Departmentation is a part of the organisation process. It involves the grouping of common activities under a single person’s control. The activities are grouped on the basis of a function of the organisation. This work is done by a chief executive of the concerned organisation.
Departmentation means the process by which similar activities of the business are grouped into units for the purpose of facilitating smooth administration at all levels.
Departmentation means the grouping of similar activities and employees of organisation into various departments for the purpose of facilitating administration is called departmentation. It implies the division of total work of an organisation into individual functions and sub functions. It is the process of division of organisation into different parts known as departments.
According to L. A. Allen – “Departmentation is the means of dividing a large and monolithic functional organisation into smaller, flexible, administrative units.”
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Learn about:- 1. Introduction to Departmentation 2. Meaning of Departmentation 3. Definitions 4. Importance 5. Features 6. Factors 7. Functions 8. Process 9. Fundamental Points 10. Principles
11. Choosing a Basis 12. Bases 13. Purpose 14. Need 15. Types 16. Methods 17. Advantages 18. Benefits 19. Dangers.
Departmentation in Management: Meaning, Definitions, Importance, Features, Factors, Functions, Process, Fundamentals, Methods and Advantages
Departmentation in Management – Introduction
Departmentation is a part of the organisation process. It involves the grouping of common activities under a single person’s control. The activities are grouped on the basis of a function of the organisation. This work is done by a chief executive of the concerned organisation.
Organisation involves the dividing and grouping of the work to be done in an enterprise. Dividing the work naturally means the identification of individual activities which have to be undertaken for the attainment of the organisational objectives.
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But once the various activities have been identified, it is necessary to group them together on some logical basis so that a team can be organised. “Departmentation is the process of grouping activities into units for purposes of administration.” The administrative units so created may be designated as divisions, units, branches or by some other name.
Departmentation means the process by which similar activities of the business are grouped into units for the purpose of facilitating smooth administration at all levels.
The process of organising an enterprise consists of – (i) dividing and grouping the work to be done, and (ii) assigning different duties and responsibilities to different people. Departmentation is the process which is used to group activities into units for purposes of administration at all levels. By this process, personnel and functions comprising an enterprise are departmentalised by division into separate sub-units and by arrangements of groupings so as to contribute to achievement of the organisation’s purposes.
Departments comprise a framework for an organisation and are an agency of management. This structuring enables management to expand an organisation indefinitely without collapse. Departmentation can provide a necessary degree of specialisation of executive activity for efficient performance. It can simplify the tasks of management within a workable span. It also provides a basis on which top management can co-ordinate and control the activities of sub-units.
Departmentation in Management – Meaning
Koontz and O’Donnell define a department as designating – “a distinct area, division, or branch of an enterprise over which a manager has authority for the performance of specified activities”. Most enterprises are involved in producing a product or a service for the benefit of others. The latter aspect requires marketing or distribution so that the persons for whom the product or service is intended will accept it if it satisfies his needs. These activities require money or sufficient capital or finance.
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Departmentation means the grouping of similar activities and employees of organisation into various departments for the purpose of facilitating administration is called departmentation. It implies the division of total work of an organisation into individual functions and sub functions. It is the process of division of organisation into different parts known as departments.
As per views of Koontz and O’Donnell, “departmentation is a process of dividing the large monolithic functional organisation into smell and flexible administrative units.” The process of departmentation takes place at all levels in the organisation. The chief executive groups activities into major departments such as production, finance, marketing, and personnel.
These departments operate under the control of a manager known as departmental head who report directly to the chief executive. The departmental head has adequate authority over the activities and employees working there. He is ultimately responsible for the smooth functioning of the department.
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He further assign duties to their juniors, for example, the marketing manager may divide his activities on the basis of activities like advertising, marketing research, customer service and so on. At the lower level, there may be sales assistants and sales representatives etc.
Organisation involves dividing and grouping of activities to be done in an enterprise. Division of work means the identification of activities which are to be done for the achievement of organisational goals. After identifying various activities, these are grouped together on some logical basis.
Departmentation is the process of grouping various activities into separate units of departments. A department is a distinct section of the business establishment concerned with a particular group of business activities of like nature. The actual number of departments in which a business house can be divided depends upon the size of establishment and its nature.
A big business enterprise will, usually, have more departments as compared to a small one. In the words of Allen, “Departmentation is a means of dividing a large and monolithic functional organisation into smaller, flexible, administrative units.”
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A department is a work group combined together for performing certain functions of similar nature. The process of division of the enterprise into different parts is broadly called departmentalization. Departmentation leads to grouping of both functions and personnel who are assigned to carry out allocated functions.
Departmentalization describes the manner in which divided tasks are combined and allocated to work groups. The impact of departmentation is a delineation of executive responsibilities and a grouping of operating activities. Grouping of activities into manageable units is necessary at all levels in the enterprise. Their work must be so coordinated as to ensure contribution to the welfare of the organisation.
The job functions of employees need to be divided among them and combined in a logical way. Workers with related functions usually share a common work area and constitute a work unit. Departmentalization is the process of dividing the work of the organisation into various units or departments.
Grouping of activities is an essential step for the efficient functioning of the organisation. It involves the combining of jobs into effective work groups and combining of groups into identifiable units.
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Efficiency of work flow depends on the successful integration of various units within the organisation. Division of work and logical combination of tasks should lead to departmentalisation. A department is a work group combined together for performing certain functions of similar nature.
