The document discusses departmentation, which is the process of grouping activities in an organization for effective administration, and outlines various types such as by function, territory, customer group, and product. It also explains the distinctions between line and staff organization, including their respective authorities and the advantages and disadvantages of each approach. Additionally, it provides an example of Walmart's organizational design and how it effectively manages its operations through structured departmentation.

2. Bibliography
 http://www.businessdictionary.com/definition/line-
and-staff-management.html
 https://en.m.wikipedia.org/wiki/staff_and_line
 http://www.preservearticles.com/2012051832428/what
-is-the-departmentation-by-functions-in-
management-limitations.html
 https://www.referenceforbusiness.com/management/I
nt-Loc/line-and-staff-Organizations.html
 Books referred :
Essentials of management – Harold Koontz

3. DEPARTMENTATION
 Departmentation is the process which is used to group
activities into units for the purpose of administration at all
levels.
 By this process, the personnel and functions of an
enterprise are departmentalized by division into separate
units
 The administrative units so created may be called as
divisions, units, branches, or any other name.

5. Types of Departmentation
 Departmentation by enterprise function
 Departmentation by territory or geography
 Departmentation by customer group
 Departmentation by product

6. Departmentation by function
 The grouping of activities according to the functions of
an enterprise is known as departmentation by
function.
 This is the most common type of departmentation.
The basic enterprise functions generally consist of
production, sales, finance etc.
 Firstly, there is no generally accepted terminology as a
manufacturing enterprise employs the terms
production, sales and finance. A wholesaler, on the
other side is involved with operations, traffic and
finance.

7. Contd..
 Secondly, the basic activities often differ in
importance. For example, hospitals have no sales
department. This does not mean that these activities
are not undertaken, rather they are unspecialized.
 Functional organizations are present in almost every
enterprise and is the most widely used basis for
organizing activities.

8. Advantages of functional
departmentation
 This method follows the principle of specialization
 It is a logical and time proven method
 Authority and responsibility can be clearly defined and
fixed
 Since the top managers are responsible for the end
results, control becomes effective.

9. Disadvantages of functional
departmentation
 It develops a loyalty towards the functions and not the
enterprise as a whole.
 Co-ordination of different functions becomes difficult
 Only the departmental heads are held responsible for
defective work

10. Departmentation by territory
 When the organization is large and geographically
dispersed , departmentation on territorial basis is the best.
It is also considered suitable where the branches produce
the same goods or perform similar services at various
locations. For example: chain retailing, automobile
assembling etc.
 Many government agencies like the tax department, the
central bank, the courts and the postal services adopt this
basis of organization.
 It is mostly used in sales and production and not in finance
because the financial operations are usually handled at the
hedquarters.

11. Merits of territorial
departmentation
 Sales activities can be conduced more effectively. The
sales personnel can spend more time on sales rather
than on travelling.
 The executives of territorial department can become
familiar with the key details and can take on the spot
decisions in times of emergency.
 The department will have an excellent training
situation for all round managers needed in the future
at higher levels.

12. Demerits of territorial
departmentation
 It requires more persons with general managerial
abilities
 It tends to make maintenance of economical central
services difficult and may require services such as
personnel, or purchasing at the regional level.
 It increases the problem of top management control.

13. Departmentation by customer
group
 Grouping of activities that reflects a primary interest
in customers is known as departmentation by
customer.
 Under this method, the customers are divided into
separate categories such as distributers, retailers and
consumers, and the task of satisfying the needs of
different categories of customers is assigned to
different departments.

14. Merits of customer
departmentation
 Particularly in the modern times, the needs of the
customers should be satisfied effectively. It aims to
satisfy the needs of the customers in a better way.
 This method is highly useful where a product or
service of wide variety is offered through many
marketing channels and outlets.

15. Demerits of customer
departmentation
 There may not be enough work in each department.
Hence, some workers would have to stay idle.
 It may also develop an unequal development of
customer groups in times of expansion and
disappearance of recession.
 This kind of departmentation may also create a
tendency to remain rigid. Consequently, it may
become difficult to adjust to the situation in case of
any fluctuation.

