Organisational Structure: Departmentation
Departmentation means grouping activities and people into departments, making it possible to expand organisations, at least in theory, to an indefinite degree. Departmentation refers to the formal structure of the organisation, composed of various departments and managerial positions and their relationships to each other. As an organisation grows, its departments grow and more subunits are created, which in turn add more levels of management.
Now assume that the products and services of the enterprise continue to grow and conditions become such that further units are deemed necessary for efficient operation. Accordingly, from the advertising unit are spun the two subordinate units of (1) television and radio and (2) magazines and newspapers, both of which are placed in the organisation level below that of advertising. In addition, other units are established, as indicated by the figure. They include two sales units — one for the eastern and one for the western territory. Under the eastern sales unit are four units added to handle sales to (1) institutions, including hotels, hospitals, and schools; (2) wholesalers; (3) government; and (4) manufacturers. Likewise, under production, two units have been created. One is designated to include metal products, the other products are made of plastics. Under the former, five units for punching, heat treating, welding, assembling, and finishing have been added as subordinate units. It can be readily seen that as the enterprise continues to expand, more units will probably be required.
ORGANIZATION CHART
MEASUREMENT INSTRUMENTS CORPORATION
Co-ordinating Structure
As was stressed in the discussion of division of labour, an organisation must be viewed by all managers at all levels as a cohesive whole, never as separate, independent functional units. The organisation is a system of integrated parts, and to give undue emphasis to any functional part at the expense of the entire organisation creates organisational islands, thus resulting in inefficiency and significant behavioural problems.
Means of Departmentation
Departmentation results from the division of work and the desire to obtain organisation units of manageable size and to utilise managerial ability. An organisation structure and design are shaped significantly by the departmentation followed. The chief means of departmentation are by (1) function, (2) product, (3) territory, (4) customer, (5) process, (6) task force, and (7) matrix. An organiser is free to use any means of departmentation in constructing an organisation structure. In fact, in any given structure several means are typically used.
Departmentation by Function: This is perhaps the most common format for departmentation. Figure 4 shows that marketing, production, and finance are the three most common functions in most organisations. Personnel is another major function in many organisations and encompasses recruitment, selection, training, compensation, health and safety, and labour relations.
Departmentation by Product: This method places all the resources and authority under one manager to get a product or service produced and marketed. For example, the basic structure of General Motors Corporation looks something like Figure 4. IBM, in very simplified form, looks like Figure 5.
Departmentation by Territory: This method is followed where nearness to local conditions appears to offer advantages, such as low cost of operation and opportunities to capitalise on attractive local conditions as they arise. Territorial departmentation is especially popular for sales where division appears feasible according to some geographic market segregation. Figure 5 is the organisation chart for an international restaurant franchise organisation. Each area vice-president is totally responsible for the development, construction, operations, and marketing activities of that territory, and oversees the general managers of finance, marketing, personnel, and production.
Departmentation by Customer: This organisational form is used when great emphasis is placed on effectively serving different customer types. For instance, full-time day students and part-time night students of graduate business programs in universities usually differ in demographic profile and personal needs. Wholesale and retail publics are very different in many industries, as are government and private sector customers. For instance, banks may be departmentalised according to the markets illustrated in Figure 6.
Departmentation by Process: This is logical when the machinery or equipment used requires special skill for operating, is of a large capacity, or has technical facilities which strongly suggest a concentrated location. Economic and technologic considerations are the foremost reasons for the adoption of process departmentation. It is most commonly found in production and frequently at operative levels. Using a process as a guide, there are three basic patterns available: (i) serial, (ii) parallel, and (iii) unit assembly. The pattern followed will determine, in part, the organisational units adopted. In few instances are any of these patterns used in pure form. More commonly, part of the work is processed under one pattern, part under another, and so forth.
Departmentation by Task Force: This arrangement involves assigning a team or task force to a definite project or block of work, which extends from the beginning to the completion of a wanted and definite type and quantity of work. A task force is usually relatively small, perhaps not over a dozen members. It exists for the life of the project and is then disbanded. It has a leader, is self-contained, and includes all the necessary knowledge and skill for performing the work.
Matrix Departmentation: Matrix management was introduced in the early 1960s in response to the growing complexity and size of technically oriented enterprises, which needed more flexibility. Initially, the aerospace industry and later Dow Corning, General Electric, Shell Oil, and other industry giants adopted this concept of a project management structure superimposed on a traditional functional organisation.
ADVANTAGES AND DISADVANTAGES
Functional Organisation Grouping
Advantages:
Logical reflection of functions
Maintains power and prestige of major functions
Follows principle of occupational specialization
Simplifies training
Furnishes means of tight control at the top
Disadvantages:
Deemphasis of overall company objectives
Overspecializes and narrows viewpoints of key personnel
Reduces coordination between functions
Responsibility for profits is at the top only
Slow adaptation to changes in the environment
Limits development of general managers