The process of division of the enterprise into different parts is called departmentation. Departmentation leads to grouping of both functions and personnel who are assigned to carryout allocated functions. Grouping of activities into manageable units is necessary at all levels in the enterprise.
Departmentation in Management – Definitions
The departmentation means the process of segregating the individuals and activities from each other and grouping them to form units of similar characteristics or job or individuals. A department is a distinct area which involves in similar types of activities within the organisation.
The departmentation include a process of managerial efforts to bring the similar jobs under one unit or supervision. A manager or head of a department does have authority to influence the way the job is performed and responsibility to own any success or failure as an outcome of the departmental performance.
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Thus departmentation is a simple process of grouping the various jobs having similar nature into one to form a department so as to achieve the organisational objectives.
Departmentalisation, called as departmentation, refers to the division of the whole enterprise into different groups with a view to facilitate the administration of the enterprise. Departmentalisation leads to grouping of both functions and personnels who are assigned to carry out the allocated activity.
In other words, it can be said that identifying and grouping of similar activities on some logical basis so that the operators may be organized in order to attain the objectives of the enterprise is called departmentation.
Departmentation may be defined as “The process of dividing the work and then grouping them into units and sub-units or departments for the purpose of administration.”
According to Webster’s New World Dictionary – “A department is a separate part or division, of a government, business or school; thus a departmentation is the process of forming departments or grouping activities of an organisation into a number of separate units for the purpose of efficient functioning.”
In business undertakings the term used for a department, resulted from the departmentation, vary from organisation to organisation. In Government these are called branch, department, bureau and section; in military regiment, battalion, group and company are used. Further, terminology differs in organisations of similar nature. The process of departmentation may be the same.
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According to H. Albers – Principles of Management; a Modern Approach, John Wiley & Sons, New York; 1972. – “The impact of departmentation is delination of Executive responsibilities and a grouping of operating activities. Every level in the hierarchy below the apex is departmentalized and each succeeding lower level involves further departmental differentiation”.
According to L. A. Allen – “Departmentation is the means of dividing a large and monolithic functional organisation into smaller, flexible, administrative units.”
Departmentation is the grouping of homogeneous activities into one organisation unit on the basis of special and contiguous nature of activities. It is one of the primary tasks in designing an organisation structure. Departmentation or departmentalisation is a process where tasks are grouped into jobs, jobs into effective work groups and work groups into identifiable segments or departments. It involves horizontalisation of activities in an enterprise.
It leads to grouping of both activities and personnel. A department may be called a division, branch, regiment, section or some other organizational unit. It is headed by a manager known as departmental manager who is the in charge of the department and is responsible for the performance of activities entrusted to the department.
Departmentation in Management – Importance
Departmentation is grouping of activities and employees into departments. It is division of a complex organization into smaller, flexible administrative units. It is a method of arranging activities to facilitate the accomplishment of organizational objectives.
Departmentation is essential/important because of the following reasons:
1. Specialization:
Departmentation permits an organization to take advantage of specialization. It permits people to work in individual departments and gain experience and expertise in handling things over there. Jobs can be assigned to people who are best suited for delivering excellent results.
2. Expansion:
Organisations can cope with heavy work by simply dividing the same among a number of smaller, flexible departments. Organisations can grow only when additional departments are created to handle rush orders and specialized jobs demanding individual attention. In the absence of Departmentation, managers can control only a small group of people under their command.
3. Autonomy:
Departmentation permits people to think and act independently while working in an individual department. They have enough freedom to think and act on their own putting resources at their command to best use. When people are empowered to act in an autonomous way, they get enthused and begin to put their best foot forward.
4. Responsibility:
Departmentation helps people know their limitations. They know what to do and what not to do. They also know what they are supposed to do in order to meet targets and deadlines. When they fail to live up to expectations and go off the track it is easy to find out where things have gone wrong. Where job assignments are clear and you know who is responsible for what, accountability can be fixed fairly easily and quickly.
5. Appraisal:
The performance of people working in a department can be appraised easily against the assigned goals and targets. When they fail to deliver results, you can put the finger on the problem causing trouble. You can separate the wheat from the chaff easily.
6. Management Development:
Departmentation allows people to grow in a particular area or field. They can put in their best while working in a department fairly independently. They can put their skills, capabilities and talents to best use. Repeated operations in a micro area would help them gain mastery over the discipline. Over the years, they can also offer guidance, assistance and help to the younger executives reporting to them directly and thus, contribute to their growth.
7. Communication and Control:
Departmentation facilitates communication, coordination and control and contributes to the organizational success. Working in a department permits people to interact freely and communicate without any hurdles. They can coordinate their efforts with others in an attempt to reach goals. It becomes easy to find out where things have gone wrong, who is not able to pick up speed, how to plug the loopholes promptly. This, of course, would facilitate the control process.
Departmentation in Management – 5 Salient Features
In an organisation, departmentation plays a vital role. It adds to the efficiency of the enterprise. Following are the salient features of departmentation.
Feature # 1. Increase in Efficiency:
When the activities of a large organisation are divided into different departments, decentralisation of authority to departmental heads takes place. The departmental heads take charge of tasks assigned to them along with the personnel and function efficiently. They also shoulder the responsibility and accountability to the organisation for all the activities performed by them.
Feature # 2. Responsibility and Accountability:
When the responsibility is fixed on the executive of the department, he automatically feels responsible for the work. This ensures accomplishment of tasks as per schedule given to each department by the organisation and thus will be accountable to superior authority.
