A Functional Structure is an organizational design that groups employees based on their specific skills and functions. In this setup, departments such as marketing, finance, and human resources operate independently, allowing for specialization and efficiency. Each department is managed by a department head who reports to upper management, ensuring clear lines of authority and communication. This structure promotes collaboration within departments, as team members share similar expertise and goals. However, it can lead to challenges in inter-departmental communication and coordination, as each function may prioritize its objectives over the organization's overall goals.