Departmentalization Departmentalization 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. ? 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 women’s footwear, children’s footwear and men’s’ footwear. ? 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.  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 company’s 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.  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 driver’s license. Owing to the complexity of tasks and the competitive environment in which organisations operate, they often use a combination of the above-mentioned methods in departmentalization.

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Some philosophical Considerations As March and Simon (1958) noted when tracing a first approach to departmentalization back to Aristotle (Politics, Book IV, Chap. 15), the problem of distributing work, authority and responsibility throughout an organization is hardly new. In modern times, Gulick and Urwick (1937) were the first to introduce a theory of different departmentalization strategies, which were referred to as departmentalization by purpose and departmentalization by process. First [organization by major process] … by bringing together in a single office a large amount of each kind of work (technologically measured), makes it possible in the most effective divisions of work and specialization. Second, it makes possible also the economies of the maximum use of labor saving machinery and mass production. … there is danger that an organization erected on the basis of purpose will fail to make use of the most up-to-date technical devices and specialists because … here may not be enough work of a given technical sort to permit efficient subdivision. Is there any advantage in placing specialized services like private secretaries or filing in [process departments]? In a very small organization, yes; in a large organization, no. In a small organization, where there is not a full-time job on some days for a secretary, it is better to have a central secretarial pool than to have a private secretary for each man. In a large organization, the reverse is true. ” (Gulick ; Urwick, 1937)

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