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Aby Abdul Rabb, Nagercoil, India

M.Com.,M.L.M., M.B.A.,M.Phil (Com)

Departmentalization or departmentation is a part of the organization process. It involves the

grouping of common activities on the basis of a function of the organization under a single persons
control. A department is a unique group of resources established by management.
1. Meaning:
Departmentalization means the process by which similar activities of the business are
grouped into units for the purpose of facilitation smooth administration at all levels. In short, it
means grouping activities and people into departments.
2. Definition:
Departmentalization the grouping of related functions into manageable units to achieve the
objectives of the enterprise in the most efficient and effective manner. Departmentalization refers to
the classification of activities on operations of an undertaking into functionalized categories.



1. It groups people or activities into a department to achieve organizations objectives.

2. It facilitates staffing, directing, communicating, control and co-ordination.

It helps managers to easily spot the source of information, skills and competencies to make

4. It contributes to the success of organization and makes the departmental heads efficient.


The departmentalization is divided into eight categories such as:

1. Numbers Departmentalization:
This method is used to group activities on the basis of a certain number of persons. This
method is best suited to army. Under this method similar type of duties is performed by small
groups and each group is controlled by a supervisor or an executive.
E.g. Squads, battalions, companies, brigades and regiments In Army.







2. Time Departmentalization:
Under this method of departmentalization activities are grouped together on the basis of the
time of the performance. This method is most suited to hospitals and other health care facilities
where the round the clock patient care is essential.
E.g. hospitals and other care facilities
A. Merit of time departmentalization
1. Services can be reentered round the clock.
2. It is possible to use processes that required uninterrupted continuing cycle.
3. Expensive equipment can be used continuous
B. De- Merit of time departmentalization
1. Supervision may be lacking during the night shift.
2. Employees engaged in day and night shifts may suffer from fatigue.
3. Shift causes problem of co-ordination and communication.
4. Paying overtime may result increase in product or service cost
3. Functional Departmentalization:
It is the most logical, widely used and basic form of departmentalization. Under this method
activities are grouped on the basis of the functions of enterprises. The basic functions are
production, selling and financing. This method is universally popular.
A. Advantages of Functional Departmentalization
1. It is scientific and time tested method.
2. It follows the principles of specialization and division of labour.
3. It ensures performance control and it preserves the importance of each of activities.
4. Due weightage and prestige are given to managers and respected.
B. Disadvantages of Functional Departmentalization
1. It makes management control work more difficult.
2. Increases work load and responsibility of managers.
3. Does not offer scope for training for overall development of managers.

4. It extremely difficult to achieve co-ordination among the specialized departments.

5. It does not encourage innovation.

4. Territorial Departmentalization:
Department organized on the basis of geographical area is known as territorial
departmentalization. This kind of departmentalization is best suited to large- scale enterprises whose
business activities are geographically dispersed.
E.g. Indian railways are the best example for territorial departmentalization. It is departmentalized
into Northern, Southern, Eastern, central, south central etc.
Territorial Departmentalization





South central

A. Advantages of Territorial Departmentalization

1. Maximum utilization of personnel efficiency of workers.
2. Gaining economy in manufacturing and marketing of products.
3. It place responsibility at lower level.
4. It enables managers to pay special attention to the needs, requirements and
problem of local market.
5. It improve face- to- face communication with local people.
6. It provides better services to customers.
B. Disadvantages of Territorial Departmentalization
1. It needs more persons with general managerial abilities.
2. It increases the problem of control by the headquarters.
3. It is difficult to monitor the activities of the departments spread over a vast area.
4. It gives rise to problem of communication.
5. Administrative expenses are bound to increase, since the division will have its own
staff and specialists.
5. Customer Departmentalization:
Under this method of departmentalization activities are grouped on the basis of customers
interest. It is customer centered. It is assumed that major customers can be identified and divided
into logical categories such as agriculturists, traders, industrialist, professionals etc.

Customers Departmentalization of a University

Regular Courses

Evening courses

Open University

Distance Education

A. Advantages of Customer Departmentalization

1. It fulfills the expectations and needs of customers.
2. It develops specialization among the organizational staff.
3. Each section of customers gets better services.
4. It helps the enterprises to earn the esteem support and goodwill of the major
B. Disadvantages of Customer Departmentalization
1. Duplication of activities and achievement of coordination is very difficult.
2. Wastage of available of resources and facilities.
3. Production activities cant be done under this method due to heavy cost.
4. It discriminate rich customers from poor customers and encourage unhealthy
6. Process Departmentalization:
Grouping activities on the basis of product or service or customer flow. Because each
process requires different skills, process departmentalization allows homogenous activities to be
categorized. It is grouping of activities under around production process. Different processes are











Process departmentalization of manufacturing industry







A. Advantages of Process Departmentalization

1. It is supremely suited for manufacturing firms.
2. It enables the enterprises to reap the benefits of specialization, optimum maintenance
of equipment and resources.
3. Costlier machines can be used effectively.
4. Economy of operation and no duplication of activities.
5. Principle of specialization and division of labur is followed.
B. Disadvantages of Process departmentalization
1. Heavy cost of operation.

2. More specialists are essential to each process.

3. Lack of overall development of managerial talents.
4. It makes co ordination of various functions and product difficult.
5. It is unsuitable for developing general managers
7. Product Departmentalization:
Grouping activities by product line. Tasks can also be grouped according to a specific
product or service, thus placing all activities related to the product or the service under one
manager. Each major product area in the corporation is under the authority of a senior manager who
is specialist in, and is responsible for, everything related to the product line.
For example, a furniture enterprise may be divided into departments for tables, chairs, beds,
dressing table etc.
Product Departmentalization of Furniture Enterprises

Dept. of Tables

Dept. of Chairs

Dept. of Beds

Dept. of Dressing Table

A. Advantages of Product Departmentalization

1. It place attention and efforts on product line
2. It channelizes specialized capital.
3. It permit growth and diversity of product and services
4. It improve co-ordination of functional activities
B. Disadvantages of Product Departmentalization
1. It requires more managers with general managers abilities.
2. It present increased problem of top management control.
3. It is costly because it requires more materials, personnel and resources.
4. It results in available duplication of staff, money and materials.
5. It encourages employees to identify themselves.

A departmentalization is a unique group of resources established by management.
Departmentalization helps the business organization to specialize activities and expand the business
to the extent necessary.

Drucker, Peter. The Practice of Management, New York: Harper, 1954.

Gulick, Luther and Urwick, Lyndall, (eds). Papers on the Science of Administration. New York:
Institute of Public Administration, 1973.
Koontz, Harold & Cyril ODonnell. Principles of Management. New York: McGraw-Hill, 1964.