What is Departmentalisation / Various bases of Departmentation
Meaning of Departmentation
Departmentation is the process of grouping various activities into separate departments. It is a process of dividing and sub-dividing each activity into small jobs and further grouping them into administrative departments. Departmentation is an essential part of the organising process. The formal structure of orgnisation is created through the process of departmentation. It facilitates efficient performance of departmental activities to achieve overall organisational objectives.
Departmentation is a means of dividing large and complex organisations into smaller and flexible administrative units. It involves horizontal differentiation of activities in an enterprise. The differentiation of activities bring in specialisation and managerial convenience. It ensures suitable span of control. It fixes the scope of authority and responsibility of the departmental heads.
“Departmentation is the means of dividing a large and monolithic
functional organisation into smaller and flexible administrative units”. -Louis A. Alle
“Departmentation is the grouping of jobs, processes and resources into logical units to perform some organisational task”. -Pearce & Robinson Bases (or Patterns) of Departmentation
There are many alternative bases (or patterns) for departmentalishing organisational activities. The following patterns may be followed for grouping activities into departments:
1. Departmentation by functions;
2. Departmentation by products (or services);
3. Departmentation by territories (or regions);
4. Departmentation by customers (or markets);
5. Departmentation by processes (or equipment).
1. Departmentation by functions: This refers to grouping the activities of an enterprise on the basis of functions which are to be performed (such as purchase, personnel, production, finance, marketing, etc.) Each major function is organised as a separate department under functional departmentation. The functional departmentation has become quite popular due to added dimensions to various functions. The actual number of departments in which an enterprise can be divided depends upon the size and nature of the organisation.
2. Departmentation by products (or services): This refers to the grouping of activities of an enterprise on the basis of major products. All activities related to one type of product are put together under one department under the direction of a production manager. This pattern is most common with large multi-product organisations. It is useful when the expansion and diversification of the product are of primary significance. Here, manufacturing, sales, finance and personnel functions are arranged separately for each type of product. Each department is responsible for manufacturing a product and selling it to customers.
3. Departmentation by territories (or regions): This refers to grouping the activities of an enterprise on the basis of regions (or zones). Territorial (or geographical) departmentation may be suitable when the activities of an enterprise are dispersed in different locations. The business activities are grouped area-wise and each area is in charge of a single person. Geographical departmentation becomes essential for organisations having widely scattered business operations with nation-wide or global markets. Here, all activities in a given area are grouped and placed under the control of one manager. Banks, insurance companies, the Indian Railways, the Posts and Telegraph department, etc. have departmentalised their activities in terms of geographical locations (like zones, divisions, departments, branches, etc.).
4. Departmentation by customers (or markets): This refers to grouping the activities of an enterprise according to the type of customers (or markets). This pattern of departmentation is often used by the enterprise engaged in producing and distributing goods and services for various groups of customers (or markets). Here, activities of an organisation are graped according to the types of customers (or markets) to be served. It serves different needs of various sets of customers (or markets) in an efficient manner. This type of classification is resorted to by enterprises engaged in specialised activities. For example, a bank may divide its loan section into a number of departments, such as loans to consumers, industrial users, wholesalers, retailers, etc.
5. Departmentation by processes (or equipment): This refers to grouping the activities of an enterprise on the basis of production processes (or equipment) used. This pattern of grouping activities is used by manufacturing organisations. Activities which are needed to be performed with respect to a particular process are grouped in that particular process. It is widely used in processing industries (such as oil refineries, chemicals, sugar, cement, engineering tools, etc.). Hence, the output of one process becomes the raw material of the next process.
