Principle of Management

Question # 4: List categories

departmentation by functions

of

departmentation

and

explain

Answer:
Departmentation
Introduction
Organizations are formed when a group of individuals unite to accomplish a
specific goal. They are responsible for creating a work environment that best
utilizes resources such as people, tasks and technology. But, in order to meet
this objective, they will need to create an organizational structure or design.
Organizational structure and design include work specialization,
departmentalization, chain of command, span of control, centralization and
decentralization and common organizational designs. Departmentalization is
discussed here.
Meaning of departmentation
Grouping of activities is an essential step in designing an organisational
structure. Grouping of activities into departments or other homogeneous unit
is known as departmentation. Departmentation or departmentalisation is the
process of grouping tasks into jobs, the combining of jobs into effective work
groups and the combining of groups into identifiable groups or departments.
Need and importance
The basic purpose of departmentation is to make the size of each
departmental unit manageable and to secure advantages of specialization. It
is necessary on the account of following reasons
Specialization: Departmentation enables an organization to avail the
benefits of specialisation.
Expansion: One manager can supervise and direct only a few
subordinates.
Autonomy: Departmentation results in the division of enterprise into
semi-autonomous units.
Fixation of responsibilities: Departmentation enables each person to
know the specific part he is to play in the total organization.
Appraisal: Appraisal of managerial performance becomes easier when
specific tasks are assigned to specific personnel.
Managerial development: Departmentation facilitates communication,
coordination and control.
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Administrative control: Departmentation is a means of dividing the
large and complex organization into small and flexible administrative
units.
Functional departmentation:
Functional Departmentalization groups jobs by the functions that they
perform. Hence each major or basic function is organized as a separate
department. The basic or organic functions are the functions the
performance of which is vital and essential to the survival of the
organization. For example, key functions of a manufacturing company
include production, purchasing, marketing, accounting, and personnel. The
functions of a hospital include surgery, psychiatry, nursing, housekeeping,
and billing.
If necessary, a major function may be divided into minor or sub-functions. A
production departments activities may classify into quality control,
processing of materials and repairs and maintenance. The process of
functional differentiation can continue as long as there exists a sound basis
for further differentiation. It is the widely used basis for grouping activities
and exists almost in every organization at some level.
List of departentation:
1.
2.
3.
4.

Departmentation
Departmentation
Departmentation
Departmentation

by
by
by
by

Enterprise
Territory or geography
Customer Group
Product

ENTERPRISE DEPARTMENTATION
A method for separating the activities performed within an organization into
groups differentiated by the function they perform. For example, a business
employing functional departmentalization would tend to group together
workers that perform a particular function, such as accounting, that differs
substantially from the tasks performed by other staff members.

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TERRITORIAL
DEPARTMENTATION
Organizations that
find
advantages
lines

are
in

spread over a wide area may

organizing along geographic
so that

all
the
activities
performed in a region
are managed together.
Bank,
insurance
companies,
transport
companies, distribution
agencies are examples
of such enterprises.
The
activities
are
divided
into
zones,
divisions and branches.
It is obviously not
possible for one functional manager to manage efficiently such widely
separated activities this makes it necessary to appoint regional managers for
different regions.

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CUSTOMER DEPARTMENTATION
An organization may find it advantageous to organize according to the types
of customers it serves. For example, a distribution company that sells to
consumers, government clients, large businesses, and small businesses may
decide to base its primary divisions on these different markets. Its personnel
can then become proficient in meeting the needs of these different
customers. This
figure depicts an
organization
grouped by customers
and
markets.

PRODUCT DEPARTMENTATION
Product Departmentalization jobs are grouped by product line in which each
major product area is placed under the authority of a manager whom is
responsible for all aspects of the product line. It is useful when product
expansion and diversification, manufacturing and marketing characteristic of
the product are of primary significance. It is generally employed when the
product line is relatively complex and diverse requiring specialized
knowledge and a great deal of capital is required for plant and equipment. A I
company with diversified product line may have the following divisions

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