Departmentation
A department is a work group
combined together for performing certain functions of similar nature. The
process of division of the enterprise is called Departmentation or
decentralisation.
Objectives and
significance of Departmentation:
1.
specialise
activities
2.
simplify managerial tasks
3.
maintain control by grouping employees within well-defined areas.
Advantages:
a.
Increase
in efficiency
b.
Fixation
of accountability
c.
Development
of managerial faculties
d.
performance appraisal
e.
Better control
Choice of method of
Departmentation:
a.
degree of
specialisation
b.
adequate
attention to key areas
c.
Coordination
d.
Control
e.
Cost considerations
f.
Human considerations
Methods of Departmentation
The following are the basis of dividing
responsibility within an organisation structure:
1. Functional Departmentation.
2. Product wise Departmentation.
3. Territorial or Geographical Departmentation.
4. Customer wise Departmentation.
5. Process or Equipment wise Departmentation.
6. Combined or Composite Form of Departmentation.
1. Functional Departmentation:
It refers to grouping the
activities of an enterprise on the basis of functions such as production,
sales, purchase, finance, personnel, etc. The actual number of departments in
which an enterprise can be divided depends upon the size of establishment and
its nature. To begin with, we may have three or four main departments. With the
growth in the size of the business, more departments and sub-departments may be
created.
Advantages:
The important advantages of functional departmentation
are:
I.
It is a very simple, natural and logical way of grouping activities.
II.
It promotes specialisation and expertise in various functional areas and
experts can be employed.
III.
It facilitates co-ordination both within the function and at the
inter-departmental level.
IV.
It generates a high degree of centralisation at the level of chief executive.
Functional departmentation suffers from the
following drawbacks:
(i) It may lead to
internal frictions among the various departmental heads as one department may
ignore the interest of the other,
(ii)
In functional departmentation, men are experts of these areas of function
only. This hinders the development of all-round managers.
(iii)
It leads to excessive centralisation and delay in decision making.
(iv) It is unsuitable where
emphasis lies on products more than the functions.
Product Wise Departmentation:
The grouping of
activities on the basis of products is very popular with large organisations
having distinct type of products. Under this method, all activities related to
one type of product are put together under one department under the direction
of a production manager. An electronic company, for instance, may have
different departments dealing in television sets, radios and transistors,
computers, agro-dairy instruments, etc.
Product
wise departmentation is also known as multifunctional product departmentation,
because each product department handles all the functions concerning it.
Advantages:
The following are the main advantages of product
wise departmentation:
(ii)
Unprofitable product lines can be easily determined.
(iii)
It solves the co-ordination problem of functional departments.
(iv)
It makes control effective.
(v)
It assists in the development of all-round managerial talent.
Disadvantages:
Product wise departmentation suffers from the
following drawbacks:
(i)
It is expensive because of duplication of service functions in various product
divisions.
(u)
It may not be linked by customers and dealers who have to deal with different
salesmen of the same enterprise for different products.
(iii) It may cause difficulty in apportioning
general expenses incurred by the enterprise as a whole.
Departmentation
by number: – some
organization may have large number of people. All people may not be in same
department and in that condition; a certain number of people are grouped in one
department and other certain number in other department. Thus, when department
are developed on the basis of number is known as Departmentation by number. For
e.g. army
Customer Wise Departmentation:
A business house may be divided into a number of
departments on the basis of customers it serves, viz., large and small
customers ; industries and ultimate buyers ; government and other customers.
The peculiar advantage of customer wise departmentation is that it ensures full
attention to different types of customer and their different needs, tastes and
requirements can be read effectively.However, it may not be possible to group
all activities of an enterprise on the basis of customers. In fact,the activities
may be classified or grouped on such basis. But there may be problems of
co-ordination with other departments. There may not be enough work, at times,
in case of certain types of Customers. This may lead to idle capacity.
Process or Equipment Wise Departmentation:
An enterprise where production is
carried through different processes may adopt process wise departmentation to
enable continuous flow of production. Similarly, where work is carried on
machines which are common, departments may be created on the basis of
equipments, such as milling departments, grinding departments, lathe department
etc. The main advantage of this method is that it avoids duplication of
equipment in various activities. Moreover, specialised people can be engaged to
work on specialised equipments and departments.
Territorial or Geographical Departmentation:
When
several activities of an enterprise are geographically dispersed in different
locations, territorial or geographical departmentation may be adopted. All
activities relating to a particular area or zone may be grouped together under
one zonal manager or head.
There may be further sub-division of activities
under one zonal manager as illustrated here:
Advantages:
The territorial departmentation offers the
following advantages:
(i)
It enables an enterprise to cater to the needs of local people in a
satisfactory manner.
(ii)
It enables a concern to make use of locational advantages.
(iii)
It facilitates effective control.
(iv)
It facilitates effective co-ordination of activities within an area.
(v)
It assists in the development of all-round managerial talent.
Disadvantages:
(i)
It is an expensive method of creating departments and over head costs are also
increased,
(ii)
It leads to duplication of activities which creates confusion and involves
costs,
(iii) Co-ordination among various
territorial divisions may become difficult
Combined or Composite Method of Departmentation:
In practice, it may not be
advisable to create departments on the basis of any one of the above mentioned
methods. An enterprise may have to combine two or more of the methods of
departmentaton to make best use of all of them. Such a method is known as combined
or composite method of departmentation.