16. Departmentation by product
 This type of departmentation is desirable for large
undertakings which deal with a variety of products or
product lines.
 To departmentalize on product basis means to
establish each product or group of closely related
products in a product line as a relatively autonomous
integrated unit within the overall framework of the
company.
 Under this method, an executive will be in charge of
and responsible for all the activities relating to a
particular product from the production to distribution.

17. Merits of product departmentation
 It facilitates optimum use of specialized skill, labour
and capital.
 Various economies relating to production, assembly
and handling can be availed.
 All the activities connected to a particular product can
be effectively coordinated.
 Better timing and customer service can be ensured.

18. Demerits of product
departmentation
 It will often result in unnecessary duplication of work
and ultimately result in increase in the production
cost.
 The problem of maintaining headquarters control
shall be more acute.
 There can be difficulties in coordination with the
organizational structure.
 Successful managers will be tempted to acquire more
and more powers and build up their own empire. This
danger can be averted by centralizing all major policy
decisions.

19. Departmentation in conclusion
 Departmentation is not an end in itself but is simply a
method of arranging activities to facilitate the
accomplishment of objectives. Each method has its
advantages and disadvantages. Consequently, the process
of selection involves a consideration of the relative
advantages of each pattern at each level in the organization
structure. In all cases, the central question concerns the
type of organizational environment that the manager
wishes to design and the situation being faced. The
preceding discussion of the alternative methods of
departmentation shows that each method yields certain
gains and involves certain costs.

21. An introduction- Authority &
power
 Power a much broader concept than authority, is the
ability of individuals or groups to induce or influence
the beliefs or actions of other persons or groups.
 Authority in an organization is the right in a position
(and through it, the right of the person occupying the
position) to exercise discretion in making decisions
affecting others. It is of course a type of power, but
power in an organizational setting.

22. Line organization
 Line organization is the oldest and the simplest type of organization, also
known as scalar organization or military type of organization
 It is characterized by direct lines of authority flowing from the top to bottom
and lines of responsibility flowing in an opposite but equally direct manner.
 The most important feature of this type of organization is superior subordinate
relation. The superior delegates the authority to the subordinate and so on,
forming a line from the very top to bottom of the organizational structure.
 Principle of unity of command is the most salient feature of this type of
organization, i.e. orders are received from only one boss and the subordinates
are accountable to their immediate superior.
 It is very simple to establish and operate and can be easily understood by the
employees.
 It is quiet flexible in the sense that it is subject to quick adjustments to suit the
changing conditions.
 It also helps to achieve effective coordination as all the activities pertaining to a
single department are controlled by one person. In addition to this, it is a very
economical kind of organization.

23. There are certain drawbacks of line organization…
 Overloading – this system tends to overload the existing executives
with too many responsibilities. The work may not be performed
effectively on account of innumerable tasks before the single
executives.
 Lack of specialization –absence of specialization is the major drawback
of this system. On account of many functions & complexities, it is very
difficult for a single individual to control all the matters effectively.
 Scope for favoritism – there may be a good deal of favoritism under this
organization. The concerned officer may judge the performance
according to his own norms.
 Lack of coordination – in reality, it is very difficult to achieve proper
coordination among various departments. Each departmental head
carries out his own functions in their own ways and means this leads to
lack of uniformity in operations among various departments.

24. Line and staff organization
 The line and staff organization combines the line
organization with the staff department.
 In staff hierarchy, the departments are revenue consumers,
and their managers are responsible for activities that
support line functions(such as accounting, maintenance,
personnel management)
 However , in modern practice, the difference between the
two hierarchies is not so clear cut and jobs often have
elements of both types of functions.

25. Line position
 A line position is directly involved in the day to day
operations of the organization, such as producing or selling
a product or service.
 A line personnel carries out the primary activities of a
business and are considered essential to the basic
functioning of the organization.
 Example : a marketing executive. Although, a marketing
executive does not actually produce the product or service,
he or she directly contributes to the firms overall objectives
through market forecasting and generating product or
service demand. Thus line positions whether they are
personnel or managers, engage in activities that are
functionally and directly related to the principal workflow
of an organization.

