What is the meaning of departmentation?

‘Departmentation’ or ‘departmentalization’ is the process of classifying the activities of the enterprise into several units for the purpose of administration at all levels.

Departmentation and Departmentalization are two different terms with same meaning.

The administrative units created can be designated as departments, divisions, units, branches, sections, etc.

The process of organizing involves dividing and grouping the tasks to be performed in an enterprise and delegating various duties and responsibilities to different people.

Dividing work naturally means identifying individual activities that are to be done for the achievement of organizational objectives. But once the various activities are identified, it is necessary to group them together on some logical basis so that a team can be organized.

Need and Importance of Departmentation

The basic requirement of departmentalization is to make the size of each departmental unit manageable and secure the benefits of expertise. The set of activities and, as a result, personnel departments, makes it possible to expand an enterprise to any extent.

The department is required due to the following reasons:

  1. Advantages of expertise: The department enables an enterprise to reap the benefits of expertise. When each department looks at a key function, the enterprise develops and the efficiency of operations increases.
  2. Sense of autonomy: Generally, departments are created in the enterprise with some degree of autonomy and independence. Managers in charge of a department can make independent decisions within the overall structure of the organization. A sense of autonomy provides job satisfaction and motivation that leads to higher efficiency of operations.
  3. Expansion: A manager can only supervise and direct a few subordinates. The group of activities and personnel in the department make it possible for the expansion and development of the enterprise.
  4. Fixation of Responsibility: The department enables each person to know the specific role he has to play in the total organization. Responsibility for results can be defined more clearly, precisely and accurately and a person can be held responsible for the performance of his responsibility.
  5. Enhancing managerial skills: Helps in development of departmental managerial skills. Development is possible due to two factors. First, managers focus their attention on some specific problems that are effective in providing them with on-the-job training. Secondly, the managerial need for further training can be readily identified as the role of managers is fixed and training can provide them with an opportunity to work better in their area of ​​expertise.
  6. Facility in Appraisal: Evaluation of managerial performance becomes easier when specific tasks are assigned to departmental personnel. Managerial performance can be measured when areas of activities are specified and standards of performance are set. The department provides assistance in both these areas.
  7. Administrative Council: A department is a means of dividing a large and complex organization into smaller administrative units. The grouping of activities and personnel in manageable units facilitates administrative control. Standards of performance for each department can be accurately determined.

Types of Departments

1. Functional Departmentation: tasks involving the same or similar activities.

Functional Departmentation


  • Each department can be appointed by experts in that functional area.
  • Supervision is also facilitated because an individual manager should only be familiar with a relatively narrow set of skills.
  • Coordination activities are easy within each department.


  • It emerges as an organization as it becomes increasingly difficult to monitor accountability and performance.

2. Product Departmentation: groups activities around products or product groups.

Product Departmentation


  • All activities associated with a product or product group can be easily integrated and coordinated.
  • Decision making speed and impact are enhanced.
  • The performance of individual products or product groups can be more easily and objectively evaluated, which will improve departments’ accountability for the results of their activities.


  • Managers in each department can focus on their own product or product group to include the rest of the organization.
  • The cost of administration may increase as each department must have its own functional experts for areas such as market research and financial analysis.

3. Customer Departmentation: occurs when the organization structures its activities to react and interact with specific customers or customer groups.

Customer Departmentation
Customer Departmentation
  • The major advantage is that the organization is able to use skilled experts to deal with unique customers or customer groups.
  • A disadvantage is that fairly large, administrative staffs are required to integrate the activities of the various departments to ensure that the organization in one area does not over commit itself.

4. Location Departmentalization: functions based on group defined geographical sites or regions.

Location Departmentalization
  • The primary advantage is that it enables the organization to easily respond to unique customer and / or environmental characteristics in various areas.
  • A disadvantage is that the organization must keep track of units at different locations, a larger administrative staff may be required.

Factors to be considered in Departmentation

An appropriate foundation of the department is that which efficiently and effectively accomplishes the performance of organizational functions so as to achieve the objectives of the organization. Since each base is suitable for a particular type of organization, often a combination of different bases is adopted.

These factors or principles are described below:

1. Expertise:

The activities of an organization should be grouped in such a way that it leads to specialization of work. Expertise helps to improve efficiency and ensure economy of operation. This enables personnel to become experts.

2. Coordination:

Separate activities can be grouped together under one executive as they need to be coordinated. Therefore, the base of the department should ensure that the dissemination activities are put together in a department.

3. Control:

The department should be such that it facilitates the measurement of performance and the adoption of timely corrective action. This should enable managers to hold employees accountable for results. Effective control helps to achieve organizational objectives economically and efficiently.

4. Proper Attention:

Substantial attention should be given to all activities that contribute to the achievement of subordinate outcomes. This will ensure that all necessary activities are carried out and there is no unnecessary duplication of activities. Special attention should be given to major areas.

5. Economy:

The creation of departments involves additional space, additional cost of equipment and personnel. Therefore, the pattern and number of departments should be so fixed that the maximum possible economy is achieved in the use of physical facilities and personnel.

6. Local Position:

Adequate attention should be given to local conditions while forming the departments. This is more important for the organization which operates in different geographical regions. The department should be adjusted according to available resources. It should aim for full utilization of resources.

7. Human Consideration:

The department should also consider the human aspect in the organization. Therefore, along with the technical factors discussed above, departments should be built on the basis of personnel availability, their attitudes, aspirations and value systems, informal work groups, cultural patterns, and more. The department will be more effective by focusing on human factors.

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