Departmentation is a means of dividing the large and complex organization into smaller, flexible administrative units. It is the organization-wide division of work into various manageable units or departments. It refers to horizontal differentiation in an organization. It is the grouping of activities and employees into departments. It is a method of arranging activities to facilitate the accomplishment of organizational objectives.

Departmentation is defined as the establishment of a distinct area, unit or subsystem of an organization over which a manager has authority for performance of specified activities and results. In simple words, the organizational process of determining how activities are to be grouped is called departmentation.