Departmentalization

Departmentalization
See also
Decision types in business Development of the organization International corporation Strategic business unit Types of strategies Hierarchical dependence Strategic management system Forms of advertising Principles and features of organizational structure

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

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.