Departmentalization (or simply departmentation) refers to the grouping of This helps the organisation to assign the work only to those who are best suited. Departmentation can provide a necessary degree of specialisation of executive activity for efficient performance. It can simplify the tasks of management within a . In the words of Allen, “Departmentation is a means of dividing a large and monolithic functional organisation into smaller, flexible, administrative units.”.

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Contemporary marketing world revolves around customers. All the primary and auxiliary activities are managed by one manager. Change in consumer behaviour, their demand xepartmentation different goods at different times cannot be easily predicted.

Soldiers in army are grouped departmenation numbers to form departments. Sales people for one product will concentrate on sales promotion of that product only.

They can directly communicate with the consumers and frame policies to satisfy their needs. Firstly, the managers focus their attention on some specific problems which provide them effective on-the-job training.

Since each basis is suitable to a particular type of organisation, often a combination of various basis is adopted. In such method orbanisation departmentation, the activities are grouped according to the type of customers.

Notes on Departmentation: Meaning, Importance and Basis | Organisation

The activities of an organisation should be grouped in such a way that it leads to specialisation of work. The enterprise may be divided into departments on the basis of functions like production, purchasing, sales, financing, personnel etc. Top management is relieved of operating task responsibility and can concentrate on such centralized activities as finance, research etc.


They use other basis of departmentation also to remain competitive in the market; either customer or product or territorial departmentation depending upon where and how they want to reach, grow and expand their business. It is rather difficult to set up specific accountability and profit centres within functional departments so the performance orrganisation not accurately measured. Departments should be so created as to fix clear responsibilities so as to enable effective control.

Territorial departmentation offers certain facilities in operation. If workers are not able to carry out the activities efficiently, managers can train them to do so.

Appraisal of managerial performance becomes easier when specific tasks are assigned to departmental personnel. It is helpful in fixing responsibilities and accountability.

The feeling of autonomy provides job satisfaction and motivation which lead to higher efficiency of operations. The basic object of such departmentation is to achieve efficiency and economy of operations.

The employees become so focused on departmental goals that they lose sight of the overall organisational goals. The process of organising consists of dividing and grouping of the works to be done in an enterprise and assigning different duties and responsibilities to different people. When organisations sell to customers with different needs, departments are created on the basis of departmentatkon.


Development is possible due to two factors. With growing size of organisations, departments are created for activities of similar nature.

Departmentation: it’s Meaning and Definition – Explained!

Various regional units may become so engrossed in short term competition among themselves that the overall long term interests of the organisation as a whole may be overlooked. Each product division can be taken as a viable profit centre for accountability purposes. It renders the task of fixation of accountability for results very easy since activities are well defined and responsibilities are clearly laid.

This basis of departmentation is suitable for small sized organisations which produce a limited line of products.

Departmentation: Need, Significance and Process

It economizes operations and makes possible the adoption of logical and comprehensible structure. It is suitable for organisations where limited number of products are produced. Similarly, funds required for each product line are different. Creating departments and sub-dividing the work of departments into smaller units creates organisation structure. Since departments are widely dispersed, top managers find it departmengation to control and co-ordinate their activities.