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Organizational Departmentalization

July 23, 2013

DepartmentalizationDepartmentalization is an important part in businesses, because it allows for higher specialization and accountability.  It is defined as subdividing work and workers into separate organizational units responsible for completing particular tasks.  I take a further look into this important aspect.

There are many different types of departmentalization and the first on the list is functional departmentalization.  It organizes work and workers into separate units responsible for completing particular tasks.  Typically found in the service sector.  Its advantages are:

  1. Work done by highly skilled specialists
  2. Lowers costs through reduced duplication
  3. Communication and coordination problems are lowered

Its disadvantages are:

  1. Cross-department coordination can be difficult
  2. May lead to slower decision making
  3. Produces managers with narrow experiences

Another type is product departmentalization.  This is the organizing of work and workers into separate units responsible for producing particular products or services.  It is more prevalent in retail because of the diversity of products stores can sell.  Its advantages are:

  1. Managers specialize, but have broader experiences than functional
  2. Easier to assess work-unit performance
  3. Decision making is faster

Its disadvantages are:

  1. Difficulty to coordinate across departments
  2. Duplication of activities

Customer departmentalization is the organizing of work into separate units responsible for particular kinds of customers.  This type’s advantages are as follows:

  1. Focuses on customer’s needs
  2. Products and services tailored to customer needs

Its disadvantages are:

  1. Duplication of resources
  2. Difficult to coordinate across departments
  3. Efforts to please customers may hurt business

Geographic departmentalization is organizing work and workers into separate units responsible for doing business in particular geographic areas.  In being geographically diverse, companies that use this are more responsive to demands of different areas and cultures.  They also provide unique resources located close to the customer.  However, they are difficult to coordinate across departments and often duplicate resources.

Matrix departmentalization, the final type, is a hybrid of two or more forms of departmentalization.  The most common combination is product and functional but anything can work if applied correctly.  The advantages to this type is:

  1. Pool of available resources
  2. Efficiently manage large, complex tasks

It, however, requires high levels of coordination, often has conflict between bosses, and requires high levels of management skills.

Departmentalization can help businesses specialize and appeal to more specific customers.  Although not discussed often, it is still a very important aspect of organizing a business.

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One Comment
  1. Clifton Portis permalink

    Thank you for explaining the importance of departmentalization. It was very informative. By the way, I like the Stock Market Advantage.

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