[Solution] Departmentalization
Created at:
Author: Sarah Bennett
A very small organization may consist of a single department run by the owner, but larger organizations are more complex, and therefore must group jobs into multiple departments. Putting jobs into the right groups together is important for the effective and efficient operation of the organization.
The Four Bases of Departmentalization
The process of grouping certain jobs together is departmentalization. Typically, employees in jobs within a single group report to the same supervisor, who coordinates their work.
When deciding how to group jobs, managers choose from among four bases for departmentalization: function, product, customer, and location. The figure shows a hypothetical organization that is using all four bases to group its jobs.
- Functional departmentalization groups together jobs involving the same or similar activities. In the figure, the Manufacturing, Finance, and Marketing departments are functional departments.
- Product departmentalization groups jobs according to what product or service, or set of products and services people work on. In the figure, the high-level division between Computers and Software is product departmentalization.
- Customer departmentalization groups jobs according to which customers employees interact with. In the figure, the Marketing department is further divided into Industrial Sales and Consumer Sales departments, which sell to other businesses and individual customers, respectively.
- Location departmentalization groups jobs by geographic areas. Mangers of the organization in the figure have found it advantageous to group computer manufacturing jobs by the city they are in (Dallas and Phoenix) and to group software design jobs by city as well (Chicago and St. Louis).
Advantages and Disadvantages of Different Job Groupings
Each basis for departmentalization has its own strengths and weaknesses:
| Basis | Advantages | Disadvantages |
|---|---|---|
| Functional |
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| Product |
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| Customer |
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| Location |
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Select the correct response for the following question.
A government agency groups jobs according to whether employees provide services to individuals or businesses. What basis for departmentalization is the agency using?
- Customer
- Function
- Product
- Location
View Explanation
Customer departmentalization groups jobs according to which customers employees interact with. In this case, employees work in different departments depending on whether they serve individuals or businesses.
The table lists advantages to organizations of different bases for departmentalization. For each row, select the basis for departmentalization that offers that advantage.
Departments are staffed by experts in a certain line of work.
All activities associated with a certain output can be easily coordinated.
View Explanation
Functional departmentalization has several advantages. One is that jobs are staffed by experts in the particular function of that department.
Product departmentalization has several advantages. One is that all activities associated with a given product or service, or set of products and services, can be coordinated easily.
Select the correct response to the following question.
Which of the following is a disadvantage of customer departmentalization?
- Employees may focus on the success of their product and lose sight of tradeoffs that would benefit the organization as a whole.
- Administrative costs can be high due to the need to integrate the common activities of different departments.
- Administrative costs can be high because activities in different places need to be monitored across department boundaries.
- It can be difficult to determine which department is accountable for success or failure.
View Explanation
With customer departmentalization, jobs are grouped so that employees serving the same customer are together. However, most departments will perform many of the same activities, such as billing, customer service, and human resources. Therefore, administrative staff are needed to coordinate these activities across departmental boundaries and maintain organizational consistency.