Feature # 3. Provide Specialization:
Specialisation is a mandatory requirement leading to perfection of any manufacturing item or any work for that matter. When a particular work is divided methodically into many parts, perfection of the work can be achieved. An individual who will be doing a particular job will gain the requisite experience, as the adage goes – ‘Experience without learning is more than learning without experience.’ Thus perfection enhances the quality of the product.
Feature # 4. Sound System of Job Appraisal:
Before the departmentation takes place, duties, responsibilities of an individual are defined and specific tasks are assigned to him. This will enable a correct evaluation of performance of the departments in general and of an individual in particular.
Feature # 5. Economy-Oriented Budgeting:
The budgeting of the departments is done for their specific tasks and funds are allotted to the optimum, taking into consideration the expenditure over the previous year and the target for the ensuing year. Thus, the control system will function efficiently.
Departmentation in Management – 6 Main Factors that are Basic to Divide an Organization into Departments
The following factors are basic to divide an organization into departments:
Factor # 1. Specialization:
Department should yield the advantages of specialization. Specialization may be functional such as in marketing, we have advertising, sales promotion etc. or byproducts such as cosmetics, condiments etc.
Factor # 2. Control:
Departmentation should serve to make control as effective as possible. One activity intended to serve, as a check on another should be under specific executive. Territorial departments (zonal or districts) may be established in such a way that the performance of one can be checked by comparison with the other. A clean break made between two departments will help in fixing responsibility clear and squarely.
Factor # 3. Co-Ordination:
Quite different activities may be grouped together under one executive, because they need to be co-coordinated. In case of orphan activities like filing, or other service function, the most-use criterion may be applied. That is such activities may be clubbed together with the function that relies on it the most.
Factor # 4. Attention:
An activity that is considered to be basic to the success of an enterprise may be given greater attention than others and may, for this purpose, be placed in separate division.
Factor # 5. Local Conditions:
While forming departments, attention must be given to local conditions, at the places concerned, for example, the personalities of individuals who will man the organization, or the pattern of informal relationships among people, or the need to combine activities into full-time jobs.
Factor # 6. Economy:
The expenses involved in creating a separate division for an activity or activities should also be considered though this should not become the all- important factor.
Departmentation in Management – 3 Fundamental Activities or Functions to be Performed by Every Organisation
Thus, for every organization or enterprise, there are three fundamental activities or functions to be performed, namely:
1. Production,
2. Marketing and
3. Finance.
Thus, functional departmentation consists of grouping of common activities in the form of an organizational unit. In short, units are formed around common functions. The term functional departmentation is used at the higher organizational levels. In addition to the functional departmentation on the basis of production, marketing and finance, it is possible to attempt departmentation in different ways such as by product, by territory, by customer, by process and by task force.
Top management is at liberty to use any means of departmentation while forming an organization structure. Usually for the top and bottom organization levels, functional departmentation is followed and for the intervening organization levels other means of departmentation is used. The selection of the media of departmentation will be determined on the basis of the extent to which it is likely to achieve the objective.
Departmentation in Management – Process
Departmentation is done through the following process:
1. Identification of work.
2. Analysis of details of each work.
3. Description of the function of the organisation.
4. Entrusting the functions to a separate person who has specialised in the respective field and providing him with suitable staff.
5. Fixing the scope of authority and responsibility of the departmental heads.
Departmentation in Management – Important Fundamental Points to be Kept in Mind at the Time of Drafting Departmentalized Organisation Plans
The important fundamental points to be kept in mind at the time of drafting departmentalized organisation plans are as follows:
(i) Specialisation – The benefit of specialisation can be secured if the total effect required to be undertaken by the organisation is divided into functions and sub functions.
(ii) Coordination – The work is being carried on in a number of organisations. There must be a proper mechanism for coordinating the activities of different departments so as to enable the organisation to achieve its objectives successfully.
(iii) Control – The purpose of departmentation is to enable the organisations of function efficiently and economically and hence, departmentation should provide for effective control of activities performed in different departments.
(iv) Economy – The expenditure involved in producing departmentalised organisation is also another point to be considered. Whatever the type of departmentation used, it should not result in an excessive financial burden to the organisation.
(v) Ground work – The management should make certain preparations and prepare the ground for decentralisation of authority, for enforcing adequate controls, for providing facilities for management development, and for introducing effective communication network.
Departmentation in Management – 9 Main Principles Governing Departmentation
Principles governing departmentation are as follows:
1. Principle of attainment of organisational objectives – This principle implies that the basis of departmentation in any organisation must ensure attainment of departmental goals which ultimately lead to accomplishment of organisational objectives.
2. Principle of comprehensive departmentation – This principle states that any chosen basis of departmentation must ensure grouping of activities in such a way, that no organisational function is ignored.
3. Principle of inter-departmental cooperation – Grouping of activities in the course of forming departments should be such that inter-departmental cooperation is facilitated and scope of conflicts minimized.
4. Principle of organisational efficiency – The chosen basis of departmentation must promote managerial and operational efficiency in the organisation.
5. Principle of cost-benefit analysis – This principle of departmentation states that the benefits associated with a basis of departmentation must outweigh the operational costs.
6. Principle of control by top management – The basis of departmentation applied in an organisation must ensure appropriate authority responsibility fixation on the departmental heads for effective control.
