Departmentalisation

Departmentalisation (or departmentalization) means making groups of activities and putting them into different departments. Division of labour creates specialists who need coordination. This coordination becomes easier by grouping specialists together in departments.

Popular types of departmentalisation

Functional departmentalisation - this means making groups of activities by jobs that people do. This can be useful for economies of scale by putting employees with the same skills and knowledge into the same department. For example human resources, IT, accounting, manufacturing, logistics, and engineering. Functional departmentalisation is used in all types of organisations.
Product departmentalisation - this means making groups of activities by the type of product. The groups can also be dependent on a certain product or service. This puts all activities linked to the product or the service under one manager. A senior manager looks after each important product area in the corporation. The manager is a specialist in (and is responsible for) everything related to the product line.
Customer departmentalisation - this means making groups of activities dependent on having the same customers or types of customers. There can be groups of jobs dependent on the type of customer that on organisation helps. The idea is that customers in each department have the same set of problems and needs. Specialist can looks after these problems and needs. For example, the sales activities in companies that sell items for offices can have three departments. One for retail, one for wholesale and one for government accounts.
Geographic departmentalisation - this means making groups of activities based on territory. If an organisation's customers are in different places, it can group jobs based on geography. For example, the organisation structure of Coca-Cola shows the company’s operation in two main geographic areas – the North American market and the international market. The international market has the Pacific Rim, the European Community, Northeast Europe, Africa and Latin America groups.
Process departmentalisation - this means making groups of activities based on product, service or customer flow. Each process needs different skills, so process departmentalisation allows different activities to be in the same group. For example, people who need a driving license might need to go through several departments before they receive their document, such as validation, licensing and treasury.
Divisional departmentalisation - this is when a company makes separate lines of business that work as different companies. All these companies all work towards the corporation making profit. This is called divisional departmentalisation or M-FORM. For example, the Limited. Inc., has these divisions: The Limited, Express, Lerner New York, Lane Bryant and Mast Industries.

Organisations often use different sorts of departmentalisation because tasks are complex there is competition.