Bases Of Departmentation.

Departmentation By Functions.

Every manufacturing unit, except a small one

has to perform certain basic functions such as
Production, Marketing, Finance and Personnel.
Each of these are grouped into separate
departments such as Production Department,
Marketing Department, Finance Department
and Personnel Department. This is known as
Departmentation By Functions.
 Board Of Directors.

Managing Director/General Manager

Personnel Department. Finance Department. Production Department. Marketing Department.

Merits Of Departmentation By Function.
1. Functional Departmentation is a Logical and
Time-Tested Method.
2. The available Manpower in the departments is
utilized fully.
3. It is suitable and convenient for creating major
departments.
4. It facilitates intra-departmental coordination. It
also promotes and provides the benefits of
occupational specialization.
5. It facilitates performance appraisal and control
of departments.
 Demerits Of Functional
Departmentation.
1. In functional departmentation, the decision
making process is delayed due to specialization.
2. It is not conducive to overall organizational
strength and survival.
3. Functional Departmentation may not be suitable
when the area covered by business activities is
rather wide.
4. Conflicts between departments are possible if
proper mechanism for cooperation and
coordination is not instituted.
 Departmentation By Process.
Another way of horizontal grouping of activities is
to organize them according to the process of
production performed. Thus, a textile mill may have
a separate department for Spinning, Weaving,
Dyeing, Bleaching and Printing, as these are the
most important processes in manufacturing of cloth. In
case of administrative offices departments such as Filing,
Accounts, Correspondence and so on are formed. They
will operate under overall supervision and control of the
general manager.
 Board Of Directors.

Managing Director.

Finance Manager. General Manager. Sales Manager.

Processing. Spinning. Weaving. Dyeing. Bleaching. Printing.

 Merits of Departmentation By
Process.
1. It ensures specialization.
2. It is possible to appoint experts at each stage.
3. It can use costly equipments.
4. It provides economical repairs and maintenance
because similar machines are put together.
5. It is suitable to concerns manufacturing products
requiring a number of processes.
 Demerits of Departmentation by
process
1. It is difficult to compare performance of different
process-based departments because their nature of
work differs.
2. It face the problem of coordinating processes
between different departments.
3. It may create conflicts among managers of different
processes.
4. It is unsuitable where manufacturing activity does
not involve distinct processes.
5. It provides little scope for managerial
developments.
 Departmentation By Product.
Under the departmentation by product, the organization is
divided into as many departments as the number of
products in the product line of the company. All functions
and activities related to particular products are brought
under one departmental umbrella. The in-charge of the
department is called Product Manager who is given the
operating authority by the top level management. Thus,
an automobile company will have one department for
passenger cars, another for jeeps and a third one for
trucks. Departmentation by Products is quite convenient
in case of large multi-product enterprise.
 Board Of Directors.

Managing Director/General Manager.

Finance. Production. Marketing.

Manager. Manager. Manager. Manager.

(Jeeps) (Trucks) (Buses) (Three-Wheelers)
 Merits Of Departmentation By
Product.
1. It motivates departmental managers to take more
initiative for raising efficiency and productivity of their
departments.
2. As the comparison of different departments is
possible, the management can make investment in
the profit making departments and can close loss-
making departments.
3. It also provides training and development
opportunities to managerial staff. In addition, it
facilitates growth and diversification of products at
the departmental level.
 Demerits Of Departmentation By
Product.
1. This type of departmentation is costly as service
function are duplicated.
2. It is not convenient for small and medium-sized
concerns due to cost factor.
3. The top management finds it difficult to have
effective control on the departments.
 Departmentation By Geographical
Location/ Area.
Along with the increase in the company’s volume of
business it may find it necessary to establish regional
factories and branch offices to meet the increasing
demand for its products/services. These factories/offices
are then given the status of separate departments or
divisions. This type of departmentation is on the basis of
territory/region/area and has been found more suitable or
service organizations such as insurance companies, banks, and
so on. In India, the Indian railways is have different divisions
such as Central Railway, Western Railway, and so on. Similarly
LIC has its zonal and divisional offices.
 Board Of directors.

Managing Director/General Manager.

Overseas Division. Northern Zone.

Eastern Zone.
Western Zone. Southern Zone.
 Merits Of Departmentation By
Geographic Location.
1. It motivates regional heads to achieve high
performance.
2. It can adapt to local conditions.
3. It provides training to middle level executives.
4. It facilitates expansion of business to various
regions.
 Demerits Of Departmentation By
Geographical Location.
1. It cannot avoid duplication of activities
e.g., service functions performed by regional
units can be performed centrally by the head
office.
2. It is likely that each regional unit may give higher
importance to its unit and neglect the overall
interest of the organization.
3. It may lead to conflicts between regional
managers.
4. It may be difficult to control different branches
from the head office.
 Departmentation By Customer.

In the departmentation by customer, the

departments are establishes as per the customer that it
serves. Enterprises offering specialized services prefer
departmentation by customers. Manufacturers of
products such as tyres, compressors, spare-parts, etc.,
who sell their products to different categories of
customers, have found it convenient to set up customer-
wise departmentation for marketing their products. This
type of departmentation is possible in case of big
automobile company supplying cars to different
categories of customers.
 Board Of Directors.

Managing Director.

General Manager.

Finance. Production. Marketing. Personnel.

Foreign Buyers. Dealers/Retailers. Manufacturers. Defense Department. Public Undertakings.

 Merits Of Departmentation By
Customer.
1. It ensures full attention to customers.
2. It provides benefits of division of work.
3. It is possible to know the likes and dislikes of the
customer.
4. It helps the organization to earn higher goodwill
through better service.
 Demerits Of Departmentation By
Customer.
1. It may result in under utilization of resources.
2. It may create duplication of facilities.
3. It may face heavy overheads.
4. It may give special treatment to certain class of
customers.
 Departmentation By Time.
Public service institutions like hospitals, police
stations and fire brigade work round the clock.
Supervisor.

Day Shift. Evening Shift. Night Shift.