Chapter – 9 DEPARTMENTATION

DEPARTMENTATION
Introduction
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 person’s control.

Meaning
Departmentation means the process by which similar activities of the
business are grouped into units for the purpose of facilitation smooth
administration at all levels.

Definition
Departmentation refers to the classification of activities on operations of an
undertaking into functionalized categories. It is created in product wise,
process-wise or area wise. It ensures proper direction to and control on
them.

Process of Departmentation
1. Identification of work.
2. Analysis of details of each work.
3. Description of the function of the organization.
4. Entrusting the function to a separate person who has specialized in
the respective field.
5. Fixing the scope of authority and responsibility of the departmental
heads.

Need and Importance of Departmentation

1. It increases the operating efficiency of the employees.
2. It makes the executive to be alert and efficient in his duties.
3. It increases the prestige and skill of the departmental heads.
4. It makes the departmental heads efficient.
5. Further expansion of the organization is possible.
6. It gives advantages like facilitating budget preparation, effective
control of expenditure, attaining specialization, better coordination etc.

Factors in Departmentation
1. Specification
2. Control
3. Coordination
4. Securing attention
5. Recognition of local conditions
6. Economy

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Basis of Grouping Diverse Activities

1. Maximum use
2. Interest
3. Competition
4. Policy matter
5. Separation
6. Proper attention
7. Coordination

Basis pattern types of Departmentation

1. Departmentation by Function
2. Departmentation by Product or Service
3. Departmentation by region or area
4. Departmentation by Customers
5. Departmentation by Process
6. Departmentation by Time
7. Departmentation by Numbers
8. Departmentation by Marketing Channels

Departmentation by Function
Anil Starch Ltd.

Production Sales Accounts Purchase Finance

Dep. Dep. Dep. Dept. Department

Advantages:
¾ It is scientific and time tested method.
¾ It follows the principles of specialization and division of labour
¾ Ensures performance control
¾ Preserves the importance of each of activities.
¾ Due weightage and prestige are given to managers and respected
¾ Facilitates coordination activity within departments
¾ Economical, simple and easy to understand
¾ Helps utilization of manpower and other natural resources.

Disadvantages:
¾ It makes management control work more difficult
¾ Increases work load and responsibility of managers
¾ Does not offer scope for training for overall development of managers
¾ Managers may be experts but may not understand the problems of other
departments.

Departmentation by Product or Service

Birla VXL Ltd. – Saurashtra Chemical Division

Manufacturing Sales Purchase Finance

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Advantages:
¾ Maximum utilization of personnel efficiency of workers.
¾ Gaining economy in manufacturing and marketing of products
¾ Better services to customers
¾ Profitability of each product is known.
¾ Proper attention is given
¾ New line of product can be introduced without difficulty.

Disadvantages:
¾ Danger of duplication of work
¾ Increases number of personnel that leads to heavy cost
¾ Additional cost for maintaining a sales force for each product
¾ Control becomes more difficult
¾ Machines and equipments may not be used fully.
¾ Only for large scale diversified groups.

Departmentation by region or area

GM – Marketing

Area Mgr.-North Area Mgr.-East Area Mgr. -West Area Mgr. -South

Advantages:
¾ Effective span of control.
¾ Reduces the cost of operation and gains saving in time.
¾ Intimate knowledge about the taste and preference of customers
¾ Win the confidence of customers and reduce the competition
¾ Profitability of each area can be known.
¾ Gives opportunities to managers to improve their skills
¾ More suitable for large scale business unit
¾ Control process very easy to manager.

Disadvantages:
¾ Increases number of personnel and heavy cost of operation
¾ Control of head office is less effective one
¾ Involves duplication of work
¾ Small business can’t manage the high cost.

Departmentation by Customers

ICICI

Corporate Advances Home Loans Personal Loans Credit Cards

Advantages:
¾ It fulfills the expectations and needs of customers

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¾ It develops specialization among the organizational staff.

¾ Out of fashion products can be dispensed with
¾ Each section of customers gets better services.

Disadvantages:
¾ Duplication of activities.
¾ Achievement of coordination is very difficult
¾ Wastage of available of resources and facilities.
¾ Production activities can’t be done under this method due to heavy cost.

Departmentation by Process

General Manager

Melting Rolling Peeling Metal Drawing Packing Sales

Advantages:
¾ Costlier machines can be used effectively.
¾ Economy of operation
¾ No duplication of activities
¾ Principle of specialization and division of labour is followed
¾ It helps top management to have effective performance control
¾ This is more suitable for a product manufacturing passes through more
processes.

Disadvantages:
¾ Heavy cost of operation
¾ More specialist are essential to each process
¾ Lack of overall development of managerial talents.

Departmentation by Time
The business activities are grouped together on the basis of the time of the
performance.
Departmentation by Numbers
Similar type of duties is performed by small groups and each group is
controlled by a supervisor or an executive. The principles of span of
management span of control or span of supervision is used under this type.
E.g. Squads, battalions, companies, brigades and regiments In Army.

Departmentation by Marketing Channels

This type of departmentation is adopted on the basis of the channel of
distribution chosen by the particular business unit. This method of
departmentation has grown in importance as business has become
increasingly market oriented.