DEPARTMENTALIZATION

DEPARTMENTALIZATION


”A department is a distinct area, division or branch of an enterprise over which a manager has authority for the performance of specified activities”. Koontz & O’Donnell

Divisionalisation is the means of dividing the large and monolithic functional organization into smaller flexible administrative units.” Louis Allen

Departmentation is the process of classifying and grouping all the activities of an enterprise into different units and sub-units. With this type of assignment, the executive can focus their experience and interest only on that work assigned to them departmentally rather than concentrating on overall jobs. It further helps the executive to direct and control the work to be done under his department.

In simple words we can say that, Departmentation is the process of grouping of work activities into departments, divisions, and other homogenous units. Departmentation takes place in various patterns like departmentation by functions, products, location, customers, process, equipment, numbers and time etc.

There are some negative points in this process of departmentation. These are:

(i) The work of coordination becomes difficult, the greater the number of departments and particularly levels, the more complicated becomes the task of co-ordination.
(ii) The work of communication, control, supervision and planning appears more difficult and enhances the cost of managing an enterprise.
(iii) There is remote possibility of direct contact between Top Management and operative personnel, which causes loss of morale on the part of subordinates.

FORMS/TYPES OF DEPARTMENTALIZATION

DEPARTMENTALIZATION BY FUNCTION: This is the simplest and the most common types of organization. It consists of grouping of all similar activities of the business into major departments or divisions under an executive who reports to the chief executive. Under this type all the activities are classified into different departments like production, marketing, finance, personnel, purchasing, engineering, accounting etc. Further a single department has the sub-divisions on the basis of the functions they perform, like marketing which constitutes the sub-units of advertising, marketing research, sale, sales promotion, product planning etc.

MERITS OF DEPARTMENTALIZATION BY FUNCTION:
a) It provides the benefits of occupational specialization in full.
b) It ensures an effective utilization of manpower in all departments.
c) It results in an economy of operation because of simple organizational design.
d) It reaps the facility of intra-departmental co-ordination.
e) It leads to the adoption of a logical and comprehensible structure.
f) It gives a greater emphasis on basic activities rather than o service activities.
g) It helps in the training of specialist managers rather than generalist managers.

DEMERITS OF DEPARTMENTALIZATION BY FUNCTION:
a) The functional classification has a proneness to greater centralization.
b) It involves delay in decision-making, thereby reducing efficiency.
c) It is responsible for poor inter-departmental co-ordination in respect of operation between two departments
d) It exercises ineffective control over work performance in the absence of any rigid standards of performance.
e) For excessive specialization it destroys teamwork and employee motivation.
f) Succession to the position of the chief executive is a serious problem in fictionalization.
g) The greatest disadvantage lies in the unsatisfactory handling of diversified product liners.

DEPARTMENTALIZATION BY PRODUCT: Products manufactured may be adopted for division as well as for sub-division purposes. When there are several product lines and each product line comprises of a variety of items, functional classification fails to give a balanced emphasis on each product. Slow moving and outdated products may be given a greater attention at the cost of growing ones. For the sake of expansion and development of their products, many large sized enterprises have created more or less autonomous, self-sufficient product divisions based either on one single product or on a grope of related products.



A gigantic structure with separate product lines is usually laid on this pattern of departmentation, which is technically called divisionalisation. With favorable product and market characteristics, divisionalisation becomes the only choice available to large sized manufacturing enterprises. Apart from this use, product or services may be made the basis for dividing activities by a departmental store, a banking concern and an insurance company i.e., each department becomes autonomous.

PROS AND CONS OF DEPARTMENTALIZATION BY PRODUCT:
2. Profitability or otherwise of each product can be assessed.
3. It ensures a steady growth and expansion of product lines.
4. It is suitable for undertakings manufacturing varied and complex product lines.
5. Flexibility in product lines can be provided easily as the addition or dropping of product lines is easy.
6. Better service to consumers can be provided as the salesman has thorough knowledge about the product.
7. It ensures the maximum use of the specialization in technical skill, managerial knowledge and capital equipments.
8. It motivates the subordinates for high performance because of wider delegation and greater freedom.
9. It develops the quality of managerial personnel through training, testing and grooming managers on a continuous basis.

