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:

Specialisation:
Departmentation enables an organization to avail the benefits of specialisation. When every department looks after one major function, expertise is developed and efficiency of operation increases.

Expansion:
One manager can supervise and direct only a few subordinates. Grouping of activities and personnel into departments makes it possible or the enterprise to expand and grow. If there is no departmentation, the size of the organization will be restricted to the manager’s span of control

Autonomy:
Departmentation results in the division of enterprise into semi-autonomous units. In these units, every manager is given adequate freedom. The feeling of autonomy provides job satisfaction and motivation which in turn lead to higher efficiency of operations.

Fixation of responsibilities:
Departmentation enables each person to know the specific part he is to play in the total organization. It provides a basis for building up loyalty and commitment. The responsibility for results can be defined more precisely and an individual can be held accountable for performance.

Appraisal:
Appraisal of managerial performance becomes easier when specific tasks are assigned to specific personnel. The sources of information, the skills and competence required for total managerial decisions can be located.

Managerial development:
Departmentation facilitates communication, coordination and control. It simplifies the training and development of executives y providing them opportunities to take independent decisions and o exercise initiative.


Administrative control:
Departmentation is a means of dividing the large and complex oranisation into small and flexible administrative units. Grouping of activities and personnel into manageable units facilitates administrative control. Standards of performance for each and very department can be precisely determined. Excessive departmentation may result in several organisational problems such as erosion of the line of command, multiple accountability, dysfunctional conflicts and difficulty of coordination and control.

Types of departmentation:
The following patterns may be used for grouping activities into departments:



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 department’s activities may classified 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.

DEPARTMENTATION BY FUNCTION
ADVANTAGES:
The main advantages of functional departmentation are as follows:

 It is the most logical, time proven and natural form of departmentation.
 It provides occupational specialisation which makes optimum utilisation of manpower.
 It ensures the performance of all activities necessary for achieving organizational objectives. It gives status to major function.
 It facilitates delegation of authority.
 It enables top management to exercise effective control over a limited number of functions.
 It eliminates costly duplication of effort.
 It simplifies training because managers have to be experts only in a narrow range of skills.

Disadvantages:
The following demerits can be drawn for functional departmentation-

 There is too much emphasis on specialisation.when each employee specializes only in a small part of the job, cannot develop a balanced attitude towards the job as a whole.
 There may be conflicts between departments as the responsibilities are interdependent and cannot always be clearly delineated.
 Functional departments may grow in size to justify their cost. Managers may try to build their functional empires
 The scope for management development is limited. Functional managers do not get training and experience for top management positions. Responsibility for results cannot be fixed on any one functional head.
 There may be difficulties in coordinating the activities of different departments. There may be inflexibility and complexity of operations.
Committees may be constituted to ensure coordination between functional departments. The functional basis is more useful to large organizations. Very often the functional basis is used at top level and some other basis is applied at lower levels.

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-
DEPARTMENTATION BY PRODUCT


ADVANTAGES:
The following are its advantages-
 Product departmentation can reduce the problem of coordination between production and sales activities. All activities concerning a particular product line are integrated together.
 It focuses individual attention on each product line which facilitates product expansion and diversification
 It permits full use of specialised production facilities. Personal skills and specialised knowledge of product managers can be fully utilized.
 The performance of each product division and its contribution to overall results can be easily evaluated.
 Product managers can be held accountable for the profitability of each product
 As each product division is semi-autonomous and contains different functions, product departmentation provides an excellent training ground for top management positions.
 It is more flexible and adaptable to change.

DISADVANTAGES:
The disadvantages of product departmentation are as follows-
 There is duplication of physical facilities and functions. Each product division maintains its own specialised facilities and personnel due to which operating cost may be high.
 Advantages of centralization of certain activities like financing, accounting, industrial relations, etc; are not available.
 There may be underutilization of plant capacity when the demand for a particular product is not adequate.
 It creates the problem of effective control over product divisions by the top management.
 More persons with general management ability are required.
 Each product manager asserts his autonomy disregarding the interest of the organization.

The choice of product (or service) categories becomes an important component of product departmentation. Products can be grouped according to such diverse criteria as technology (e.g., electronic versus mechanical versus electromechanical), brand (e.g., Noxzema versus Cover Girl), product function (e.g., welding versus grinding equipment), size (e.g., low-volume versus high-volume pumps), and so forth. These distinctions often become manifest in "product-line" decisions, which, in turn, have organizational implications.

