What is Departmentalization? Advantages, Factors, and Types


Departmentalization is the grouping of jobs, processes, and resources into logical units to perform some organizational task. Departmentalization is used when similar activities are grouped together to form various departments. For example, all accounts-related activities are grouped together to make the accounts department. Similarly, one can form a purchase department, production department, sales department, finance department, human resource (HR) department, etc.

Advantages of Departmentalization

The advantages of departmentalization are

1. Specialization

Each department performs a different function. For example, a finance department looks after finance, marketing department looks after sales and marketing, etc.

2. Growth and expansion

An organization that is suitably divided into different departments can easily grow and expand.

3. Better customer service

Departmentalization results in better customer service because customers can get quick and efficient service.

4. Performance appraisal

A specific job is given to a particular person or department, making performance appraisals very easy.

5. Management development

Departmentalization facilitates managerial training, also called management development.

6. Optimum utilization of resources

Departmentalization facilitates the optimum utilization of resources. Men, money, materials, machines, methods, and markets are put to maximum use.

Factors Determining Departmentalization

The factors determining departmentalization are

1. Specialisation

While assigning activities to departments, the benefits of specialisation must be achieved.

2. Control

One of the primary aims of departmentalization is to facilitate control. Departments should be created with clear responsibilities to enable effective control.

3. Coordination

Another factor influencing how activities are grouped is to ensure that it does not become very difficult to coordinate different business activities.

4. Key Activities

Certain activities are very crucial and should be placed in separate divisions.

5. Economy

Another important factor to consider while creating separate departments is the expense involved and economy in operations.

Functional departmentalization

Departments are segregated or separated from each other based on the functions or tasks they perform.

1. Functional departmentalization

  • Production department
  • Finance department
  • Marketing department
  • Human Resource department

2. Process departmentalization

Departments are separated based on their role in the production process.

Process departmentalization

  • Spinning Department
  • Weaving Department
  • Dyeing Department
  • Printing Department

3. Product departmentalization

Departments are separated based on the type of product produced by the company. Each individual department is responsible for producing and selling the type of product assigned to them.

Product departmentalization

  • Two Wheeler Department
  • Three Wheeler Department
  • Four Wheeler Department
  • Heavy Motors Department
  • Geographic departmentalization

Separate departments are made based on the company’s operations over a vast area or some restricted area through branches or offices established at different zones or places in that area.

4. Geographic departmentalization

  • North zone Department
  • South zone Department
  • East zone Department
  • West zone Department

Departments are separated from each other based on the types or groups of customers to be handled or dealt with.

5. Customer departmentalization

  • Department to handle foreign customers
  • Department to handle Domestic customers
  • Department to handle Wholesale customers
  • Department to handle retail customers
  • Combined departmentalization

A company or organization uses a mixture or combination of two or more types of departmentalization.

6. Combined departmentalization

Production Department

  • It includes Purchase department
  • Quality Department

Sales Department

  • It includes the Marketing department
  • Sales pricing department

7. Time departmentalization

Departments are created based on the division of their working hours or job shifts.

  • Time departmentalization
  • Morning shift department
  • Evening shift department
  • night shift department
  • Number departmentalization

Separate departments are created after analysing and judging the maximum limit up to which a number of persons can be managed, educated, supervised, or taken care of.

8. Number departmentalization

  • Division “A” Department
  • Division “B” Department
  • Division “C” Department
  • Division “D” Department