Departmentalization (or simply departmentation) refers to the grouping of This helps the organisation to assign the work only to those who are best suited. Departmentation can provide a necessary degree of specialisation of executive activity for efficient performance. It can simplify the tasks of management within a . 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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Product departmentation is grouping of jobs and resources around the products or product lines that a company sells. Need, Significance and Process Departmentation: It also provides a basis on which the top managers can co-ordinate and control the activities of the departmental units. The management of the enterprise is made more effective by departmentation. Departmentalisation further helps the executive to direct and control the work to be done under his department.

The feeling of autonomy provides job satisfaction and motivation which lead to higher efficiency of operations. The process of organising consists of dividing and grouping of the works to be done in an enterprise and assigning different duties and responsibilities to different people. This is comparatively a costly basis of departmentation than functional departmentation because every department appoints people to look after specialised activities, like accounting, finance, marketing, personnel etc.

6 Different Basis of Departmentation in an Organisation

A large industrial buyer for one product, for example, may be a small buyer for another product. The executive under this system will also get a chance to exhibit his skill and experience regarding various problems to be handled in his department—thereby the basis for top management to have effective co-ordination and control over the various departments.

Business Jargons A Business Encyclopedia. There are some problems associated with functional departmentation. These are pointed out below: Since decisions are made by departmental heads for their respective departments, it may delay decision-making for the organisation as a whole.

Notes on Departmentation: Meaning, Importance and Basis | Organisation

Departments are created and activities of similar nature are grouped in one unit. It provides the advantages of specialisation required at each level of the total processes.

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It is helpful in fixing responsibilities and accountability. Personnel department has sub-departments to take care of appointments, training, placement and promotion of employees. 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.

They use other basis of departmentation also to remain competitive in the market; either customer or product or territorial departmentation depending upon where and how they want to reach, grow and expand their business.

For example, a big company with a diversified product line may have three product divisions, one each for plastics, chemicals, and metals. Departments comprise a framework for an organisation and enables it to expand indefinitely. Nature, Advantages and Demerits.

Departmentation should also consider the human organixation in the organisation. Production department, for example, has sub-departments to manage purchase, production planning and control, manufacturing etc. Since all decisions related to a product are taken by product manager under the guidance of General Managers of different functional departmentatioondecisions are taken quickly. Sales department should know the plans of production department and vice-versa.

A lending institution, for example, gives loan to meet different customer requirements like housing loan, car loan, commercial loan etc.

Departmentation: it’s Meaning and Definition – Explained!

The goal of an organisation is to earn profits by customer satisfaction. Creating departments and sub-dividing the work of departments into smaller units creates organisation structure.

Another important factor to be considered while creating separate departments is the expense involved and economy in its operations.

The organisation chart for customer departmentation for a lending company appears as follows: Water-tight compartments are sometimes created amongst departments as people show loyalty towards their departmental managers. It should aim at full utilisation of resources.

It is not easy to identify various consumer groups. Departments and levels emerge from the deparmentation of activities. Importance of Departmentation 3. The sales people belong to local areas of operation.


Departmentalization of activities results in the increase dpeartmentation efficiency of organixation management and ultimately the enterprise. For example, a large cloth store may be divided into wholesale, retail, and export divisions. Personal skill and specialised knowledge of the production managers can be fully utilised. This form of departmentation is suitable for companies that produce multiple products. Flow of work from one level to another and for every department, i. To entrust the grouped activities to departmental heads and.

So, along with the technical factors discussed above, departments should be created on the basis of availability of personnel, their attitude, aspiration and value systems, informal work groups, cultural patterns, etc.

In simple words, departmentation is the process of classifying and grouping all the activities of an enterprise into different units and sub-units.

The responsibility for results cannot be fixed on any one functional head. Dividing the business house into various departments makes the co-ordination of various activities very difficult. Large organisations, where each process requires different technology, operate most suitably under process departmentation. Lastly, assignment of work to manageable units can be effectively made under divisionalised organsation of organisation.

There are several bases of Departmentation. When a broader function is divided into small segments and a particular segment is assigned to each manager, the area to be appraised is clearly known; and the factors affecting the performance can be pointed out more easily.

Top managers find it difficult to hold accountability of any one department for failure of the product in the market. Product departmentation, along with various functional areas appear on the organisation chart as follows: Here we detail out the need and significance of departments, process involved and dangers of departmentation and factors influencing assigning of activities.