7. Principle of optimum utilization of resources – As per this principle of departmentation, basis of departmentation in an organisation must ensure optimum utilization of all organisational resources.
8. Principle of autonomy of department heads – Departmentation must allow the departmental heads to function with autonomy, so that their creative abilities may be nurtured.
9. Principle of flexibility – This basis of departmentation ensures that the departmental set up of an organisation must be flexible. This implies that in response to changing environmental factors, new departments may be set up or existing departments may cease to exist.
Departmentation in Management – Choosing a Basis for Departmentation
Most of the organisations rely on the classical way of departmentalisation. But the fast changing business environment and customers have forced to the organisation to opt for more flexible system rather than rigid one. The important trends to mention in modern era are how important the customer is for the organisation and their success.
The customer based departmentation have been to some extent successful in addressing the customer demands. Today’s competitive environment has necessitated the importance of customer and brought it to the centre of business. In order to respond in a better way to the customer needs, many organisations have adopted the customer based departmentation having customer satisfaction as their augmented objective.
The static nature of the organisations has also faced threats from the dynamic nature of the business activities putting strong demands of making structure flexible. Expertise at different levels have also come forward to supplement the gap of being rigid in departmentation to tap every opportunity the organisation gets.
This has necessitated the cross functional teams replacing the rigid departments. The cross functional teams usually have members from production, finance, marketing, research and business development etc., to make their work highly interdependent.
The cross functional teams are finding their role in designing the product to finding a solution of market problem, formulating the policy and strategy to looking at the floor level implementation issues. The matrix form of organisation structure reflects the same concept based on cross functional teams.
The departmentation is the process of grouping the similar activities into one department. The departmentation is a crucial process as it needs to learn the nature of job or activity, product, service or customer.
The departmentation is usually based on function, product, territory, customer or process involved in the business. The different bases do have their own importance and need depending on the business. There is need to learn and chose the right base of department in order to develop the business and serve to the customer.
Departmentation in Management – Basis of Departmentalisation
While thousands of different organisation structures exist, almost all are built on the concept of departmentalisation. Departmentalisation involves grouping jobs into related work units. The work units may be related on the basis of work functions, product, customer, geography, technique, or even time. Every organisation of a given type must perform certain jobs in order to do its work. Key functions of a manufacturing company, for example, include production, purchasing, marketing, accounting and personnel.
1. Work Functions:
Every organisation of a given type must perform centre jobs in order to do its work. Key functions of a manufacturing company, for example, includes production, purchasing, marketing, accounting and personnel. Functional departmentalisation occurs when organisation units are defined on the basis of the nature of the work to be done. Most organisations have four basic functions – production, marketing, and finance and human resources. Production refers to the actual creation of something having market value— either goods, services, or both.
Marketing involves product or service planning, pricing the product or service with respect to demand, evaluating how to best distribute the good or service with respect to demand, evaluating how to best distribute the good or service, and communicating (transmitting) information to the market through sales and advertising. Any organisation, whether manufacturing or service, must provide the financial structure necessary for carrying out its activities. The human resource function is responsible for securing and developing the organisation’s people.
Each of these basic functions may be broken down as necessary. For instance, the production department may be divided into maintenance, quality control, engineering, manufacturing, and so on. The marketing department may be grouped into advertising, sales and market research.
Advantages:
The primary advantage of functional departmentalisation is that it allows for specialisation within functions. It also provides for efficient use of equipment and resources, potential economies of scale, and ease of coordination within the function itself. Using such functions as the basis for structuring the organisation has the advantage of gaining efficiency. Grouping jobs that require the same knowledge, skills, and resources allows them to be done more quickly, and promotes the development of greater expertise.
Disadvantages:
However, functional departmentalisation can have some negative effects. A disadvantage of functional groupings is that people with the same skills and knowledge may develop a narrow departmental focus and have difficulty appreciating any other view of what is important to the organisation; organisational goals, in this case, may have to be sacrificed into achieve of departmental goals.
For example, sub-optimisation of goals occur when members of a functional group develop more loyalty to the functional group’s goals than to the organisation’s goals. For example, the marketing department might be overzealous in selling products even when the production department cannot meet any additional demand. If the group’s goals and the organisation’s goals are not mutually supportive, such activity can create several problems.
Conflict(s) may also arise among different departments trying to achieve different goals. Similarly, employees who are locked into (tied to) their functions, have a restricted view of the organisation. Finally, the rather narrow functional scope of managers may be a disadvantage when a multidisciplinary approach is needed.
2. Product:
Large, diversified companies are often organised according to product(s). All the activities necessary to produce and market a product or group of similar products are grouped together. Typically in such an arrangement, the top manager of the product group has considerable autonomy over the operation as well as responsibility for the profitability of the group.
The great advantage of this type of structure is that the personnel in the group can focus on the particular needs of their product line and become expert in the development, production and distribution of different products. The greatest disadvantage, in terms of the larger organisation, is the duplication of resources. Each product group wants research, engineering, marketing, and other functions under its own control. The top leadership of the organisation must decide how much redundancy it can afford.
Under product departmentation, all the activities needed to produce and market a product or service are usually under the control of a single manager. This system allows employees to identify themselves with a particular product and thus develop esprit de corps. It also facilitates managing each product under a separate profit centre. Product departmentation provides opportunities for training for executive personnel by letting them experience a broad range of functional activities.
Problems can arise if departments become overly competitive to the detriment of the overall organisation. A second potential problem is duplication of facilities and equipment. Product departmentation adapts best to large, multiproduct organisations.
