Departmentation
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One reason organizations exist is to do things that would be hard for one people to do by themselves. For example, its hard to conceive of one person building an office building. Instead, we have organizations of thousands of people with diverse skills that work together to build buildings. However, coordinating, controlling and just keeping track of a lot of individuals introduces its own problems.
One way to solve these problems is to create a hierarchical system of supervision so that the small groups of workers, (up to say, 50 people) are supervised by coordinators (managers). Depending on how many people there are in the organization, the coordinators themselves need to be organized into groups supervised by higher level managers, and so on. Part and parcel of this hierarchical supervisory system is the cutting up of the organization into groups (departments).
Departmentation can be defined as the grouping of jobs under the authority of a single manager, according to some rational basis, for the purposes of planning, coordination and control. The number of departments in an organization depends on the number of different jobs, i.e., the size and complexity of the business.
Bases for Departmentation:
What organizations actually do is a group person in a way that relates to the task they perform. This still leaves a lot of possibilities. Here are some common bases for departmentation:
1. Departmentation by Function
Employees with similar jobs (functions) are grouped together.
e.g. production, financing, marketing and human resources.
Advantages:
Employees can specialise and become experts in certain areas.
Simplifies tasks – each employee works with only one task or skill so it is easier to hire people.
Can be very cost efficient.
2. Departmentation by Product/ Customer
Employees who work on a particular product (or group of customers) are grouped into one department.
Product departmentation can be used by organizations which produce several different product lines. Eg, Al Futtaim has several different divisions to manage their different businesses.
Customer departmentation can be used by organizations that serve different groups of customers with different needs. Eg a bank may have separate departments for personal accounts and business accounts.
Advantages:
All tasks in department can be centred around the product (customer) allowing product decisions to be made more quickly
Managers oversee the all functions relating to the product (customer) and so receive broad training
3. Departmentation by Geographic Location
Employees who work in a particular geographic region are grouped into one department.