Departmentalization (or departmentalisation) refers to the process of grouping activities into departments. Division of labour creates specialists who need coordination. This coordination is facilitated by grouping specialists together in departments. Show
Popular types of departmentalization[edit]
Owing to the complexity of tasks and the competitive environment in which organisations operate, they often use a combination of the above-mentioned methods in departmentalization. Some philosophical considerations[edit]As March and Simon (1958) noted when tracing a first approach to departmentalization back to Aristotle (Politics, Book IV, Chap. 15), the problem of distributing work, authority and responsibility throughout an organization is hardly new. In modern times, Gulick and Urwick (1937) were the first to introduce a theory of different departmentalization strategies, which were referred to as departmentalization by purpose and departmentalization by process.
Studying the above characterizations of the two forms of departmentalization we note that purpose decentralization is concerned with building work around specific products, customers, or geographic locations, while process departmentalization encompasses the efficiency of ”production”. March and Simon (1958) described the basic difference between the two ways of departmentalization as following:
Author's note: Please keep in mind that the content of the term "process" as it is used today in concepts such as Business Process Management or business process reengineering differs significantly from its use by Gulick and Urwick. While G. and U. refer to functional decomposition when using the term "departmentalization by process", process orientation in today's meaning is more comparable to what G. and U. refer to as "purpose departmentalization". When taking a closer look at the three ways of departmentalization by purpose–product, customer, and location–we note that there are some specific advantages related to it. First, self-containment tends to improve the ability for internal coordination within the unit. At the same time, the need for developing and maintaining extensive external coordination mechanisms is reduced. Second, a clearer focus on the purpose itself–serving a specific customer or market–is enabled. On the other hand, the sense of independence may result in a drift-off from the achievement of the overall objectives of the organization. Therefore, several authors have emphasized the need for establishing control systems that serve the purpose of allowing decentralized decisions, while still aligning all sub-units to the overall goals of the organization (Drucker 1954, Koontz & O’Donnell, 1964). Departmentalization by process, on the other hand, seeks to benefit from the advantages that are found in high specialization, and tends to be very efficient in some instances. A high degree of specialization leads to the development of proficiency and professional competence, as well as it enables, and implies, the development of centralized control functions. On the other hand, the problem of aligning individual and organizational goals remains. In addition, in this case, we would also need to consider departmental goals. Also, the high level of specialization is a barrier for the flexible reallocation of resources within the organization, i.e. people can not perform other tasks than those they are working with in their functional occupation. The most common way of process departmentalization is the division of the firm into business functions, such as purchasing, manufacturing, sales, accounting, etc. Looking at the circumstances encompassing the use of either of the departmentalization strategies, we find that departmentalization by process generally is advantageous in cases of stable environments, while departmentalization by purpose, featuring self-containment and certain amounts of independence, appears to be the appropriate strategy for handling changing or unpredictable circumstances. Alfred Chandler (in: March and Simon, 1958) identified a correlation between the application of purpose departmentalization and the use of a diversification strategy:
Recent trends in departmentalization[edit]
References[edit]
Which of the following is the process of dividing an organization according to the areas of the country or world served by a business unit?Dividing an organization according to groups' activities is known as departmentalization. is the process of creating and maintaining the innovation and flexibility of a small-business environment within the confines of a large organization.
Which of the following is the process of dividing an organization to offer products and meet the needs of identifiable buyers?Market segmentation is the process of dividing prospective consumers into different groups depending on factors like demographics, behavior and various characteristics. Market segmentation helps companies better understand and market to specific groups of consumers that have similar interests, needs and habits.
Which of the following is an organizational structure created by superimposing one form of structure onto another?Cards
Which of the following describes the specification of the jobs to be done within the organization and the relationship between those jobs?The answer is E) Organizational structure.
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