Once you have divided jobs through work specialization you need to group these jobs together so that common tasks can be coordinated. The basis by which jobs are grouped together is called departmentalization.
One of the most popular ways to group activities is by function performed. A manufacturing manager might organize a plant by separating engineering, accounting, manufacturing personnel and supply specialists into common departments. Of course, departmentalization by function can be used in all types of organizations. Only the functions change to reflect the organization’s objectives and activities. A hospital might have departments devoted to research, patent care, accounting and so forth. A professional football franchise might have departments entitled Player Personnel, Ticket Sales, and Travel Accommodations. The major advantage in the type of grouping is obtaining efficiencies from putting like specialists together. Functional departmentalization seeks to achieve economies of scale by placing people with common skills and orientations into common units.
Jobs can also be departmentalized by the type of product the organization produces. Procter & Gamble, for instance is organized along these lines. Each major product – such as Tide, Pampers Charmin, and Pringles is placed under the authority of an executive who has complete global responsibility for that product. The major advantage this type of grouping is increased accountability for product performance since all activities related to a specific product are under the direction of a single manager. If an organization’s activities are services rather than product related each service would be autonomously grouped. For instance, Automatic Data Processing has departments for each of its employer provided services – payroll, retirement, expenses, management taxes and the like. Each offers a common array of services under the direction of a product or service manager.
Another way to departmentalize is on the basis of geography or territory. The sales function for instance may have western, southern, mid-western and eastern regions. Each of these regions is, effect a department organized around geography. If an organization’s customers are scattered over a large geographic area and have similar needs based on their location then this form of departmentalization can be valuable.
At an Alcoa aluminum tubing plant in upstate New York, production is organized into five departments; casting; press; tubing; finishing; and inspecting packing and shipping. This is an example of process departmentalization because each department specializes in one specific phase in the production of aluminum tubing. The metal is cast in the furnaces sent to he press department, where it is extruded into aluminum pipe, transferred to the tube mill, where it is stretched into various sizes and shapes of tubing moved to finishing where it is cut and cleaned and finally arrives in the inspecting packing and shipping department. Since each process requires different skills this method offers a basis for the homogeneous categorizing of activities.
Process departmentalization can be used for processing customers as well as products. If you have ever been to a state vehicle office to get a driver’s license, you probably went through several departments before receiving your license. In one state, applications must go through three steps each handled by a separate department: (1) validation by motor vehicle division; (2) processing by the licensing department and (3) payment collection by the treasury department.
A final category of departmentalization is to use the particular type of customers the organizations seeks to reach. Microsoft for instance is organized around four customer markets: consumers, large corporations, software developers and small business. The assumption underlying customer departmentalization is that customers in each department have a common set of problems and needs can be best met by having specialists for each.
Large organizations may use all of the forms of departmentalization that we’ve described. A major Japanese electronics firm for insurance organizes each of its divisions along functional lines and its manufacturing units around processes: it departmentalizes sales around seven geographic regions and divides each sales region into four customer groups. Across organizations of all sizes, one strong trend has developed over the past decade. Rigid functional departmentalization is being increasingly complemented by teams that cross over traditional departmental lines.