3. Geographic:
Organisations that are spread over a wide area may find advantages in organising along geographic lines so that all the activities performed in a region are managed together. In a large organisation, simple physical separation makes centralised coordination more difficult. Also, important characteristics of a region make it advantageous to promote a local focus.
For example, marketing a product in Western Europe may have different requirements than marketing the same product in Southeast Asia. Companies that market products globally frequently adopt a geographic structure. In addition, experience gained in a regional division is often an excellent training for management at higher levels.
Geographic departmentation is most likely to occur in organisations like maintain physically dispersed and autonomous operations or offices. Departmentation by geography permits the use of local employees and/or salespeople. This can create customer goodwill and an awareness of local feelings and desires. It can also lead to a high level of service. Of course, having too many geographic locations can be very costly.
4. Customer:
An organisation may find it advantageous to organise its activities according to the different kinds of customers it serves. A distribution company, for example, that sells to consumers, government clients, large businesses and small businesses may decide to base its primary divisions on these different markets. Its personnel can then become expert in meeting the needs of these different customers. In the same way, an organisation that provides such services such as – accounting or consulting may group its personnel according to the kind of customers it serves.
Customer departmentation is based on division by customers served. A common example is an organisation that has one department to handle retail customers and one department to handle wholesale or industrial customers. Figure 8 shows departmentation by customer for Johnson & Johnson. This type of departmentation has the same advantages as product departmentation. For example, if the professional group and the pharmaceutical group in the same department becomes too competitive with each other for corporate resources, the organisation’s overall performance is likely to suffer.
Departmentation in Management – 3 Main Purposes and Aims of Departmentation
The purpose and aims of departmentation are as follows:
(1) To Administer the Enterprise in the Best Way:
The purpose of departmentalisation is to administer the enterprise in the best possible manner. It aims at scientific distribution of work of the enterprise among different sections and their personnels in a manner in which their work can be – (a) supervised, (b) guided, (c) controlled, and (d) co-ordinated to the maximum advantage of the organisation and to the benefit of the personnel who are on the operation line.
(2) To Attain the Goal:
Departmentalisation seeks diffusion of authority and responsibility aiming at the attainment of the goal of the enterprise in a manner in which it stands benefited.
(3) Division of Work in Groups and Sub-Groups:
It is an easy and simplified appraisal of the efforts to achieve the most important purpose of departmentalisation. It is for this purpose the work and personnels are divided into groups and sub-groups known as departments.
Departmentation in Management – Need
The division of labour makes it complicated the handling the similar activities by different people making more differentiation in similar activities. The need was realised that if the similar activities are performed by same or similar people, then it would be easy to align their output with organisational objectives.
Not only, the activities performed by similar people, but the activities should be supervised and assessed by same person in order to make coordination smooth. Division of labour creates specialists to perform specific activity, who need coordination. This coordination can be facilitated by putting all of them in one department under the supervision of a manager. The departmentation of this kind is usually based on the nature of common activities which are put in one department.
The departmentation also helps in establishing work teams and supervision structure. The similar kinds of job, people or products need a common work environment and people discussing the problems to provide best solutions. It creates to identify the common resources and their best utilisation for the achievement of objectives.
The departmentation envisage need to develop the common standards and measures of performance. A department provides scope for the informal communication within the department.
The need for departmentation arises due to specialization of work and limitation on the number of sub-ordinates that may be directed and controlled by a superior. In the objective of departmentation there would be serious limitations on the size of organization.
A superior cannot supervise an unlimited number of sub-ordinates. Grouping of activities and personnel into departments makes it possible to expand the organisation to any limit.
New departments, divisions, sections or sub-sections may be created as the organisation expands according to the need of the organisation. However, when departments are created to meet this basic need, it serves a number of other functions leading to organizational efficiency.
Departmentation in Management – Types (With Advantages and Disadvantages)
The limitation on the number of subordinates that can be directly managed would restrict the size of enterprises. Grouping activities and people into departments makes it possible to expand organisations to an indefinite degree.
Departmentation is a part of the organisation process. It involves the grouping of common activities under a single person’s control. The activities are grouped on the basis of a functions of the organisation. This work is done by a chief executive of the concerned organisation.
Departmentation means the process by which similar activities of the business are grouped into units for the purpose of facilitating smooth administration at all levels.
Departmentation is an essential one in the modern business world. All the business activities cannot be looked after by a single individual. The classified activities bring in specialisation and managerial convenience. It ensures suitable span of control. Departmentation is created in product-wise, process-wise or area-wise. It ensures proper directions to and control on them.
There are certain basic methods of dividing the duties and responsibilities within an organisational structure.
They are given below:
1. Departmentation by functions.
2. Departmentation by regions (area or location) or territory.
3. Departmentation by customers.
4. Departmentation by product or service.
5. Departmentation by process.
6. Matrix organisation
7. Strategic Business Units.
A brief discussion of the above classified departmentation is given below:
1. Departmentation by Enterprise Function:
Grouping activities in accordance with the functions of an enterprise-functional departmentation-embodies what enterprises typically do. Since all enterprises undertake the creation of something useful and desired by others, the basic enterprise functions are production (treating utility or adding utility to a good or service), selling (finding customers, patients, clients, students, or members who will agree to accept the good or service at a price or for a cost), and financing (raising and collecting, safe guarding, and expending the funds of the enterprise).