26. Staff position
 Staff positions serve the organization by indirectly
supporting line functions. Staff personnel use their
technical expertise to assist line personnel and aid top
management in various business activities. Staff
mangers provide support, advice and knowledge to
other individuals in the chain of command.
 Example : a legal advisor. A legal advisor does not
actively engage in profit making activities but does
provide legal support to those who do. Therefore, staff
positions whether personnel or managers, engage in
activities that are supportive to the line personnel.

27. Authority within line and staff
 There are three types of authority present within a
line and staff organization:
1. line authority
2. Staff authority
3. Functional authority

28. Line authority
 Line authority flows down the chain of command.
 For example: line authority gives the production
supervisor the right to direct an employee to operate
on a particular machine.
 Therefore, it gives an individual a certain degree of
power relating to the performance of an organizational
task.

29. Staff authority
 Staff authority is the right to advise or counsel those
with line authority.
 Example : human resource department employees
help other departments by selecting and developing a
qualified workforce.
or
 A quality control manager aids production manager
by determining the acceptable quality level of products
at a manufacturing company.

30. Functional authority
 Functional authority is referred to as limited authority. It gives a
staff or line person power over a particular function.
 It can also be defined as the authority given to the line or staff
manager to do a specific job. When the job is completed, the
authority is taken back.
 Example : the normal job of marketing manager is to sell the
products of the company. The MD of the company may give him
the authority to conduct a new year party for the whole
company. This is functional authority. This job is not his normal
job. The manager already has a line or staff authority to do his
normal job. thus, functional authority is the additional authority
given to him to do the new job.
 Thus it is a special type of authority for staff personnel that must
be designated by top management.

31. Organizational design (approaches)
 Organizational design is the way an organization is to be structured
and operated by its members. It is both a plan and a process.
 There is no particular theory of organizational design. However, some
main approaches include:
 Simple or flat structure: a simple structure tends to be flat, meaning
it doesent have a lot of managers. This approach consists of a lot of
employees and a single boss. This works well for small businesses that
operate in one location and depends on the owner for their direction.
 Team structure: it divides employees into groups. These groups work
on projects or come up with solutions to specific problems usually the
team leader reports to the management. This leader can be assigned
by management or voted into the position by the individuals.

32. Contd..
 Functional structure: if a company has self contained
departments that have many employees who require an
overseeing manager or executive, a functional structure
may work.
 Divisional structure: this structure enables different
divisions to operate like businesses within the businesses.
Each division has a manager who reports to the CEO and
the division sets its own department(shipping, marketing
etc).
 Matrix structure: in this, the employees may report to
more than one person. Lines of authority can go both up
and sideways. For instance a person may have to report to
a divisional manager and the sales manager at the same
time.

33. Example: organizational design
 SRG aluminum Pvt. Ltd, an aluminum industry,
recognized that they were becoming bureaucratic and
unresponsive to their customer’s needs. Following a
period of assessment of their strengths and
weaknesses, they went through a process of
organizational redesign in which they made their
main functions more collaborative.

34.  In the pre design workflow, the
tendency of most people in the
organization was to think in terms
of sale and organize people
according to the similarity of
functions.
 In the post design workflow, the
company became more cross
functional. They combined people
from a number of departments
into teams that took full
responsibility of managing
customer orders.
 Aas a result, the company was able
to improve their total billings of a
major product line by 25%
This is the kind of integration and
improved collaboration that can
result from organizational design

35. Corporate example for
departmentation: Wallmart
 Wallmart was originally opened in Rogers, United States by
Sam Walton in 1962 and has been growing since then.
 It carries general merchandise and a selection of groceries.
Many stores also have a garden, pharmacy, optical centers,
one hour photo processing lab, a bank branch, fast food
outlets etc.
 Due to its huge workforce, good departmentation
structure is very important. The retail store employees
include the hourly workforce, store management and
higher level managers such as district and regional
managers.

36. Contd..
 The organizational structure of wallmart is a formal bureaucratic
structure.
 The three successful operating divisions are logistics, real estate
and store operations which are under a unified leadership team.
 Being geographically diverse, territorial departmentation is
carried out too.
 This therefore, has taken wallmart from being departmentalized
by function to geographical departmentalization.
 There is also a clear chain of command from the top to the
bottom
 On the other hand, the span of control is narrow as the
organization has management teams that decide how the
merchandise gets priced, how the items are to be shipped and
other items that need to be managed.