Contents
Meaning of Departmentation
Departmentation is the process of dividing the whole organization into different groups and segregating people into those groups based on their expertise and efficiency.
This is generally seen in a large organization that employs numerous people. This is because, as the organization grows, it becomes difficult to handle every employee under one shelter. Employees tend to confuse and duplicate their job duties. It leads to chaos in working relationships.
Departmentation clarifies the job roles of every employee, ensures proper and smooth transfer of information from one department to another, and also strengthens the organizational structure.
Mainly, there are two participants in the organizational structure: superior & subordinate.
Superior is the person with a higher rank and authority. He creates groups, delegates the responsibilities to employees, and monitors them.
Subordinates are the people who work under superiors and are accountable to them.
Every superior has some Subordinates under him.
The number of subordinates that superiors can manage efficiently and effectively under them is called the span of management.
Narrower the span, the larger the organizational structure and vice-versa.
Benefits of Departmentation
Functional Specialization
Since functions are divided and work evenly distributed, departmentation leads to specialization in every function that different departments of the organization perform.
Thus, each department can scale at its own pace and efficiency.
Healthy working environment
When duties and job roles of each department and each employee are clearly defined, the speed and accuracy of work increases, and workflow is smooth and hierarchical. It also promotes coordination within the department.
For example – once the production team clearly defines the number of units that can be produced, it becomes easy for the finance team to do budgeting and costing of raw materials and inventories.
Growth and Expansion
When subordinates delegate routine jobs to employees, they can find more time to go beyond the daily planning and think creatively, design innovative ideas, explore areas for growth and give new dimensions to the organization.
Thus, they can expand their operational efficiency as well as give a new edge to their organization.
Effective resource use
By departmentation, men & machinery are put to optimum use. Be it financial or human, every resource is effectively employed in different functions of the organization.
Types of Departmentation
There are various types of departmentation made by an organization like Functional, product, territorial, customer, etc.
Below is a brief of a few of them:
Functional Departmentation
In functional departmentation, activities of similar nature are grouped to form one single department. This leads to specialization of functions and optimum usage of available resources. It also avoids confusion and duplication of efforts as everyone has a specific job role.
Moreover, the job of the department head, who acts as a link between the top manager and department subordinate, is simplified as he needs to train the employees only in a certain area because of the employees’ established background in the field.
Geographical Departmentation
The grouping of employees based on their territorial location is called geographical departmentation. Banks, insurance companies, and other sectors which are widely spread and functional in every area have geographical departmentation.
This kind of departmentation gives locational facilities to employees and familiarity with the local market. There is also no cultural difference as everyone belongs to the same place.
Product Departmentation
A company may be involved in manufacturing different types of products. The workforce is thus divided and grouped into different product sections to plan the production and market it. For example, Hindustan Unilever is involved in different product distribution like eatables, cosmetics, food drinks, etc.
Customer Departmentation
Grouping of employees based on customer’s nature is customer departmentation. Customers are of different types. They can either be wholesale buyers or retail buyers. Some demand high standards i.e., costly products whereas some look for cheap products.
Functional Structure vs Divisional Structure
Broadly, all other departments except the functional department can be headed under the divisional department. This is because all other departments like the product, customer, etc. are separate divisions in themselves with a division head.
| Basis | Functional Structure | Divisional Structure |
| Structure | The structure is based on different organizational functions like sales, budgeting, etc. | The structure is based upon different organizational divisions like the product, customer, etc. |
| Authority | The functional manager does not hold strong autonomy and has to take decisions as directed by higher authority. | Divisional managers are free to take their decisions and implement them within their departments. |
| Suitability | This type of departmentation is suitable for single-line products organization. | This type of departmentation is suitable for organizations selling multiple types of products. |
| Cost | The cost incurred in this departmentation is low because the activities like sales, budgeting, etc. are not repeated. | The cost incurred in this department is high as the organization has to duplicate the same activities in all the divisions. |
