

3. The managers' duties in each of the functional departments tend to be more specialized (a manager may specialize in finance or production, for instance); the enterprise therefore needs fewer general managers--those with the breadth of experience to administer several functions at once. This can simplify both recruiting and training.

4. Functional department managers also tend to receive information on only part of the big picture of the company--on that which concerns their own specialized functions. This can make it easier for top management to exercise control over the department managers' activities.

Disadvantages

Functional organizations also have disadvantages:

1. Responsibility for the enterprise's overall performance rests on the shoulders of one person, usually the president. He or she may be the only one in a position to coordinate the work of the functional departments, each of which is only one element in producing and supplying the company's product or service. This may not be a serious problem when the firm is small or does not work with a lot of products. But as size and diversity of products increase, the job of coordinating, say, production, sales, and finance for many different products may prove too great for one person; the enterprise could lose its responsiveness.

2. Also, the tendency for functional departments to result in specialized managers (finance experts, production experts, and so forth) makes it more difficult to develop managers with the breadth of experience required for general management jobs like president.

Implications

Qualities of Leadership - Leading your company in a tough economy are a difficult, but not impossible task. Your can help your company weather changing times and come out a winner. As far as a tough economy is concerned the United States has experienced one as recently as September 11, 2001, and although conditions has improved since then, you can bet that tough times will periodically occur in the future. Yet, during all such periods of stagnant growth and lackluster corporate performances, many companies have not only survived, but also prospered. How have they done it?

Change, of course has always been present, but certain economic trends used to be predictable within reasonable limits. Employments would grow at such a pace, interest rates would do this or that, and Gross Domestic Products would reach such and such a level. But today all bets are off. We can scarcely predict with confidence what will happen next week, let alone next year. As H.G Wells said it in a different context, "the pattern pf things to come fade away."

Becoming an Optimist, optimist managers are better at problem solving during difficult times than pessimistic managers. Optimistic managers are more likely to handle reversals by drawing on past experience, finding good things about the turn of events and fighting for what they

want. Pessimists often accept their fate or bad luck or seek sympathy in understanding. Optimistic managers are therefore more that likely to overcome difficulties and turn problems into opportunities for advancement.

To improve the company's performance, employees need commitment, competence, and communications, the three C's of success. Commitment is determined spirit of an Olympic swimmer who practices alone for hundreds of pre-dawn hours. Competence is the inner confidence of a well trained

pilot who uses all his knowledge, training, equipment, and intuition to make quick decisions. Communications is the critical personal contact and consensus between the CEO and employee that make performance at work flow smoothly.

Resources Allocation

We generate revenue from three sources: software licenses, software maintenance and implementation revenues. The proportion of what each makes up of our total revenue varies based on the market and our customer base. When a customer decides to purchase our solution they are charged a licensing fee. This fee could vary depending on how many users they estimate using our system, if they need more users we would then charge the customer for more licenses. In order to receive upgrades and enable the customer to use our support desk when there is an issue, we charge a support fee.

This fee could be a yearly, quarterly or monthly allocation depending on how the customer would like to be charged. Any software whether it is out of the box or custom produced, there is an implementation process that would need to be done in order to ensure that the software is working properly. This could consist of on-site training, training materials and the use of our support desk.

The revenues for our company are generated by these services. These services need to be the best in class in order for our company to make a profit. When we say best in class that means that they are better than any of our competitors and will give our customers a competitive advantage.

Conclusion

Phoenix Logistics' has the expertise and the means for producing the best software in the energy industry. We work with our customers in order to plan, build and implement our software into their business with the least amount of interruption to their employees and their productivity.

The return on their investment is in the ease of processing their transactions, turnaround time of those transactions and a time savings in the administrative processing. Our customers will be able to focus their attention on the selling, trading and the delivery of energy to their customers, this is their business and where their profits are generated. Phoenix Logistics is in the business of helping our customers make a profit and to make their customers happy.

Works Cited

Dessler, Gary. Management, Leading People and Organizations in the 21st Century (2nd ed.), 2001. New Jersey: Prentice Hall, Inc.