It has been logical to group these activities into such departments as engineering, production, sales or marketing, and finance.
The most commonly followed basis of departmentation is by functions. Under this departmentation, the activities are grouped on the basis of functions which are to be performed. Each department is headed by one responsible person, who is directly responsible to the General Manager.
1. It is a scientific and time tested method.
2. It follows the principles of occupational specialisation and division of labour.
3. It ensures proper performance control.
4. Due weightage and prestige are given to the departmental managers and they are respected by top management people.
5. It facilitates co-ordination activity within the department itself and the organisation as a whole.
6. It is economical, simple and easy to understand.
7. It helps the utilisation of manpower and other natural resources of the organisation.
8. It is logical reflection of functions.
9. It maintains power and prestige of major functions.
10. It simplifies training.
11. It furnishes means of tight control at top.
1. It makes the management control work more difficult.
2. The department heads consider themselves to be autonomous sections of the organisation. The managers will not look upon the undertaking as a unit.
3. It increases the work load and responsibility of departmental managers.
4. It doesn’t offer any scope for training for the overall development of managers.
5. The departmental managers are experts in handling the problems in their departments alone. They may not be able to understand the problems of other departments.
6. It reduces coordination between functions.
7. Responsibility for profits is at the top only.
8. Slow adaptation to changes in the environment.
2. Departmentation by Territory or Geography (or) Region (or) Area:
Departmentation based on territory is rather common in enterprises that operate over wide geographic areas. In this case, it may be important that activities in a given area or territory be grouped and assigned to a manager.
Business firms resort to this method when similar operations are undertaken in different geographic areas, as in automobile assembling, chain retailing and wholesaling and oil refining. Many government agencies-Bank and the Postal Service, and so on, adopt this basis of organisation in their efforts to provide similar services simultaneously across the nation.
Territorial departmentation is most often used in sales and in production; it is not used in finance, which is usually concentrated at the headquarters. This method of departmentation may be suitable for a business unit which is wholly dispersed.
The business activities are grouped in area-wise and each area is incharge of a single person. The local persons are appointed as salesmen in each area. It will help the business unit to increase the sales. The reason is that the local person is familiar with the local language, the culture and preferences of the customers.
1. It makes possible an effective span of control.
2. It reduces the cost of operation and gains saving in time.
3. The sales may be increased with the help of intimate knowledge about the tastes and preferences of the customers in the local market.
4. Regional managers could win the confidence of customers and remove the competitors from the market.
5. Accounts are prepared area-wise. So, the profitability of each area is known to the management.
6. It provides opportunities to managers to improve their skill in various fields.
7. This type of departmentation is more suitable for a large scale business unit.
8. Control process is very easy to manage.
9. It places responsibility at a lower level.
10. It places emphasis on local markets and problems.
11. It improves coordination in a region.
12. It takes advantage of economies of local operations.
13. It has better face-to-face communication with local interests.
14. It furnishes measurable training ground for general managers.
1. It increases the number of personnel with general manager abilities and involves high cost of operation.
2. The control of head office is less effective one.
3. It may also involve duplication of work.
4. A small business concern cannot manage the high cost of operation.
5. It tends to make maintenance of economical central services difficult and may require services such as personnel or purchasing at the regional level.
6. It increases problem of top management control.
3. Customer Departmentation:
Grouping activities so that they reflect a primary interest in customers is common in a variety of enterprises.
This type of departmentation is preferred when the various needs of customers are different in nature. For example, a bank or a financial institution may divide its loan section into number of heads and assign them to various departments, such as loans to businessmen, farmers, professionals and so on. Similarly, the sales department of a business concern could be divided into industrial goods and consumer goods. The consumable goods could again be sub-divided into perishable and non-perishable in nature.
1. It fulfills the expectations and needs of customers.
2. It encourages concentration on customer needs.
3. It gives customers feeling that they have an understanding supplier.
4. It develops expertness in customer area.
5. It develops specialisation among the organisation staff.
6. The out of fashion products can be dispensed with through the departmentation by customers. The reason is that the business unit has intimate knowledge of the customer’s tastes and preferences.
7. Each section of the customer is able to get better service from the company and helps the company to win the goodwill, of its customers.
1. There may be duplication of activities.
2. The achievement of co-ordination is very difficult.
3. There is a wastage of available resources and facilities.
4. The production activities cannot be organized under this methods of departmentation. If it is so, the cost of operation will be high.
5. It may be difficult to coordinate operations between competing customer demands.
6. It requires managers and staff expert in customers problems.
7. Customer groups may not always be clearly defined (for example, large corporate firms vs. other corporate businesses).
4. Departmentation by Product:
Grouping activities on the basis of products or product lines has been growing in importance in multi-line, large-scale enterprises.
This structure permits top management to delegate to a division executive extensive authority over the manufacturing, sales, service and engineering functions that relate to a given product or product line and fix a target of profit responsibility for each of these managers.
This type of departmentation is made by the large-scale business unit. A single business unit may manufacture and sell different types of products. Then, each type of product or services is allocated to a separate department. Functionalised units for each product are created within the general structure of the organisation. Manufacturing, sales, finance and personnel functions are arranged separately for each type of product.
Each department is responsible for manufacturing a product and selling it to customers. Grouping of all activities are planned in advance within each product section. The co-ordination function is performed by the top management.
1. Product departmentation helps in the maximum utilisation of personal efficiency of workers in the area of manufacturing and marketing of product.
