Explain one disadvantage of a functional structure for ABC's new activity.

• A. It may lead to improved cross-functional coordination that speeds decisions.
• B. It may lead to efficient, rapid decisions due to specialization.
• C. It may lead to poor coordination between departments, slowing decisions in a fast-moving and innovative business area.
• D. It eliminates overhead costs.

Answer: (C)

In a functional structure, people are grouped by specialist areas (like marketing, finance, operations), so communication tends to stay within each department rather than across them. A new activity that is fast-moving and innovative needs rapid, cross-functional collaboration, and delays in getting input from multiple departments can slow decisions and create misalignment. That’s why this option captures the main drawback: poor coordination between departments slows decisions in a fast-moving and innovative area. The other ideas don’t fit as well because improving cross-functional coordination isn’t a typical outcome of a functional setup, specialization doesn’t automatically guarantee rapid decisions for new activities, and overhead costs aren’t eliminated simply by organizing by function.