Departments based on territory are rather common in enterprises that operate over wide geographic areas. In this case, it may be important that activities in a given area or territory be grouped ad assigned to a manager.
Extent of Use
Territorial department formation is especially attractive to Large Scale firms or other enterprises whose activities are geographically
dispersed. However, a plant may be local in its activiities and still assign the personnel in its security department on a territorial basis, placing two guards, for example, at each of the south and west gates. Department stores assign floorwalker on this basic, and it is a common way to assign janitors, window washers, and the like. Business firms resort to this method when similar operations are undertaken indifferent geographic areas, as in automobile assembling, chain retailing and wholesaling, and oil refining.
Many government agencies — the Internal Revenue Service, the Federal Reserve board, the federal courts, and the Postal Service, among others — adopt this basis of organization in their efforts to provide like services simultaneously across the nation. Territorial department formation is most often used in sales used in sales and in production; it is not used in finance, which is usually concentrated at the headquarters.
Departments by territory, or geography, have a number of advantages. It places responsibility at a lower level, encourages local participation in decision making, and improves coordination of
activities in a region. Managers can give special attention to the needs and problems of local markets. Thus, they may recruit local salespeople who are familiar with the special situation in the area. Moreover, these salespeople can spend more time selling and less
Production may also be organized on a territorial basis by establishing plants in a particular region. This can reduce transportation costs and delivery time. Moreover, labor rates may be lower in certain regions, and producing things locally may create jobs and goodwill in the local community.
Geographically located departments improve face-to-face communications with local people. Also, since the manager in a territory has to carry out many different functional and managerial activities, this type of organization provides a good training ground for General Managers.