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What Is a Functional Area?

A functional area in a business refers to a group or department that performs a specific role, such as marketing, finance, or human resources. Each area is essential, working synergistically to drive the company's success. Understanding these components can unlock insights into organizational efficiency. How does each area contribute to your business's overall goals? Let's explore further.
Esther Ejim
Esther Ejim

Functional area refers to the method of dividing an organization into different segments where the respective segments that are thus divided will serve as fully functional units that perform stated functions. That is to say that such a segmented unit serves a particular purpose in the organization, which can be separated from the function of other segments. An example of such an area within an organization is the human resource department, which is a division within the organization separated from other functional areas by the specific duties that are peculiar to only the human resource department.

Such a clear delineation of duties according to the related functional area assists a company in the organization of the business and in the determination of what division is responsible for specific duties. One of the characteristics of this type of area is the fact that it is usually treated as a separate arm of the business, with a manager and subordinates under the manager. For instance, if the functional area under consideration is the accounting department it will have a manager who will oversee the general activities in that accounting department as well as a deputy manager, chief accountant and other junior accountants. The manager will be responsible for the unit and will ensure that its operation is aligned with the general goals of the organization.

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Another application of the functional area in the business is as a means to make the different sections more manageable and also accountable in terms of performance. For instance, the marketing department is a functional area within an organization that has its own specific duties in relation to the organization. By dividing the marketing section into a functional area, the company can monitor the performance of the section and decide if it is meeting any stated targets or other objectives. This would not be so easy if the whole business was one unit without any divisions of functions into departments.

The human resource department in the organization is aware of its responsibilities, which is the procurement of the right human capital to fill empty slots in the company. This department must also anticipate the human capital requirement of the company and take proactive steps to provide for such a need. By dividing this department into its own unit its responsibilities have been properly defined, and the human resource department will not perform the duties of the accounting department or the marketing department, for instance.

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Discussion Comments


I feel like half the time when a company decides to separate out into "functional areas" what they are actually looking to do is to fire a few people. It's only happened once to me, but it involved all of us resubmitting our resumes for newly created positions, of which there were suddenly fewer than there were when the company was whole.

Yes I'm sure there are other reasons to do it, but beware that when they say it's for your own good, sometimes they don't really mean it.


@Mor - I find stuff like that can even happen inside a functional area, let alone between them. Communication is definitely a key, although sometimes it's as simple as making sure people know when to send memos and to read every one that they get.


I think it's really important to formally commit to making sure that the functional areas of a business still understand and interact with each other well. I've worked in too many jobs where, as they say, the left hand didn't know what the right hand was doing.

I had that come up recently, in fact, where the school I attend has recently divided itself up so that two of the subjects I'm taking towards my degree are now under different departments.

Both assumed the other was going to inform us about a particular thing we had to do in order to pass and neither did it which was very annoying for the students.

It's easy to assume communication will happen by itself. It often doesn't, so make sure your departments all know that it is expected of them as well as when and how.

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