Which organizational structure promotes specialization but risks creating silos?

The correct choice highlights the functional organizational structure, which is characterized by grouping individuals based on their specialized skills and knowledge. In this model, departments are formed around functions such as finance, marketing, human resources, and production. This specialization allows for enhanced efficiency and expertise within each functional area, as employees can collaborate closely with those in similar roles, leading to improved performance within their specialty.

However, one significant drawback of the functional structure is the potential for "silo" mentality. Departments may become so focused on their own goals and objectives that they fail to communicate and collaborate effectively with other departments. This separation can hinder overall organizational coherence and responsiveness, as each department prioritizes its functional agenda over broader company goals or inter-departmental teamwork.

Understanding this dynamic is critical for organizations that must balance the benefits of specialization with the need for cross-functional cooperation to achieve overall success.