Departmentalization involves the dividing of an organization into different

departments, which perform tasks according to the departments' specializations

in the organization. Departmentalization as a means of structuring an
organization can be found in both public and private organizations.

Departmentalization or departmentalisation refers to the process of grouping activities

into departments.Division of labour creates specialists who need coordination. This
coordination is facilitated by grouping specialists together in departments.

Popular types of departmentalization

Functional departmentalization - Grouping activities by functions performed.

Activities can be grouped according to function (work being done) to pursue
economies of scale by placing employees with shared skills and knowledge into
departments for example human resources, IT, accounting, manufacturing, logistics,
and engineering. Functional departmentalization can be used in all types of
organizations.
An organization can be organized into departments based upon the
respective functions each performs for the organization. For example, a
manufacturing company may create a production department, sales and
marketing department, an accounting department, and a human resources
department. Functional departmentalization may be advantageous as it
can increase efficiency and expertise because all related activities are
performed in one place by one group of people that specialize in that
activity.

Product departmentalization - Grouping activities by product line. Tasks can also be

grouped according to a specific product or service, thus placing all activities related to
the product or the service under one manager. Each major product area in the
corporation is under the authority of a senior manager who is specialist in, and is
responsible for, everything related to the product line. LA Gear is an example of
company that uses product departmentalization. Its structure is based on its varied
product lines which include womens footwear etc.
An organization can also divide itself by its product lines. It creates a
department for each product and that department controls all activities
related to the product including development, production, marketing,
sales, and distribution. This structure provides the organization the
advantage of developing personnel with a high level of expertise and
specialization for each of its products.

Customer departmentalization - Grouping activities on the basis of common

customers or types of customers. Jobs may be grouped according to the type of
customer served by the organization. The assumption is that customers in each
department have a common set of problems and needs that can best be met by
specialists. The sales activities in an office supply firm can be broken down into three
departments that serve retail, wholesale and government accounts.

jobs are grouped on the basis of common customers who have

common needs or problems that can best be met by having
specialists for each.

Geographic departmentalization - Grouping activities on the basis of territory. If an

organization's customers are geographically dispersed, it can group jobs based on
geography. For example, the organization structure of Coca-Cola has reflected the
companys operation in two broad geographic areas the North American sector and
the international sector, which includes the Pacific Rim, the European Community,
Northeast Europe, Africa and Latin America groups.
Organizing departments along geographic lines is often a good idea for
large multinational firms with offices around the world. All activities related
to the organization's activities in each region are handled by a department
in that region. One advantage of this method is that it ensures the
development of expertise specific to the political, social, and cultural
needs of the region. Moreover, sending managers to work in each region
provides excellent training for upper level management positions where a
broad perspective is required for success.

Process departmentalization - Grouping activities on the basis of product or service

or customer flow. Because each process requires different skills, process
departmentalization allows homogenous activities to be categorized. For example, the
applicants might need to go through several departments namely validation, licensing
and treasury, before receiving the drivers license.
this method groups jobs on the basis of product or customer flow.
In this approach, work activities follow a natural processing flow of
product or even customers.
Divisional departmentalization - When the firm develops independent lines of
business that operate as separate companies, all contributing to the corporation
profitability, the design is call divisional departmentalization or (M-FORM). For
example, the Limited. Inc., has these division: Th Limited, Express, Lerner New York,
Lane Bryant and Mast Industries.
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The main benefits or advantages of departmentalization are listed as follows:

1. Specialization.
2. Growth and expansion.
3. Fixing responsibility.
4. Better customer service.
5. Performance appraisal.

6. Management development.
7. Optimum utilization of resources
8. Facilitates better control.
Now let's discuss briefly each advantage of departmentalization.

1. Specialization
In departmentalization, each department performs a different function. For example, Finance
department looks after finance, Marketing department looks after sales, etc. This results in
specialization. Specialization leads to speed, accuracy, efficiency and improvement in quality
and quantity of work.

2. Growth and expansion

There are many different departments in the organization. Therefore, the organization can
easily grow and expand. Without departmentalization, the organisation cannot grow and
expand. It will remain small and static.

3. Fixing responsibility
Departmentalization helps to fix the responsibility of a specific job on a particular
department. If there is a mistake in the accounts, then the accounts department will be held
responsible. Similarly, if there is a mistake in the production, the production department will
be held liable, and so on.

4. Better customer service

Departmentalization results in a better customer service. The customers get quick and
efficient service. Many organizations do Geographic Departmentalization and Customer
Departmentalization.

5. Performance appraisal
In departmentalization, a specific job is given to a particular person or department. Therefore,
it is very easy to do the performance appraisals. That is, the performance of a person or
department can be easily measured.

6. Management development
Training given to managers is called management development. Departmentalization
facilitates management development. This is because the junior or trainee managers can be
sent to different departments to get an On-the-Job-training. They are allowed to take part in
planning, decision making, implementation of strategies, etc. This results in management
development.

7. Optimum utilization of resources

Departmentalization facilitates optimum utilization of resources. The men, money, materials,
machines, methods and markets are put to maximum use. There are many organizations that
use Time Departmentalization. Here, there are working shifts like morning shift, evening
shift, night shift, etc. This results in optimum utilization of resources.

8. Facilitates better control

In departmentalization, the organization is divided into small manageable departments. These
departments can be easily supervised and controlled. Hence, departmentalization also
facilitates a better control.
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