What term describes the process of organizing employees based on both functional and divisional criteria?

The correct answer is "Matrix Arrangement." This term refers to an organizational structure that combines both functional and divisional elements. In a matrix arrangement, employees are grouped by their roles in particular functions, such as marketing or finance, while also being part of specific project teams or divisions, which allows for cross-functional collaboration. This structure is beneficial for organizations that require flexibility and agility, as it enables them to leverage resources effectively across different projects and departments.

While some of the other options mention concepts related to organization, they do not capture the dual criteria of functionality and division that characterize a matrix arrangement. For instance, hierarchical arrangements focus more on a clear chain of command and authority rather than the combination of functionalities and divisions. Functional grouping refers to organizing by specific job functions alone, without integrating divisional aspects. Therefore, "Matrix Arrangement" uniquely identifies the integrated structure that supports dynamic interaction and resource sharing among different parts of an organization.