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Departmentation

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Departmentation

  1. 1. Prof.Chhaya Patel Departmentation
  2. 2. Meaning of Departmentation Departmentation is the foundation of organisation structure. Departmentation means division of work into smaller units and their re-grouping into bigger units (departments) on the basis of similarity of features. Each department is headed by a person known as departmental manager. Division of work into departments leads to specialisation as people of one department perform activities related to that department only. Departmentation provides scope for organisation’s growth (along the same product lines) and expansion (addition of new product lines).
  3. 3. Basis of Departmentation There are two broad forms of organisation structure or departmentation: 1. Functional departmentation 2. Divisional departmentation
  4. 4. Functional Departmentaion It is grouping of activities on the basis of similarities of functions. The nature of activities performed by different organisations is different. Activities carried by a manufacturing concern are production, finance, personnel and sales. For a trader, the major activities are buying and selling. A bank performs the activities of borrowing and lending. The major functional departments further have derivative departments. Production department, for example, has departments to handle purchasing, production planning and control, manufacturing etc.
  5. 5. Organisation Chart Showing Functional Departmentation Board of Directors Functional Departments GM Production GM Finance GM Personnel GM Marketing Production Control Derivative Departments Capital Budgeting Recruitment Advertisement Manufacturing Current Assets Placement Sales Promotion Purchasing Budgets Training R&D Promotions
  6. 6. Merits of Functional Departmentation 1. Simple and logical basis of creating departments 2. Specialisaton 3. Co-ordination 4. Training and control 5. Supervision 6. Suitable for stable organisations 7. Suitable for small organisations
  7. 7. Limitations of Functional Departmentation 1. Overall organisational goals 2. Delayed decisions 3. Co-ordination 4. Holding of accountablity 5. Unsuitable for dynamic organisations 6. Complexity
  8. 8. Divisional Departmentation Divisional structures are created on the basis of smaller divisions where each division has its own functional activities (production, finance, personnel and marketing). Major divisions that determine the organisaion structure are 1. Product departmentation 2. Process or Equipment departmentation 3. Cutomer departmentation 4. Terriority or Geographic departmentation 5. Departmentation by Time 6. Departmentation by Size 7. Departmentation by Task Force
  9. 9. Product Departmentation This form of departmentation is suitable for companies that produce multiple products. Product departmentation is grouping of jobs and resources around the products or product lines that a company sells. The focus is on the product line and all functional activities associated with the product line. Departments are created on the basis of products and product manager has the authority to carry out functional activities for his department.
  10. 10. Organisation Chart Showing Product Departmentation Board of Directors GM Production GM Finance Manager Product A Production Finance Accounting R&D GM Personnel Manager Product B Production Finance Accounting R&D GM Marketing Manager Product C Production Finance Accounting R&D
  11. 11. Merits of Product Departmentation (i) Better performance (ii) Flexibility (iii) Faster decisions (iv) Co-ordination (v) Control (vi) Responsibility (vii) Efficiency
  12. 12. Limitations of Product Departmentation (i) Co-ordination (ii) Expensive (iii) Control
  13. 13. Process Departmentation In manufacturing organisations, where the product passes through different stages of production, each stage is designated as a process and departments created on the basis of processes is called process departmentation. For each process, departments are created and headed by people who are skilled and competent to carry that process.
  14. 14. Organisation Chart Showing Process Departmentation Board of Directors GM Production Manager Crushing GM Finance Manager Making Pulp GM Personnel Manager Purifying Pulp GM Marketing Manager Paper Rolls Manager Cutting
  15. 15. Merits of Process Departmentation (i) Specialisation (ii) Economic considerations (iii) Technological consideration (iv) Facilitates training
  16. 16. Limitations of Process Departmentation (i) Co-ordination (ii) Boredom
  17. 17. Customer Departmentation When organisations sell goods to customers with different needs, departments on the basis of customers is the suitable form of departmentation. It is “the organising of jobs and resources in such a way that each department can carefully understand and respond to the different needs of specific customer groups”. Clear identification of customers and their needs is the basis of departmentalisation.
  18. 18. Organisation Chart Showing Customer Departmentation Board of Directors Managing Directors Manager Car Loans Manager Housing Loans Manager Electronic Loans Manager Commercial Loans
  19. 19. Merits of Customer Departmentation (i) Competitive advantage (ii) Customer orientation (iii) Specialisation
  20. 20. Limitations of Customer Departmentation (i) Co-ordination (ii) Identification of consumer groups (iii) Change in consumer behaviour (iv) Specialised staff
  21. 21. Geographic Departmentation In territorial departmentation, organisation creates departments (i) close to its customers because they are geographically dispersed over different areas, or (ii) near the sources of deposits. Each geographic unit has resources to cater to the needs of consumers of that area. General Manager of every department looks after functional activities of his geographical area while overall functional managers provide supporting services to the managers of different areas.
  22. 22. Organisation Chart Showing Geographic Departmentation Board of Directors Managing Director GM Production GM Finance Manager Product A Production Purchase Personnel Marketing GM Personnel Manager Product B Production Purchase Personnel Marketing GM Marketing Manager Product C Production Purchase Personnel Marketing
  23. 23. Merits of Geographic Departmentation (i) Training and development (ii) Customer orientation (iii) Low cost of production (iv) Communication
  24. 24. Limitations of Geographic Departmentation (i) Co-ordination and control (ii) Expensive (iii) Managerial skills
  25. 25. Departmentation By Time This method of departmentation is used in situations where work is done round the clock because — 1. the machine cannot be stopped before finishing the work (manufacturing steel) 2. the demand is high and the machine has to work overtime (during boom conditioned) 3. the nature of work entrusted to the organisations is such (Airlines or Railways) 4. the services are essential in nature (health and fire services). 5. Workers work in shifts; morning, afternoon and night, so that work can progress continuously.
  26. 26. Departmentation By Size This method is followed in army where number of workers in the unit is important. The company’s performance is judged by the number of people working with it, and therefore, it adopts departmentation by size.
  27. 27. Departmentation By Task Force When organisation takes up different projects, it forms task forces, which consist of people from different units having different skills to carry out those projects. These groups are formed temporarily to work till completion of the project. They are similar to project organisations.
  28. 28. Distinction between Functional and Divisional Structures The following table highlights the differences between functional and divisional structures :
  29. 29. Choice of Methods of Departmentation Though departments can be created on different basis, no method can be described as the best. The factors that must be considered while choosing a basis of departmentation are: 1. The work and the process involved 2. The extent of specialisation 3. The capabilities of workers 4. The technology employed 5. The competitor’s approach 6. The extent to which co-ordination and control is centralised or decentralised 7. The environment, internal and external to the organisation 8. Optimum utilisation of resources

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