departmentation
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TRANSCRIPT
Prof.Chhaya Patel
Departmentation
Meaning of Departmentation
Departmentation is the foundation of organisation structure.
Departmentation means division of work into smaller units and their
re-grouping into bigger units (departments) on the basis of similarity
of features. Each department is headed by a person known as
departmental manager. Division of work into departments leads to
specialisation as people of one department perform activities related
to that department only. Departmentation provides scope for
organisation’s growth (along the same product lines) and expansion
(addition of new product lines).
Basis of Departmentation
There are two broad forms of organisation structure or
departmentation:
1. Functional departmentation
2. Divisional departmentation
Functional Departmentaion
It is grouping of activities on the basis of similarities of functions.
The nature of activities performed by different organisations is
different. Activities carried by a manufacturing concern are
production, finance, personnel and sales. For a trader, the major
activities are buying and selling. A bank performs the activities of
borrowing and lending. The major functional departments further
have derivative departments. Production department, for example,
has departments to handle purchasing, production planning and
control, manufacturing etc.
Organisation Chart Showing Functional Departmentation
Board of Directors
GMProduction
GMFinance
GMPersonnel
GMMarketing
ProductionControl
Manufacturing
Purchasing
CapitalBudgeting
Current Assets
Budgets
Recruitment
Placement
Training
Promotions
Advertisement
Sales Promotion
R & D
FunctionalDepartments
DerivativeDepartments
Merits of Functional Departmentation
1. Simple and logical basis of creating departments
2. Specialisaton
3. Co-ordination
4. Training and control
5. Supervision
6. Suitable for stable organisations
7. Suitable for small organisations
Limitations of Functional Departmentation
1. Overall organisational goals
2. Delayed decisions
3. Co-ordination
4. Holding of accountablity
5. Unsuitable for dynamic organisations
6. Complexity
Divisional Departmentation
Divisional structures are created on the basis of smaller divisions where each division has its own functional activities (production, finance, personnel and marketing). Major divisions that determine the organisaion structure are
1. Product departmentation
2. Process or Equipment departmentation
3. Cutomer departmentation
4. Terriority or Geographic departmentation
5. Departmentation by Time
6. Departmentation by Size
7. Departmentation by Task Force
Product Departmentation
This form of departmentation is suitable for companies that produce
multiple products. Product departmentation is grouping of jobs and
resources around the products or product lines that a company sells. The
focus is on the product line and all functional activities associated with
the product line. Departments are created on the basis of products and
product manager has the authority to carry out functional activities for
his department.
Organisation Chart Showing Product Departmentation
Board of Directors
GMProduction
GMFinance
GMPersonnel
GMMarketing
ManagerProduct
A
ManagerProduct
B
ManagerProduct
C
Production
Finance
Accounting
R & D
Production
Finance
Accounting
R & D
Production
Finance
Accounting
R & D
Merits of Product Departmentation
(i) Better performance
(ii) Flexibility
(iii) Faster decisions
(iv) Co-ordination
(v) Control
(vi) Responsibility
(vii) Efficiency
Limitations of Product Departmentation
(i) Co-ordination
(ii) Expensive
(iii) Control
Process Departmentation
In manufacturing organisations, where the product passes through
different stages of production, each stage is designated as a process
and departments created on the basis of processes is called process
departmentation. For each process, departments are created and
headed by people who are skilled and competent to carry that
process.
Organisation Chart Showing Process Departmentation
Board of Directors
GMProduction
GMFinance
GMPersonnel
GMMarketing
ManagerCutting
ManagerPaper Rolls
ManagerPurifying Pulp
ManagerMaking Pulp
ManagerCrushing
Merits of Process Departmentation
(i) Specialisation
(ii) Economic considerations
(iii) Technological consideration
(iv) Facilitates training
Customer Departmentation
When organisations sell goods to customers with different needs,
departments on the basis of customers is the suitable form of
departmentation. It is “the organising of jobs and resources in such a
way that each department can carefully understand and respond to the
different needs of specific customer groups”. Clear identification of
customers and their needs is the basis of departmentalisation.
Organisation Chart Showing Customer Departmentation
Board of Directors
Managing Directors
ManagerCar Loans
ManagerHousingLoans
ManagerElectronic
Loans
ManagerCommercial
Loans
Merits of Customer Departmentation
(i) Competitive advantage
(ii) Customer orientation
(iii) Specialisation
Limitations of Customer Departmentation
(i) Co-ordination
(ii) Identification of consumer groups
(iii) Change in consumer behaviour
(iv) Specialised staff
Geographic Departmentation
In territorial departmentation, organisation creates departments (i) close
to its customers because they are geographically dispersed over different
areas, or (ii) near the sources of deposits.
Each geographic unit has resources to cater to the needs of consumers of
that area. General Manager of every department looks after functional
activities of his geographical area while overall functional managers
provide supporting services to the managers of different areas.
Organisation Chart Showing Geographic Departmentation
Managing Director
GMProduction
GMFinance
GMPersonnel
GMMarketing
ManagerProduct
A
ManagerProduct
B
ManagerProduct
C
Production
Purchase
Personnel
Marketing
Board of Directors
Production
Purchase
Personnel
Marketing
Production
Purchase
Personnel
Marketing
Merits of Geographic Departmentation
(i) Training and development
(ii) Customer orientation
(iii) Low cost of production
(iv) Communication
Limitations of Geographic Departmentation
(i) Co-ordination and control
(ii) Expensive
(iii) Managerial skills
Departmentation By Time
This method of departmentation is used in situations where work is done round the clock because —
1. the machine cannot be stopped before finishing the work (manufacturing steel)
2. the demand is high and the machine has to work overtime (during boom conditioned)
3. the nature of work entrusted to the organisations is such (Airlines or Railways)
4. the services are essential in nature (health and fire services).
5. Workers work in shifts; morning, afternoon and night, so that work can progress continuously.
Departmentation By Size
This method is followed in army where number of workers in the unit is
important. The company’s performance is judged by the number of
people working with it, and therefore, it adopts departmentation by size.
Departmentation By Task Force
When organisation takes up different projects, it forms task forces,
which consist of people from different units having different skills to
carry out those projects. These groups are formed temporarily to work
till completion of the project. They are similar to project organisations.
Distinction between Functional and Divisional Structures
The following table highlights the differences between functional and
divisional structures :
Choice of Methods of Departmentation
Though departments can be created on different basis, no method can be described as the best. The factors that must be considered while choosing a basis of departmentation are:
1. The work and the process involved
2. The extent of specialisation
3. The capabilities of workers
4. The technology employed
5. The competitor’s approach
6. The extent to which co-ordination and control is centralised or decentralised
7. The environment, internal and external to the organisation
8. Optimum utilisation of resources