Departmentation refers to dividing work into departments based on similarity of functions. There are two main types: functional departmentation, which groups activities by similarity of functions; and divisional departmentation, which creates divisions with their own functional activities. Functional departmentation provides specialization but can lead to delayed decisions, while divisional structures allow faster decisions but challenge coordination. The document discusses various bases for departmentation including products, processes, customers, geography, time, size, and task forces. The choice of departmentation method depends on factors like the work process, specialization needs, technology, and environment.

1. Prof.Chhaya Patel
Departmentation

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. Basis of Departmentation
There are two broad forms of organisation structure or
departmentation:
1.
Functional departmentation
2.
Divisional departmentation

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. 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. 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. 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. 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. 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. 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. Merits of Product
Departmentation
(i)
Better performance
(ii)
Flexibility
(iii) Faster decisions
(iv) Co-ordination
(v)
Control
(vi) Responsibility
(vii) Efficiency

12. Limitations of Product
Departmentation
(i)
Co-ordination
(ii)
Expensive
(iii) Control

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. 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. Merits of Process
Departmentation
(i)
Specialisation
(ii)
Economic considerations
(iii) Technological consideration
(iv) Facilitates training

16. Limitations of Process
Departmentation
(i)
Co-ordination
(ii)
Boredom

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. Organisation Chart Showing
Customer Departmentation
Board of Directors
Managing Directors
Manager
Car Loans
Manager
Housing
Loans
Manager
Electronic
Loans
Manager
Commercial
Loans

19. Merits of Customer
Departmentation
(i)
Competitive advantage
(ii)
Customer orientation
(iii) Specialisation

20. Limitations of Customer
Departmentation
(i)
Co-ordination
(ii) Identification of consumer groups
(iii) Change in consumer behaviour
(iv) Specialised staff

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. 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. Merits of Geographic
Departmentation
(i)
Training and development
(ii)
Customer orientation
(iii) Low cost of production
(iv) Communication

24. Limitations of Geographic
Departmentation
(i)
Co-ordination and control
(ii)
Expensive
(iii) Managerial skills

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. 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. 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. Distinction between Functional
and Divisional Structures
The following table highlights the differences between functional and
divisional structures :

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