2. It places attention and effort on product line.
3. There is a possibility of gaining economy in manufacturing and marketing of products on account of large scale operation.
4. Better services may be provided to the customer.
5. The profitability of each product is known to the management. So, it is easy to fix the responsibility on the departmental heads.
6. Proper attention may be devoted to the manufacture of a product.
7. All the functions pertaining to the manufacture of a particular product are performed by managers. Then, there is the possibility of an effective co-ordination and control.
8. A new line of product can be introduced without any difficulty.
9. It facilitates use of specialized capital, facilities, skills, and knowledge.
10. It permits growth and diversity of products and services.
11. It improves coordination of functional activities.
12. It places responsibility for profits at the division level.
13. It furnishes measurable training ground for general managers.
1. There is a danger of duplication of work.
2. It increases the number of personnel with general manager abilities which in turn increases the cost of operation.
3. It requires additional cost for maintaining a sales force for each type of product.
4. In proportion to the increase in the number of employees, the problem of control at the executive levels become more difficult.
5. Machines and equipments in each product department may not be used fully
6. It tends to make maintenance of economical central services difficult.
7. It increases problem of top management control.
5. Departmentation by Process:
This type of Departmentation is followed when the production activities are carried on in many places. For example, a textile mill has many departments such as Ginning, Spinning, Weaving, Dyeing and Printing, Packing and Sales. Each section will be in charge of separate specialised persons.
1. The costlier machines can be used effectively.
2. There is no interruption of the departments or process in other production processes. The requirements and renewals of any process cannot affect the production of other processes.
3. There may be economy in operation.
4. There is no duplication of activities.
5. The principle of specialisation and division of labour is followed under this method of departmentation.
6. This departmentation helps the top management to have effective performance control.
7. This type of departmentation is more suitable to any business unit which manufactures a product passing through a number of processes.
1. Separate rooms for operation and other facilities should be given to all the process. This results in heavy cost of operation.
2. More specialties are essential to each process.
3. It does not give good training to staff members and there is a lack to overall development of the managerial talents.
6. Matrix Organisation:
Another kind of departmentation is matrix or grid organisation or project or product management. However, pure project management need not imply a grid or matrix. The essence of matrix organisation normally is the combining of functional and project or product patterns of departmentation in the same organisation structure.
And an overlay of project managers is responsible for the end product. This kind of organisation occurs frequently in construction (for example, building a bridge), in aerospace (for example, designing and launching a weather satellite), in marketing (for example, an advertising campaign for a major new product), in the installation of an electronic data processing system, or in management consulting firms in which professional experts work together on a project.
1. It is oriented toward end results
2. Professional identification is maintained
3. It pinpoints product-profit responsibility
Disadvantages:
1. Conflict in organisation authority exists
2 Possibility of disunity of command exists
3. It requires manager effective in human relations
7. Strategic Business Units (SBUs):
Companies have been using an organisational device generally referred to as a Strategic Business Unit (SBU). SBUs are distinct little businesses set up as units in a larger company to ensure that a certain product or product line is promoted and handled as though it were an independent business.
This special organisation unit was introduced to ensure that each product offered by the company would receive the same attention as if it were developed, produced, and marketed by an independent company.
An SBU, must- 1. have its own mission, distinct from the mission of other SBUs, 2. have definable groups of competitors, 3. prepare its own integrative plans, fairly distinct from those of other SBUs, 4. manage its resources in key areas, and 5. have a proper size—neither too large nor too small.
For each SBU, a manager (usually a “business manager”) is appointed with responsibility for guiding and promoting the product from the research laboratory through product engineering, market research, production, packaging, and marketing and with bottom-line responsibility for its profitability. Thus, an SBU is given its own mission and goals.
Obviously, the major benefit of utilizing an SBU organisation is to provide assurance that a product will not get “lost” among other products (usually those with larger sales and profits) in a large company. It preserves the attention and energies of a manger and staff whose job is to guide and promote a product or product line. It is thus an organisational technique for preserving the entrepreneurial attention and drive the characteristic of the small company. In fact, it is an excellent means of promoting entrepreneurship.
Departmentation in Management – 4 Primary or Basic Methods of Departmentation within an Organisation Structure
There are 4 primary or basic methods of departmentation or of dividing responsibilities within an organisation structure, namely:
1. By function;
2. By territory or location;
3. By process;
4. By product or service.
Other methods exist, such as by customers or by simple numbers or by time, and are encountered under special circumstances. Departments may be set up on the basis of customers served. For example, Wenger’s Restaurant serves regular meals in the big hall, and maintains an Espresso Bar for serving snacks. Where ‘shifts’ become necessary because of rush of work, the division would be made on time basis – day shift, evening shift and night shift.
Division by simple numbers occurs when a number of indistinguishable persons is involved in an uncomplicated situation, such as- formation of squads among new recruits in an army camp.
We will confine our discussion to the 4 basic methods prevalent in industry:
Method # 1. Functional Basis:
The most commonly followed basis of depart- mentation is by functions. So the structure may build up by setting up departments by functions, such as sales, accounting, production, personnel, purchasing, etc.
Method # 2. Territorial Basis:
Where organisations are large and geographically dispersed, departmentation on a territorial basis may be made, by having Northern division or Southern division and so on with a resident manager in charge of each division. Territorial departmentation enables an executive to become thoroughly familiar with Key details required of him, and facilitates on-the-scene management during emergencies. The branch plant or district sales office is also an excellent training situation for all-around managers needed in the future at higher levels.
