Lesson 1: Managerial Organization


Functional Organization

While line organization is based on authority, functional organization is based on knowledge and expertise.



Employees report to a supervisor who is an expert in the area in which they are responsible. Usually in the business areas of production, marketing, finance, and personnel.

Functional Organization

  • Organizational structure based on knowledge and expertise
  • All workers report to a supervisor who is an expert in their area
  • Employees working in more than one area have more than one supervisor
  • Supervisors have optimum use of their expertise, specializing rather than generalizing

Try This


Below are 17 boxes with the different positions for Software Development, a hypothetical company. Arrange the boxes into the dotted lines to complete a Line Organizational Chart for this company.

Think about the possible advantages and disadvantages of this type of structure and then click on the Advantages tab or the Disadvantages tab to see how you did.


  • Supervisors might develop high levels of specialization.
  • Employees become more specialized working under supervision of experts in the field.
  • Employees might develop high levels of speed and efficiency as they are performing tasks in their fields of expertise.
  • The expertise is shared among the supervisors, making decision-making easier.
  • Possible lack of teamwork - if project calls for several areas to work together.
  • Problems arise if an employee's job is so diversified that he or she must report to two or more supervisors. Supervisors might not communicate effectively with one another regarding the deployment of an employee.
  • Top management may have difficulty maintaining control.