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Basis of Departmentation

The activities of an organization can be grouped into departments on any of the following bases:

  1. Function: Departments can be created on the basis of functions like production, sales, personnel, finance, etc. This is the most popular basis of departmentation.
  1. Product or service: Large companies with different product lines can set up separate departments for each product or service that it produces or provides. Specialized product knowledge and fixing of specific responsibilities are the merits of this division. This is also called divisionalization.
  1. Customers: Departmentation may be done on the basis of the customers of the concern. A marketing company may have separate departments to cater to the wholesalers, retailers, mail-order customers, etc.
  1. Location: This is also called territorial division or departmentation. A company may have separate departments to serve the southern region, northern region etc. It has the advantage of the intimate knowledge of local conditions.
  1. Time: When a working unit called a department works in different shifts, for each shift the working unit or department may be separate.
  1. Process: Different departments can be created on the basis of functional processes, e.g., bleaching department, drying department, printing department, etc.
  1. Combination: One or more bases can be adopted to constitute a department according to the necessity of the organization.

The following factors are to be considered m forming departments in an organization.

1.         Cost factor: The cost of creating a new department should be considered. It should be economical.

2.         Functional specialization: A new department should be based on this important factor of functional specialization. For every separate function like marketing, personnel or purchase, a separate department has to be created to secure the economies and benefits of functional specialization.

3.         Control center: One should see whether creation of a department can serve as an effective control center for that particular group of activities.

4.         Integration of different activities: Various connected activities can be brought together into one department. Sometimes even different activities which are not closely related can be brought together.

5.         Personnel factors: While creating a department, one has to see whether there is a proper personnel manager to manage the department effectively.