Chapter 9
Departmentation
Objectives
• At the end of the chapter you will be able to
– Have knowledge about Departmentation and its
various aspects
– Learn about Departmentation by function,
advantages and disadvantages
– Understand about departmentation by customers
advantages and disadvantages
– Understand Departmentation by time, process,
numbers and by marketing channels
Introduction
• Departmentation is a part of organization
process
• The activities are grouped on the basis of
functions of the organization
Meaning and Definition
• Meaning of Departmentation
– The process by which similar activities of the
business are grouped into units for the purpose of
facilitating the smooth administration at all levels
• Definition of Departmentation
– Refers to classification of activities on operations of
an undertaking into functionalized categories
Process of Departmentation
•
•
•
•
Identification of work
Analysis of details of each work
Description of the function of the organization
Entrusting the function to a separate person
who has specialized in the respective field
• Fixing the scope of authority and responsibility
of the departmental heads
Need and importance of Departmentation
• Departmentation increases the operating
efficiency of the employees
• There is a fixation of responsibilities to various
executives of the organization which makes
them to be alert and efficient in his duties
• Certain powers, like self decision making, given
to the department heads increase their prestige
and skills
Need and importance of Departmentation
• The workings of all the departments are evaluated
by the top management
• There is a possibility of expansion of the
organization because of the fixing of the
responsibilities to the executives and there is
function wise Departmentation
• Besides, Departmentation gives other advantages
like facilitation budget preparation, attaining
specialization etc
Factors in Departmentation
• Specification
– Specification may be functional such as sales,
finance, production, personnel
• Control
– There should be a proper control under
departmentation and simplification of the control
process
• Co-ordination
– The whole business activities are grouped
department wise which requires co-ordination
Factors in Departmentation
• Securing attention
– Even a unusually important activity of the business
should be given a recognition
• Recognition of local condition
– The departmentation should take into consideration
the local condition of the place concerned
• Economy
– It should be borne in mind that expenses are
incurred in the creation of separate departments
Basis of Grouping Diverse Activities
• Maximum use
– The term maximum means that a given activity will
be attached to the major department which makes
most use of it
• Interest
– A superior is requested to look after a new activity if
he is also willing and able to serve
• Competition
– The prevailing competition among the departments
is a desirable one
Basis of Grouping Diverse Activities
• Policy matter
– A particular activity is assigned to a department which
evinces more interest in the unit
• Separation
– The maximum division of activities involves high cost of
operation to the management
• Proper attention
– Proper attention should be given to certain activities to
keep them from dying under adverse circumstances
• Co-ordination
– There is a need of coordination of various activities
where the organization’s activities are grouped into
several departments
Patterns of Departmentation
• There are certain methods of dividing the duties
and responsibilities within an organizational
structure which are as follows
• Departmentation by Function, by Product, by
Regions, by customers, by Process, by Time,
by Numbers, by Marketing channels
Departmentation by Function
• This is the most commonly followed basis of
departmentation
• Here, activities are grouped on the basis of
functions which are to be performed
Advantages of Departmentation by Function
• It is a time tested and scientific method
• It ensures proper performance control
• It avoids the interruption of subsidiary group in
the primary activities
• It is economical, simple and easy to understand
Disadvantages of Departmentation by Function
• It makes the management control work more
difficult
• It increases the work load and responsibility of
departmental managers
• It doesn’t offer any scope for training for the
overall development of managers
Departmentation by Product
• This type of departmentation is made by the
large-scale business unit
• Each department is responsible for
manufacturing a product and selling it to a
customer
Advantages of Departmentation by Product
• Product departmentation helps in maximum
utilization of personal efficiency of the workers in
the area of manufacturing and marketing of a
product
• Better services may be provided to the customer
• Proper attention may be devoted to the
manufacture of a product
• A new line of products can be introduced without
any difficulty
Disadvantages of Departmentation by Product
• There is a danger of duplication of work
• It increases the number of personnel which in
turn increases the cost of operation
• Machines and equipments in each product
department may not be used fully
Departmentation by Region
• This type of departmentation is useful for
wholly dispersed business unit
• Here the business activities are grouped in areawise and each area is in charged by a single
person
Advantages of Departmentation by Region
• It makes possible an effective span of control
• It reduces the cost of operation and gains saving in
time
• It provides opportunities to managers to improve
their skill in various fields
• Control process is vary easy to manage
Disadvantages of Departmentation by Region
• It increases the number of personnel
• Control of head office is less effective
• Duplication of work may cause
• Small business concern can not manage the high
operation cost
Departmentation by Customers
• This type of departmentation is preferred when
the various needs of customers are different in
nature
• The consumable goods can be subdivided in to
perishable and non-perishable in nature
Advantages of Departmentation by Customers
• It fulfils the needs and expectations of the
customers
• It develops the specialization among the
organization staff
• 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
Disadvantages of Departmentation by Customers
• There may be duplication of activities
• The achievement of coordination is vary
difficult
• There is a wastage of available resources and
facilities
Departmentation by Process
• This type of departmentation is followed when
the production activities are carried on in many
places
Advantages of Departmentation by Process
• The costlier machines can be used effectively
• There may be economy in operation
• No duplication of activities
• Helps the top management to have effective
performance control
Disadvantages of Departmentation by Process
• Separate rooms for operations and other
facilities should be given to all the processes
which results in heavy cost of operation
• More specialists are essential for each process
Departmentation by Time
• The business activities are grouped together on
the basis of the time of the performance
• Only interested persons are requested to do the
job and one person is responsible to supervise
them
Departmentation by Number
• Here similar types of duties are performed by
small groups
• Each group is controlled by a supervisor or an
executive
• The principle of span of management is used
under this type of departmentation
Departmentation by Marketing Channels
• This type of departmentation is adopted on the
basis of the channel of distribution chosen by
the particular business unit
• This method of departmentation has grown in
importance as business has become increasingly
market oriented
Summary
• Departmentation refers to the classification of
activities on operation of an undertaking into
functionalized categories
• In departmentation by function, activities are
grouped on the basis of functions which are to be
performed
• Departmentation by product is made by the largescale business unit
• Departmentation by region is useful for wholly
dispersed business unit
Summary
• Departmentation by customer is preferred
when the various needs of customers are
different in nature
• Departmentation by process is followed when
the production activities are carried on in many
places
• In departmentation by time, the business
activities are grouped together on the basis of
the time of the performance
End of Chapter 9
Departmentation