DIVISIONALISATION MAY LEAD TO THE FOLLOWING DIFFICULTIES:
1. It increases managerial cost. Duplicate service functions are required both at the top and operating levels of the organization.
2. Duplication of plants and wasteful use of equipments are also involved in product divisionalisation.
3. It creates a problem of policy control in autonomous divisional units.
4. The organizing problem of policy control in autonomous divisional units.
5. The organizing process in divisionalisation is cumbersome and complicated.
6. High cost of operation prevents the small and medium sized concerns from adopting this basis of classification, particularly for creating major units.

DEPARTMENTALIZATION BY TERRITORY /GEOGRAPHICAL DEPARTMENTATION:
Like the products basis, geographical region are adopted for main division as well as for sub-division purposes. Units that are located at physically dispersed areas are made so may self-contained divisions of the organ insertion. Apart from this divisionalisation, the marketing activities are very often sub-divided on the basis of geographical areas. The territory is fixed for carrying out the activities ciz., eastern region, western region, southern region, northern region. It is found in companies serving customers on a national or international level. Production and selling or the selling function alone may often be sub-divided on a regional basis. The following diagram depicts the territorial departmentation.

It has almost the same advantages and disadvantages as are to be found in the case of departmentalization by products. There are three special advantages of this pattern of grouping activities. First, being nearer to the market and becoming familiar with local conditions, this classification helps to cater to the needs of local people more materials or services and the convenience of supervision make a significant contribution towards the lower cost of production. Thirdly, it permits to extend business to foreign countries.

DEPARTMENTALIZATION BY CUSTOMERS OR MARKET: This type of classification is resorted to by enterprises engaged in specialized services. To give individual attention to diverse groups of buyers in the market, the sales activities are often split into several parts. When products are offered to an extensive market through numerous channels and outlets, it has the special merit of supplying goods in accordance with the peculiar needs of customers. Sales being the exclusive field of its application, coordination may appear difficult between sales function and other enterprise functions. Specialized sales staff may become idle with the downward movement of sales to any specified group of customers. The best examples of this type of departmentation are division of the braches of State Bank Of India by customers and of insurance companies by the type of policyholders.

Here, separate groups are crated on the basis of customers such as industrial users, consumers, wholesalers, retailers etc.


ADVANTAGES:
(a) Specialized service to customers.
(b) Supply of goods according to customer’s requirements.

DISADVANTAGES:
(a) Coordination is difficult.
(b) High Cost.
(c) Under-utilization of Human Resources.


DEPARTMENTALIZATION BY PROCESS: In organizations, where activities are performed on the basis of operation sequence, departmentation is effected on the basis if process. For example, in integrated textile concern, major division may be made on the basis of operational sequence e.g., spinning, weaving, bleaching, dyeing, inspection, boxing, shipping. Similarly, a large retail store may have shopping \, receiving, marketing and servicing departments purely based on the processes performed. In office work also, this basis of grouping activities has become common, e.g., filing department, mail handling department and duplicating department,. Cost and economy consideration urges the use of electronic office equipments and other costly machines on the basis of this sub division. It is, however, not a suitable basis to be utilized in any mass-production arrangement.

DEPARTMENTALIZATION BY EQUIPMENT: In some enterprises the equipment used determines major sub-divisions. Very often it is identical with departmentation by process e.g., division of an integrated textile unit into spinning, weaving bleaching, dyeing, inspection, boxing, shipping etc., may itself be passed on the type of equipment used in different processes.


DEPARTMENTALIZATION BY TIME: Division of work may be based on time sequence with the work broken down under the categories of planning execution and control. Thus the first major business division would be devoted to the formulation of objectives, methods of accomplishing them, forecasts and budgets. The second major division would be devoted to the execution of the plans and would correspond roughly to the major operating group in a business. The third major division is devoted to the control of the results of execution in the light of the objectives and plans of the business.


DEPARTMENTALIZATION PATTERN IN PRACTICE: In actual practice, no single pattern of grouping activities is applied in the organization structure with all its levels. Different bases are used in different segments of the enterprise. Composite or hybrid method forms the common basis for classifying activities rather than one particular method,. One of the mixed forms of organization is referred to as matrix or grid organization’s According to the situations, the patterns of Organizing varies frond case to case. The form of structure must reflect the tasks, goals and technology if the originations the type of people employed and the environmental conditions that it faces.


KEY FACTORS IN DEPARTMENTALIZATION

(a) It should facilitate control.
(b) It should ensure proper coordination.
(c) It should take into consideration the benefits of specialization.
(d) It should not result in excess cost.
(e) It should give due consideration to Human Aspects.