Departmentalization

Departmentalization is one of the mechanisms for the creation of the organizational structure, which involves a logical, efficient and effective linking of tasks and employees. Otherwise speaking, it is the result of management decisions breaking down activities by task that can be joined in groups. Departmentalization is mainly used in medium-sized and large enterprises, in which it is impossible to supervise all units by chief executives. Responsibilities are put on the managers (delegated) of individual departments (divisions). Departmentalization leads often to building Departmental organizational structure which is very similar to Divisional structure.

Criteria for grouping departments

Basically we can distinguish 4 criteria, according to which tasks and people are grouped in the departments (divisions):

1. Grouping by function - e.g. marketing, sales, etc.
2. Grouping by product - e.g. the production of the computer equipment, software,
3. Grouping by customer (or their groups) - e.g. small business, large customers, wholesale
4. Grouping by location — e.g. south branch, central branch, regional branch

In practice, these types of departmentalization often co-exist within a single organizational structure, as well as appear in the forms of merging two or more criteria (e.g. Department of finance for Central region).

Application of departmentalization

The efficiency of application is a simple mixture of the effectiveness of the coordination process, that is, integrating various departments in a compact, reliable unit. Extremely important in this context is how to establish a relationship of subordination (the so-called. hierarchy) between departments, the place of management within structure, as well as the creation of appropriate channels of communication between departments.

Fig. 1. Departmentalization in divisional organizational structure

See also:

• Divisional structure
• Linear structure
• Organization types
• Principles and features of organizational structure
• Interdepartmental planning

Examples of Departmentalization

• Functional Departmentalization: This type of departmentalization is based on functions, such as sales, finance, marketing, production, and human resources. Each function is divided into its own department, with a manager overseeing it. This type of structure is common in many organizations, as it allows for specialization of skills and resources.
• Product Departmentalization: This type of departmentalization is based on a company's products. The organization is divided into departments based on the products or services they offer. Each department is responsible for the development, production, and marketing of its respective product or service. This type of structure is useful for companies that offer a wide range of products or services, as it allows for better specialization and control.
• Geographic Departmentalization: This type of departmentalization is based on geographic location. The organization is divided into departments based on geographical location or area of operation. Each department is responsible for its respective area, and is usually managed by a local manager. This type of structure is useful for companies that have operations in multiple regions, as it allows for better control and management of operations in different regions.
• Customer Departmentalization: This type of departmentalization is based on customer type. The organization is divided into departments based on the types of customers they serve. Each department is responsible for its respective customer type, and is usually managed by a specialist in that customer type. This type of structure is useful for companies that serve multiple types of customers, as it allows for better understanding and management of customer needs.

Advantages of Departmentalization

Departmentalization is one of the most popular methods of organizing an enterprise, and it has several advantages. These include:

• Greater efficiency: Departmentalization allows for better specialization and coordination of tasks, which can make employees more productive and efficient.
• Improved communication: By grouping employees into departments, communication between different teams can be improved, leading to a better understanding of the overall objectives of the organization.
• Improved decision-making: Departmentalization allows managers to make decisions on a more localized level, rather than trying to make decisions that would affect the entire organization. This can lead to better decisions, as managers are better informed about their specific departments.
• Improved planning: With departments, planning can be more focused and efficient. Departments can more easily manage individual projects and tasks, making it easier to plan out the resources and goals of each department.
• Increased accountability: By having departments, individual managers can be held accountable for their actions, as well as the performance of their departments. This can help to ensure that tasks are completed on time and that the organization is moving in the right direction.

Limitations of Departmentalization

Departmentalization has several limitations that should be taken into consideration when building an organizational structure. The key limitations are as follows:

• Inability to recognize interdepartmental connections: Departmentalization may lead to silo mentality, as employees may not be aware of the work of other departments and therefore, overlook the interrelated nature of different tasks.
• Loss of specialization: Departmentalization may lead to the loss of specialization because it requires employees to take on multiple roles. This can lead to a decrease in efficiency and a lack of focus.
• Overlapping roles: Departmentalization can lead to overlapping roles and responsibilities, which can result in confusion and inefficiency.
• Increased costs: Departmentalization can lead to an increase in costs due to the need for additional resources to manage the departments.
• Difficulty in making changes: Departmentalization can also make it difficult to make changes due to the complexity of the structure. This can lead to a lack of flexibility and increased risk.

Other approaches related to Departmentalization

One of the main approaches related to departmentalization is the following:

• Functional departmentalization - it is a structure in which activities are divided based on the type of functions performed. This type of departmentalization is used to assign specialized tasks to particular departments, so that all tasks related to a certain field are concentrated in one unit.
• Divisional departmentalization - it is an organizational structure in which activities are divided based on the product or service, the customer, the geographic area, or a combination of these elements. The main idea behind this type of departmentalization is to assign responsibility to each division for its own performance.
• Matrix departmentalization - it is a structure which combines functional and divisional structures. Matrix departmentalization puts together tasks from different functions and combines them with tasks from different divisions.

In conclusion, departmentalization is an important organizational tool that can be used to structure the organization in an efficient and effective way. Other approaches related to departmentalization are functional departmentalization, divisional departmentalization, and matrix departmentalization. Each of these approaches has its own advantages and disadvantages, and they can be used depending on the organizational needs.

Departmentalization — recommended articles

Grouping of posts — Organizational chart — Specialization — Functional structure — Functional dependence — Organizational dependence — Span of control — Tall organization — Forms of advertising

References

• Levinthal, D. A., & March, J. G. (1993). The myopia of learning. Strategic management journal, 14(S2), 95-112.
• Price, J. (1968). The impact of departmentalization on interoccupational cooperation. Human Organization, 27(4), 362-368.
• Senior, B., & Fleming, J. (2006). Organizational change. Pearson Education.