INTRODUCTION TO PUBLIC ADMINISTRATION–MGT111 VU

LESSON 15

DEPARTMENTALIZATION

At the end of the lecture the students should be able to understand:

• What is Department
• What are the Basis of Departmentalization
• Advantages and Disadvantages of various types of Departmentalization
• The Concept of Authority and Decentralization

Department
Let us go back to the definition of department.

“A department is a distinct area, division, or branch of organization over which manager has
authority for performance of specified activities”
When activities and tasks are grouped according to some basis of similarity, it is called
departmentalization.

Departmentalization by simple numbers

Departmentalization by number is done by putting people in group who are to perform the same
duties. They are placed under supervision of a manager or supervisors. Example: Armies in old times,
Unskilled labour in construction.

Departmentalization by time
Departmentalization by time is done at operational or lower levels of organizations where activities
are grouped together on the basis of time. Example: People working in shifts in steel company, hospitals
etc.

Advantages
Departmentalization by time has two main advantages; These are:

1. The usual timings of offices are eight hours, but if departmentalization is to be done
beyond 8 hours, second shift or round the clock service can be provided.
2. Equipment can be used more often in shifts: The tools, equipment and physical facilities
can be used to full capacity.

Disadvantages
1. Lack of supervision: People working in shifts may not be supervised.
2. Increase of overtime rates: There may be increase in expenditure due to payment to
workers in shift.

Departmentalization by Enterprise Function

Departmentalization by function is the grouping of the activities in accordance with the functions
of the enterprise (Functional Departmentalization). Example of functions of organization: Production,
Budgeting, Accounts, Sales etc.

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Departmentalization by Enterprise Function
Figure - 1

President

Assistant to
President Personnel Officer

Marketing Engineering Production Finance

Department Department Department Department

Marketing
Research

Marketing
Planning

Advertising and
Promotion

Sales
Administration

Sales

In figure 1 is the organization chart (also called organogram) of a private company. The functional
departmentalization of a company is shown. There are 4 functional departments i.e. marketing, engineering,
production and finance. Under the marketing department all market related activities are grouped i.e.
marketing research, marketing planning, advertising and promotion, sales and administration.
Departmentalization by function is the most common form of departmentalization.

Advantages of Departmentalization by Function

Following are the advantages of departmentalization by function:

1. It is logical reflection of functions: This is more common and logical way of grouping
activities.
2. Maintains power of major functions: Certain functions in organization are more important
as the main or core area. For example in universities the academic department will be major
function.
3. Simplifies training: Since people are grouped according to functional departmentalization, it
becomes easier to provide training to employees in a particular functional area wise.
4. Tight control on the top: Each department head can exercise control over its own functional
area.

Disadvantages of Departmentalization by Function

Following are disadvantages of departmentalization by functions:

1. Reduces coordination among functions: Since employees work in respective department;

therefore, coordination amongst various department is reduced.
2. Slow adaptation to changing environment: When people work for longtime in a department
they become use to with the working and their styles become rigid. For example a police
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officer style of working would be different from that of a teacher. Therefore, they are slow to
changing environment.
3. Limits development of managers: Development of mangers is limited to a particular function
only.

Departmentalization by Geography
Activities of an organization in a given area or territory are grouped and assigned to a manager.
Example: Electricity and gas is supplied by regional organizations, such as local electricity Supply
Corporation, Sui Northern Gas Company and Sui Southern Gas Company.

Departmentalization by Geography
Figure-2

President

Marketing Personnel

Purchasing Finance

Western Southwestern Central Southeastern Eastern

Region Region Region Region Region

Personnel

Engineering Production Accounting Sales

Figure 2 is the organization chart of an organization that has centralized marketing, personnel,
purchasing and finance. Under the central region are shown personnel engineering, production, accounting
and sales, and likewise these functions also exist for other four geographical regions.

Advantages
Following are the advantages of departmentalization on the basis of geography:
1. Emphasis on local market: The local markets can gain benefit as service is provided
according to geography. It helps develop that market.
2. Improves coordination: Coordination within the geographical unit is better because all
functional departments operate at the geographic region.
3. Face-to-face communication: There is better communication between the service
provider and service receiver.

Disadvantages
Following are the disadvantages of departmentalization by the geography:

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1. Problems of control: As the functions are dispersed, therefore control cannot be
exercised effectively
2. Requires more human capital: from the above it is deduced that more people are
required.
3. Makes maintenance more difficult: Maintenance of service become difficult.

Customer Departmentalization
It is grouping of activities so that these reflect primary interest of the customers in a variety of
enterprises.

Customer Departmentalization
Figure-3

President

Community- Corporate
City Banking Banking

Instructional Real Estate Agricultural

Banking Loans Banking

Customer departmentalization is usually found in banking sector but there could be other
organizations that may have customer departmentalization. In figure-3 customer departmentalization is
shown. In the figure the bank has grouped banking activities according to the types of loans that will be
acquired by specific type of customer e.g., agricultural banking department will provide loans to farmers.
Real estate loans will be provided to customers who plan to buy property. Institutional banking will deal
with institutional customers.

Advantages

1. Encourages concentration on customer needs

2. The focus is on customer satisfaction
3. The staff develops expertise in customer area.

Disadvantages

1. Since everybody works in respective area coordination becomes difficult

2. There is underutilization of facilities and labour-specialized workers in customer groups

Departments by Product
Grouping of activities on the basis of the products or the product lines of an organization is known
as departmentalization by production or product. Some times organization may be producing more than
one product or services. For example a firm may be producing soaps, detergents, toothpaste etc. So for each
product it would have separate department. In the organization chart in figure 4 the organization has three
separate services like punch-press, welding and electroplating.

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Department by Production
Figure 4

President

Engineering Production Marketing Finance Personnel

Punch -
Presses Welding Electroplating

Matrix Organizations
It is the combination of functional and project or product patterns of departmentalization in the
same organization structure

Matrix Organization
Figure 5

Director

Preliminary Mechanical Electrical Hydraulic Metallurgical

Design Chief Engineer Chief Engineer Chief Engineer Chief Engineer Chief

Project ‘A’ Manager

Project ‘B’ Manager

Project ‘C’ Manager

As shown in the figure 5 which shows matrix organization in engineering department, there are
functional managers in charge of engineering functions and an overlap of project managers responsible for
the end product. This form of organization is common in research and engineering organization it has been
used in product marketing organizations as well.

PROBLEMS WITH MATRIX MANAGEMENT

Let us summarize some typical problems in matrix structure. These are:

1. A state of conflict exists between functional and product managers as both compete for limited
sources (for example financial and human).
2. There is conflict of roles and ambiguity because there is overlap of functions.
3. There is imbalance of authority and power as well as horizontal and vertical influence of the project
and functional managers which can lead to problem in matrix organization.
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4. Because of potential conflict, managers may want to protect themselves against blames by putting
everything in writing which increases administrative cost.
5. Matrix organization require many time consuming meetings

Concepts

ˆ Departmentalization: grouping of activities according to some specific

activities over which manager has authority
ˆ Departmentalization by function: grouping of activities by functions
ˆ Departmentalization by geography: Activities of an organization in a given area or
territory are grouped and assigned to a manager
ˆ Departmentalization by customer: It is grouping of activities so that these reflect
primary interest of the customers.
ˆ Matrix organizations: It is the combination of functional and project or
product patterns.

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