What is Departmentalization? What are the different forms of departmentalization?

Departmentalization is the process of breaking down an enterprise into various departments. How jobs are grouped together is called departmentalization. A  Department is an organization unit that is headed by a manager who is responsible for its activities.

Departmentalization and Division of labor are same things. However technically both are different. Both emphasize  on the use of the specialized knowledge, but  departmentalization has higher management level strategic considerations while the division of labor has a lower level operating considerations.

There are five common forms of departmentalization

(1) Functional Departmentalization: Functional departmentalization defines departments by the functions each one performs such as accounting or purchasing. Every Organization must perform certain jobs in order to do its work. For example, Manufacturing, Production, R & D, Purchasing etc. Same kinds of jobs are grouped together in departments. This kind of departmentalization includes persons with same knowledge or skills (like Accounting Department having persons of commerce, Marketing Department having MBA persons). As in department people with same skill and knowledge are there. Their focus becomes narrow and they cannot appreciate each other’s work in the same department.

 Advantages :-

• ·      Efficiency from putting together similar  specialist and people with common skills,  knowledge, and orientations.
•          In-depth specialization.
•          Co-ordination within functional area.

Limitations :-

 Poor communication across functional areas.

 Limited view of organizational goals.

(2) Geographical Departmentalization: Geographical departmentalization is an arrangement of departments according to geographic area or territory. It divides works well for international business. Geographical Departmentalization is beneficial when Organization are spread over a wide area. Even each part or areas have different requirement or interests. For example, marketing a product in Western Europe may have different requirements than marketing the same product in Southeast Asia. Market area is broken up into sales territories like Northern, Southern, West, East. The Salesman appointed for each territory report to their regional or territorial manager. These manager again reports to the sales manager who is head of the sales department.

Advantages : -

 More effective and efficient handling of specific regional issues that arise.

 Serve needs of unique geographic markets better.

Limitations :-

 Duplication of functions.

 Can feel isolated from other organizational areas.

(3) Product Departmentalization: It groups jobs by product line. Companies may have multiple products. Like Maruti is producing Alto, Zen, Swift. Large companies are often organized according to the product. All common activities required to produce and market a product are grouped together. Major disadvantages are duplication of resources. Each product requires most of the same functional areas such as finance, marketing, production etc. For example, Samsung manufactures Phones, T.V., Tablet etc. For each product, they have same functional department like marketing, production etc. Thus, it is duplication of functions. Product Departmentalization has become important for large complex organization.

                           

Advantages :-

 Allows specialization in particular products and

services.

 Managers can become experts in their industry.

 Closer to customers.

Limitations :-

 Duplication of functions.

 Limited view of organizational goals.

(4) Process Departmentalization: It groups Jobs On The Basis Of Product Or Customer Flow. Departmentalization is done on the basis of processing. In manufacturing organizations, the location of manufacturing plant or department can be at different location due to cost of raw material and even labor charges. Even departmentalization can be done depending on the types of machines required. The similar types of machines can be kept at one place e.g. all lathes, all drilling machines, all sharpers etc. Activities are grouped into separate sections, each kept at one place.

 Advantages :-

 More efficient flow of work activities.

 Limitations :-

(5) Customer Departmentalization: It groups Jobs On The Basis of specific And Unique Customers

 Customer divisions are divisions set up to service particular types of clients or customers. Some companies or organization divides the different units based on customers or markets. For example, any PC manufacturing company like HP has different divisions like Consumer PC, Commercial PC, and Workstations etc. Nokia previously had three divisions like Consumer Phone, Business Phone & Smart Phone. Recently Nokia had changed their departmentalization from customer to process base. Now there are only two divisions : Hardware and Software base departmentalization. They will also sell their software to other mobile company. Another example is an educational institution offers regular and extension courses to cater to the needs of different students groups.

Advantages :-

 Customers’ needs and problems can be met by

specialists

Limitations :-

 Duplication of functions.

 Limited view of organizational goals.