Bases Of Departmentation.

Departmentation By Functions.
Every manufacturing unit, except a small one
has to perform certain basic functions such as
Production, Marketing, Finance and Personnel.
Each of these are grouped into separate
departments such as Production Department,
Marketing Department, Finance Department
and Personnel Department. This is known as
Departmentation By Functions.

Board Of
Directors.
Managing Director/General
Manager

ersonnel Department.
Finance Department.
Production Department.
Marketing Department

Merits Of Departmentation By
Function.
1. Functional Departmentation is a Logical and
Time-Tested Method.
2. The available Manpower in the departments is
utilized fully.
3. It is suitable and convenient for creating major
departments.
4. It facilitates intra-departmental coordination. It
also promotes and provides the benefits of
occupational specialization.
5. It facilitates performance appraisal and control
of departments.

Demerits Of Functional
Departmentation.
1. In functional departmentation, the decision
making process is delayed due to
specialization.
2. It is not conducive to overall organizational
strength and survival.
3. Functional Departmentation may not be
suitable when the area covered by business
activities is rather wide.
4. Conflicts between departments are possible if
proper mechanism for cooperation and
coordination is not instituted.

Departmentation By Process.
Another way of horizontal grouping of
activities is
to organize them according to the process
of
production performed. Thus, a textile mill
may have
a separate department for Spinning,
Weaving,
Dyeing, Bleaching and Printing, as these
are the
most important processes in
manufacturing of cloth. In

Board Of Directors.

Managing Director.

inance Manager.

General
Manager.

Processing.

Weaving.

Spinning.

Sales Manager.

Dyeing.

Bleaching. Printing.

Merits of Departmentation By
Process.
1. It ensures specialization.
2. It is possible to appoint experts at each
stage.
3. It can use costly equipments.
4. It provides economical repairs and
maintenance because similar machines
are put together.
5. It is suitable to concerns manufacturing
products requiring a number of processes.

Demerits of Departmentation by
process
1. It is difficult to compare performance of
different process-based departments
because their nature of work differs.
2. It face the problem of coordinating
processes between different
departments.
3. It may create conflicts among managers
of different processes.
4. It is unsuitable where manufacturing
activity does not involve distinct
processes.

Departmentation By Product.
Under the departmentation by product, the organization
is
divided into as many departments as the number of
products in the product line of the company. All functions
and activities related to particular products are brought
under one departmental umbrella. The in-charge of the
department is called Product Manager who is given the
operating authority by the top level management. Thus,
an automobile company will have one department for
passenger cars, another for jeeps and a third one for
trucks. Departmentation by Products is quite convenient
in case of large multi-product enterprise.

Board Of Directors.

Managing Director/General Manager.

Finance.

Manager.
(Jeeps)

Production.

Manager.
(Trucks)

Marketing.

Manager.Manager.
(Buses) (Three-Wheelers)

Merits Of Departmentation By
Product.
1. It motivates departmental managers to take
more initiative for raising efficiency and
productivity of their departments.
2. As the comparison of different departments is
possible, the management can make
investment in the profit making departments
and can close loss-making departments.
3. It also provides training and development
opportunities to managerial staff. In addition,
it facilitates growth and diversification of
products at the departmental level.

Demerits Of Departmentation By
Product.
1. This type of departmentation is costly as
service function are duplicated.
2. It is not convenient for small and
medium-sized concerns due to cost
factor.
3. The top management finds it difficult to
have effective control on the
departments.

Departmentation By Geographical
Location/ Area.
Along with the increase in the companys volume
of
business it may find it necessary to establish
regional
factories and branch offices to meet the
increasing
demand for its products/services. These
factories/offices
are then given the status of separate
departments or
divisions. This type of departmentation is on the
basis of

Board Of directors.
Managing Director/General
Manager.

Northern Zone.
Eastern Zone.
Western Zone.
Southern Zone.

verseas Division.

Merits Of Departmentation By
Geographic Location.
1. It motivates regional heads to achieve
high performance.
2. It can adapt to local conditions.
3. It provides training to middle level
executives.
4. It facilitates expansion of business to
various regions.

Demerits Of Departmentation By
Geographical Location.
1. It cannot avoid duplication of activities e.g.,
service functions performed by regional units
can be performed centrally by the head office.
2. It is likely that each regional unit may give
higher importance to its unit and neglect the
overall interest of the organization.
3. It may lead to conflicts between regional
managers.
4. It may be difficult to control different
branches from the head office.

Departmentation By Customer.
In the departmentation by customer, the
departments are establishes as per the customer that it
serves. Enterprises offering specialized services prefer
departmentation by customers. Manufacturers of
products such as tyres, compressors, spare-parts, etc.,
who sell their products to different categories of
customers, have found it convenient to set up customerwise departmentation for marketing their products. This
type of departmentation is possible in case of big
automobile company supplying cars to different
categories of customers.

Board Of Directors.
Managing Director.

General Manager.

Finance.

Production.

Marketing.

Personnel.

oreign Buyers.
Dealers/Retailers.
Manufacturers.
Defense Department.
Public Undertaking

Merits Of Departmentation By
Customer.
1. It ensures full attention to customers.
2. It provides benefits of division of work.
3. It is possible to know the likes and dislikes
of the customer.
4. It helps the organization to earn higher
goodwill through better service.

Demerits Of Departmentation By
Customer.
1. It may result in under utilization of
resources.
2. It may create duplication of facilities.
3. It may face heavy overheads.
4. It may give special treatment to certain
class of customers.

Departmentation By Time.
Public service institutions like
hospitals, police
stations and fire brigade work round
Supervisor.
the clock.
Day Shift.

Evening Shift.

Night Shift.