Method # 3. Process Basis:
Departmentation on a process basis is found both in manufacturing and in distribution activities. A job machine shop, for example, that is large enough for departmentation would probably establish process departments for lathe work, milling, shaping, drilling, and grinding. A large retail establishment might also have process departments for receiving goods, in-store transportation, wrapping and delivery.
Method # 4. Product Basis:
Product departmentation, in which the major functional activities associated with a given product or commodity or service are organised under a single head, is a widely used basis for departmentation. Examples are plant, chemicals, machinery, etc.
Within this form there may be 3 different types:
i. Each product made in separate plant and sold through common sales unit.
ii. Each product made in separate plant and sold through separate sales unit.
iii. Each product made in many plants and sold through common sales units but controlled by a central product division.
Product line grouping permits maximum use of specialised knowledge and skills, of specialised capital equipment, and of specialised production and sales methods. The grouping is part of the process of division of labour and of capital for increased productivity through specialization. It also limits the span of control for executives and facilitates co-ordination of effort by functional groups within the product cluster.
Departmentation in Management – 7 Main Advantages of Departmentation
It is an established fact that there is a limitation on the number of personnel an enterprise or a supervisor can directly control. This limitation of control restricts the size of the enterprise unless it divides and groups its activities into departments. Departments comprise a framework for an organisation and enables it to expand indefinitely.
Departmentation aims at – (i) specialisation of activities for efficient performance; (ii) simplifying the task of management within a workable span; and (iii) maintaining co-ordination and control of the various activities.
The advantages of departmentation can be summed up as:
1. Specialisation – When every department looks after one major function, expertise is developed. The persons will be able to take up the work with efficiency and at a higher speed. It provides the benefit of specialisation to the organisation.
2. Autonomy – Every department is assigned a particular work and it is run as an independent entity. The departmental head is in charge of all the activities undertaken there. This improves efficiency in the organisation.
3. Fixation of Responsibility – Every department is responsible for its performance. The accountability and responsibility of the department is clearly spelt out.
4. Appraisal – When different departments are assigned the tasks, then performance can easily be appraised on the basis of their results.
5. Expansion – The departmental manager will be able to supervise the activities of his subordinates more effectively. It will result in improved efficiency and better results. Better performance will help in growth and expansion of business.
6. Better Administration – When whole business is divided into different departments on the basis of specialisation, then it becomes easy to administer it. The departments are given on the basis of their activity and they have to show results as for the predetermined goals. This brings accountability and improves administration.
7. Management Development – When a business is divided into different departments then there will be a need for proper communication and control. Every department will take their independent decisions for activities undertaken by them. All these factors will result in management development. Everybody will try to improve its skills for showing better results. The managerial personnel will be able to back better work features.
Departmentation in Management – Benefits
Departmentalisation is an important process is an organisation function. Departments increase the efficiency of the enterprise.
The following are the main advantages or benefits of departmentalisation from which the importance of departmentalisation may be judged:
(1) Specialisation:
Departmentation leads to the benefits of specialization as various organizational activities are grouped according to their relation with the specific functions or objectives. Every departmental manager specializes in the tasks assigned to him.
(2) It Increases Efficiency:
The efficiency of an organisation increases with division and sub-division of work and the personnels. With such a division one is in know of his precise duties, responsibilities and authority. Well defined duties and responsibilities help in motivating the workers to put a better performance and get the enterprise marching ahead.
(3) Effective Administrative Control:
Departmentation helps in effective managerial control because the standards of performance for each and every department can be laid down precisely. Every department has a separate objective. This also facilitates taking the various expenditures within limits.
(4) Fixation of Responsibility:
In this organisation as the duties are well defined and responsibilities are clearly mentioned it is easy to know and fix the responsibility for any erroneous work. This helps in getting the work completed in time with satisfaction.
(5) Development of Managerial Talents:
Assignment of work according to skill, knowledge, training, experience and aptitude is the motto of departmentalisation. This brings specialization in a field. It also brings standardization to both job and the product. Specialisation and standardization result in the best utilization of available human talents, be it either in the field of management or in actual operation.
(6) Easy Evaluation of Work:
In this, the duties responsibilities and authority are well defined before departmentalisation takes place. This obviously helps not only in fixing the responsibility but also in evaluating the work carried on by an individual or a group of individuals or the department as a whole. The basis of evaluation of the performance may either be work done or increased productivity or profitability.
(7) Effective Economy and Proper Budgeting:
Budgeting according to departments help in controlling the finance effectively. In this way economy can also be administered in every sphere of activity of the enterprise through its different departments.
(8) Helps in Independent Decision and Initiative:
Departmentation helps in the development of managerial personnel by providing them opportunities to take independent decisions and initiative. The executives can develop themselves for promotion to higher jobs.
Departmentation in Management – 3 Major Dangers of Departmentation
Although departmentation is very essential for the efficient running and control of a business, there are a few dangers of departmentation which should be taken care of while assigning and grouping of activities-
1. Dividing the business house into various departments makes the co-ordination of various activities very difficult. To achieve individual efficiency, one department may work against the interest of another department thus reducing the overall efficiency and profitability of the business as a whole.
2. Departmentation creates difficulties of communication among the various departments of the organisation and renders planning and control more difficult.
3. Departmentation increases the levels of management which is more expensive and it also increases the gap between the top management and the workers.