Bases of Departmentation

1. DEPARTMENTATION OR
DEPARTMENTALIZATION

2. MEANING
 Departmentation means the process
by which similar activities of the
business are grouped into units for the
purpose of facilitating smooth
administration at all levels.
 It is the process of grouping activities
of similar nature into departments

3. DEFINITION
According to Koontz and O’Donnell
“Departmentation is a process of dividing
the large monolithic functional organization
into small an flexible administrative units”

4. NEED AND IMPORTANCE
1. Specialization
2. Fixation of Responsibility
3. Autonomy
4. Smooth Functioning
5. Performance Appraisal
6. Development of Managers

5. Bases Of Departmentation
I. Functional Departmentation
II. Product Departmentation
III. Territorial/Geographical Departmentation
IV. Process Departmentation
V. Customer Departmentation
VI. Time Departmentation
VII. Alpha-Numerical Departmentation

6. FUNCTIONAL DEPARTMENTATION
 Every manufacturing unit, 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.

8. Product departmentation
Grouping of all activities necessary to
manufacture a product or product line
is called Product Deapartmentation
Head of each department is known as
Product Manager

10. Territorial / Geographical
Departmentation
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 or
services.
Eg. Banking , insurance ,
transportation companies

11. Head Office
(Mumbai)
Eastern
Zone
(Kolkata)
Central
Zone
(Kampur)
Northern Zone
(New Delhi)
Jalendher
Division
Chandigarh
Division
New Delhi
Division
Branch Branch Branch Branch Branch
Ajmer
Division
Southern
Zone
(Chennai)
Western
Zone
(Mumbai)

12. Process Departmentation
In process departmentation, process
involved in production or various type
of equipments used are taken as basis
for departmentation
Various processes can be used as the
base of grouping of activities

14. Customer Departmentation
In customer departmentation ,
activities are grouped according to the
types of customers
Eg. A large Readymade Garment Store
may have separate department each
for women , men & children

15. Board of Director
Managing Director
Finance Marketing
Wholesale Retail Exports
Production Personnel

16. Time Departmentation
 In some organisations, where work is
performed throughout the Day & Night, the
work can be divided into Shifts
 Eg. Call Centre, Medicals Stores etc
Supervisor
Day Shift Evening Shift Night Shift

17. Alpha - numerical
Departmentation
 Alpha-Numerical Departmentation are
created on the basis of number of people
irrespective of the fact what they do, where
they do & how they do
 Eg. Military Organisation

18. Merits of Deapartmentation
I. Clear Division of Activities
II. Increase in Efficiency
III. Proper Control
IV. Development of Capable Members
V. Knowledge of Departmental Costs

19. Demerits of departmentation
I. Decentarlization
II. Difficulty in Selection of Managers
III. Difficulty in Managerial Training
IV. Uneconomical System
V. Not Suitable for Small Enterprises