Functional Model

• In a functional model, the organization groups its employees based on their job function. This means that all the marketing employees form a group, as do the human resources employees. The employees that work in the finance function form a group, as do the information technology employees.
  
  

Advantages

• This is a convenient way to organize a business that does not manufacture a number of different products, or a business that provides a service. Smaller businesses may find this method of organization suits them. People in the same functional area can interact with each other and perform their tasks better. People also have the scope to gain expertise in a particular functional area.
  
  

Disadvantages

• There may be a tendency for the people in different functional areas to become isolated from each other. People in marketing may not interact much with the operations staff, for example. This means that a disconnect could set in relating to the overall organizational strategy. Marketing people could be pursuing a certain goal without communicating to the operations people. Management should nurture communication between the different functional groups so that they all work in tandem.
  
  

Choosing an Organizational Model

• A firm should choose an organizational model that best positions it for success. This is based on factors such as what products or services the firm provides and the emphasis it places on customer service. The organizational model that a firm opts for could mean the difference between success and failure. For example, a firm that has a presence in a number of different localities might find it suitable to opt for a geographic organizational model that puts together its business units in a specific region.