Chapter 4 » Meaning and Methods of Organization | Business Studies – XII




Departmentation

It is defined as a process of dividing small units of organizational activities. Departmentation may be called division sections branch etc. it helps to provide the specialization, develops the skill and knowledge of manpower and the efficiency of manpower of an enterprise will be increased. It specifies the area of the activities that facilitate the managerial task.

Methods of Departmentation

1. Departmentation by function: – grouping all similar activities of the business into department is called functional departmentation. It is the most simple and common method of departmentation. In other words, when the activities of an enterprise re proved on the basis of function, it is known as departmentation by function.

2. Departmentation by product or services: – when the departmentation are developed on the basis of product or services, it is known as departmentation by product or services. It creates division for each product or product line. This is suitable for each product and for those organizations with large and diversified product.

3. Departmentation by customer: – this type of organization is formed to give individual attention to the diverse customer. There can be so many customers in an organization. Such customer may be whole seller, retailer etc.  When the organizations group the department on the basis of customer, it is known as departmentation by customer.

4. Departmentation by time: – when the organization groups the activities on the basis of time, it is known as departmentation by time. Mainly manufacturing enterprise divide the time at different shift such as morning shift, day shift, and night shift.

5. Departmentation by location/ territory: – when the departmentation is done on the basis of location /territory, it is known as departmentation by location/ territory. It is useful when the organizational activities and business activities of an organization are widely spread all over the nation. Generally bank, insurance companies use this method. Global companies also use this same basis. For e.g.; Coca-Cola company

6. Departmentation by process: – this method is mainly used in product oriented industry. In the process of making goods there will be different stage or process. When one process is categorized in one department and next process is categorized in next department, it is known as departmentation by process.

7. Departmentation by number: – some organization may have large number of people. All people may not be in same department and in that condition; a certain number of people are grouped in one department and other certain number in other department. Thus, when department are developed on the basis of number is known as Departmentation by number. For e.g. army