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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If there are no departments, it will be difficult to keep track of who is doing what and who is accountable to whom. Each department looks after the production, sales and financing of one product.

The goal of an organisation is to earn profits by customer satisfaction. This ensures better performance of employees of each department. Top management is relieved of operating task responsibility and can concentrate on such centralized activities departtmentation finance, research etc.

While marketing strategies for cosmetics need to be intensive, it is not so in case of stationery or pharmaceuticals. Since departments are widely dispersed, top managers find it difficult to control and oranisation their activities. If there are no departments, organisational resources; physical, financial and human, will be commonly shared by different work units. Departmentation increases the levels of management which is organiswtion expensive and it also increases the gap between the top management and the workers.

Repeated handling of the same job with a very short cycle time required to complete that process leads to boredom.

Departmentation means division of work into smaller units and their re-grouping into bigger units departments on the basis of similarity of features.

Types of Organisational Designs: An organisation selling stationery, for example, also starts selling ofganisation and pharmaceuticals.

Departments are created on the basis of products and product manager has the authority to carry out functional activities for his department. Marketing department, departmentayion instance, can be further branched out on the basis of territorial or organixation departmentation.


For example, if the product does not earn profits, top managers cannot say with assertion whether the problem lies with production department or sales department. The more commonly used bases are—function, product, territory, process, customer, time etc.

For instance, a factory operating 24 hours may have three departments for three shifts—one for the morning, the second for the day, and the third for the night. The production function may be further subdivided on the basis of the process of production when organlsation production process has distinct activity groups, they are taken as the basis of departmentation.

It enables the personnel to become experts. So, product departmentation provides an excellent training facility for the top managers.

Key areas should be given special attention. Departments comprise a framework for departmetation organisation and enables it to expand indefinitely. When responsibility is clear, authority can also be delegated to managers. To give the attention to heterogeneous groups of buyers in the market, marketing activities are often split into various several parts.

6 Different Basis of Departmentation in an Organisation

Firstly, the managers focus their attention on some specific problems which provide them effective on-the-job training. As this is a suitable form of departmentation for stable organisations, organisations operating in the dynamic environment do not accept functional activities as the basis of departmentation. It is the simplest, logical and most widely accepted form of creating departments. Departmentation, thus, helps in expanding an organisation and organisatkon promotes efficiency by dividing the work on departmentatin basis of specialisation of activities and appointing people in various departments on the basis of their specialised knowledge.

Departmentalization of activities results in the increase in efficiency of the management and ultimately the enterprise. It is obviously not possible for one functional manager to manage inn such widely spread activities. Even for large organisations, it is suitable only for top levels. A bank may have separate loan departments for large-scale and small- scale businessmen.


Each division may be sub-divided into production, sales, financing, and personnel activities.

Notes on Departmentation: Meaning, Importance and Basis | Organisation

Such managers may not be always available. Each product division can be taken as a viable profit centre for accountability purposes. Business Jargons A Business Encyclopedia. Departmentation by Process 6. Functional, Place, Product and Multidivisional Design. There are several bases of Departmentation.

Sales department should know the plans of production department and vice-versa. Due attention to the human factors will make departmentation more effective and more efficient. All the primary and auxiliary activities are managed by one manager. In the absence of departmentation, managers can supervise a limited number of activities, depending upon their skills and abilities.

Managers cannot control organisational activities if they have to be collectively supervised. Here, the market is broken up into sales territories and a responsible executive is put in charge of each territory.

A big business enterprise will, usually, have more departments as compared to a small one. Subordinates are trained to carry out functions related to each product.

Similarly, a printing press may have composing, proof reading, printing and organisattion departments.

The focus is on the product line and all functional activities associated with ddpartmentation product line. The departmental heads ensure efficient functioning of their departments within the broad principles of organisation scalar chain, unity of command, unity of direction etc.

6 Different Basis of Departmentation in an Organisation

It is rather difficult to set up specific accountability and profit centres within functional departments so the performance is not accurately organiswtion. These sub-departments can be further sub-divided if needed. Factors to be Considered. A central body should act as a coordinating body. Output of one process department is input of the other.