Key Element of Organizational Structure -- Departmentalization

Departmentalization is the grouping of jobs in one area in an organization. The grouping increases efficiency in many organizations and allows workers to specialize in a particular area of the business. For example, the sales staff works together in the sales department or the accounting staff works together in the accounting department. Departmentalization is one of the steps in creating an organizational structure.

Management can group the jobs into areas by function, location, product or customers. Functional departmentalization creates groups of jobs by function for the organization. For example, departments in a functional departmentalization include marketing, production, accounting, sales and purchasing. Companies with multiple locations can departmentalize by location to increase the efficiency of workers in different areas of the country.

Companies may also group jobs in the organization by product. For example, in an electronics manufacturing company, management may create departments for televisions, stereos or computer equipment. The product departments have employees dedicated to marketing, sales, production planning and purchasing for each product. Companies may choose to create departments by customers, such as a commercial department and a government department.

Companies may combine employees from different departments for special projects. For example, during the development of a new product, the business may put together a team of employees from production, purchasing and engineering to design and build the new product.

Each type of grouping has benefits to the organizational structure. Management must select the departmentalization that works best based on the company’s needs. In a customer-based division of departments, workers learn the specific requirements for each customer and become expert in meeting those needs. Functional departmentalization allows workers to specialize in a particular area of the business while those working under a product based division of the organization become experts in their products.

Each type of departmentalization has disadvantages, as well. For example, workers in a functional department arrangement may become narrow in their focus. The employees can focus on the needs of the department over the needs of the organization as a whole.

Product-based departmentalization can create redundancies in the organization, which increase the cost of labor. For example, instead of one marketing professional working on multiple product lines, the company hires a separate worker to focus on each product.