TERRITORIAL DEPARTMENTATION

Organizations that are spread over a wide area may find advantages in organizing along geographic lines 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.
Departmentation by territory

Advantages:

 It helps in achieving the benefits of local operations. The local managers are more conversant with local customs, preferences, fashions, styles, etc. They can adapt and respond to the local demand situation with speed and accuracy. The enterprise can gain intimate knowledge of conditions in the local markets.
 It results in saving in freight, rents and labour costs. There are savings in time and money. Therefore, economies of localized operations are available.
 Every regional manager can specialize in the peculiar problems of his region.
 There is better coordination of activities in a locality through the setting up of regional division. It provides for effective span of control.
 It facilitates the expansion of business to various regions.
 It provides opportunities to train managers as they look after the complete operations of a unit. Each regional manager can be given adequate autonomy.

Disadvantages:

 Due to geographical distance there is problem of communication.
 Geographical departments require more managers with general managerial abilities which may not always be available.
 There may be friction between regional managers.
 All activities of a firm may not be amenable to territorial specialisation.
 Coordination and control of different branches from the head office becomes less effective.
 There is duplication of physical facilities due to which the cost of operation may be high. There is multiplication of personnel, accounting and other services at regional level.

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.
Advantages:
 Special attention can be given to the particular tastes and preferences of each class of customers. Customers’ satisfaction enhances the goodwill and sales of the enterprise and loyalty of customers.
 The benefits of specialisation can be derived
 The enterprise gains intimate knowledge of the needs of each category of customers.

Disadvantages:
 As such departmentation is applied only to sales function; there may be difficulties in coordinating the activities of different functions. There is constant pressure from customer department for special treatment.
 There may be under-utilisation of facilities and manpower, particularly during period of low demand.
 Managers of customer departments may put pressure for special facilities and benefits.
 It may lead to duplication of activities and heavy overheads.

PROCESS OR EQUIPMENT DEPARTMENTATION 

Here activities are grouped on the basis of production process or equipment involved. For example: The Plant Superintendent would work in conjunction with the managers of the Materials Department, Assembling Department, Finishing Department and the Inspection Department.

DEPARTMENTATION BY PROCESS

Advantages:
 There is clear-cut technical division of work.
 This ensures specialisation and facilitates training of junior executives.
 It is possible to appoint persons with special education and experience for each process.
 Location of similar type of machines in one place result in economies in costs of repairs and maintenance.

Disadvantages:
 There may be difficulty in co-ordinary different process department. Conflicts among managers of different processes may arise.
 It cannot be used where manufacturing does not involve distinct process.
 It is suitable only for special and composite type of plants.

TIME DEPARTMENTATION:

Another way to departmentalize is to group activities according to the period of time during which work is performed. Many organizations are engaged in round-the-clock operations and departmentalize on the basis of time by having work shifts (day, afternoon, night shift).

Shift work can contribute to numerous other employee problems and concerns, including personal safety, sleep deprivation, child care, and work/family conflicts. Night-shift workers often perceive that they are viewed as “second-class citizens” who have limited access to the training and development opportunities afforded to day-shift personnel.

COMPOSITE OR COMBINED DEPARTMENTATION

In order to achieve an effective structure, a supervisor may have to apply several types of departmentation at the same time. This is referred to as “mixed” departmentation. In practice, many organizations have a composite departmental structure involving functional departmentation, geographic departmentation, and other forms. All of these alternatives may be available to supervisors to facilitate the grouping of activities in their departments


CHOOSING THE BASIS OF DEPARTMENTATION

Management must be very careful in choosing the basis of departmentation because once a pattern is chosen it is very difficult and costly to switch over to another pattern. The following factors should be kept in view while selecting a suitable basis of departmentation.
 Specialisation:- The activities of an organization should be grouped in such a way that it leads to Specialisation of work. This helps to improve efficiency and economy of operations and enables people to become experts.

 Coordination in the performance of different activities is necessary so that they contribute maximum towards the organizational goals.

 Control:- The departmentation should be such that it facilitates measurement of performance and timely corrective action. Effective control helps to achieve organizational goals efficiently and economically.

 Cost:- The pattern and the number of departments should be so decided that maximum possible economy is achieved in the utilization of physical facilities and personnel.

 Special attention:- The various activities should be given adequate attention so that each necessary activity is performed and there is no unnecessary duplication of activities.

 Local Conditions:- Should be adequately considered in a scheme of decentralization. Departmentation should be adjusted according to available resources.

 Human consideration:- the existence of informal groups, cultural patterns, value system, etc. should be given due consideration. Attention to human factors will make departmentation more efficient and effective.