Departmentalization: Concept and Types

Departmentalization refers to develop the formal structure of the organization which includes various departments and managerial positions and their relationships.

Types of Departmentalization

The activities in an organization can be grouped in different forms based on the unique nature and characteristics of the organization; they are:

1. Functional Departmentalization

Functional departmentalization refers to the arrangement of the departments based on the functions where people and machines which are doing similar functions are arranged together. 

Advantages of Functional Departmentalization

Efficiencies from putting together similar specialties and people with common skills, knowledge, and orientations

Coordination within functional area

In-depth specialization

2. Product Departmentalization

The product departmentalization refers to the arrangement of the departments where activities are grouped according to a specific product or service, and organizing all activities related to the product or the service under one manager. Product Departmentalization is suitable for standardized products that are produced in large quantities.

Advantages of Product layout:

Low cost of material handling

Lesser inventory and work in progress

Continuous flow of work

Smooth and continuous operations

3. Geographical Departmentalization

Geographical departmentalization refers to grouping activities on the basis of territory. Jobs are grouped based on geography if an organization's customers are geographically dispersed.

Advantages of Geographical Departmentalization

Effective and efficient handling of specific regional issues

Better service for needs of unique geographic markets better

4. Process Departmentalization:

Process departmentalization refers to grouping activities where activities are grouped according to the sequence and flow of productions and operations. 

5. Customer Departmentalization:

Process departmentalization refers grouping of the activities on the basis of types of customers. For example arrangement of the sales activities based on the types of customers like retail, wholesale and government accounts.

6. Matrix Deparmentalizaiton

The matrix departmentalization refers to the arrangement of the activities where employees have dual reporting relationships - generally to both a functional manager and a product manager.

The matrix structure creates dual lines of authority and responsibility and combines functional and product departmentalization.