Understanding Departmentalization and Organizational Structures
Models of Departmentalization
1. Geographic (Territorial or Regional)
- Grouping by location.
- Useful when an organization develops its activities in varied and dispersed locations.
Advantages:
- Speedy model.
- Ideal for adapting to local conditions.
- Economical in terms of management and control (local responsibilities defined).
Disadvantages:
- Less specialization (standardization).
- Higher operational cost.
2. Product Departmentalization
- Based on manufacturing/commercialization for each product.
- Ideal if manufacturing techniques or conditions are different for each product.
Advantages:
- Deep product knowledge (from a commercial point of view).
- Suited when managing by objectives (management and control).
Disadvantages:
- Higher specialization (less standardization).
- More coordination required.
- More managers needed.
3. Functional Departmentalization
- Based on grouping similar activities.
- Identifying enough functions that justify a department becomes difficult.
- Typical of large corporations/organizations.
Advantages:
- Employees are directed to specific activities (focus on their competencies/ abilities).
- Logical method.
Disadvantages:
- Low flexibility in changing environments.
- Occasionally too much focus on specialization.
- Departmental conflicts might arise.
4. Customer Departmentalization
- Departments organized based on subjective customers’ features.
Advantages:
- Specialized knowledge about different clients’ needs and preferences.
- Focus on satisfying customers’ needs.
- Customers’ perception: “I am cared for.”
- Managers as ‘experts’ on customers’ problems.
Disadvantages:
- Difficult to coordinate. Higher pressure on managers.
- Very sensitive to recession situations: customers disappear.
5. Process Departmentalization
- Groups of employees working with the same team.
- Inward orientation.
- Grouped by different process stages.
Advantages:
- Ideal for product/service development, administration, logistics.
- High specialization.
- Vertical structures turn into horizontal ones.
- Employees ‘empowered.’
Disadvantages:
- Higher complexity.
- May become too specialized.
- Interdepartmental communication may be affected.
6. Time Departmentalization
- Frequent for organizations working in shifts.
- Identical activities in different shifts.
Advantages:
- Allows for extended hours.
Disadvantages:
- Control (supervision) may fail, especially over the night shift.
- Occasionally, communication and coordination problems between different shifts.
7. Project Departmentalization
- One department per project.
- Typical in organizations:
- Using sophisticated technologies.
- Using very specialized technical units.
- Working under request.
- Examples: Aircraft industry, advertising, etc.
Advantages:
- Resources concentrated on a complex activity.
Disadvantages:
- Each project is unique (might require dispersed know-how within the organization).
Organizational Structures
- Formal/Informal
- Mechanistic/Organic
- Vertical/Horizontal
Formal Organizational Structure
– Planned structure.
– Simple relationships between members.
– It works as a ‘guide.’
– Activities should be related.
– A pattern of relationships (authority, communication, work).
– Outlined by management (decisions, norms, rules, procedures).
– Main aim: achieve business objectives efficiently through labor division and coordination.
– It links all elements of an organization.
Informal Organizational Structure
– Formal structure charts don’t show interpersonal relationships, but they also affect decisions.
– Some of these interpersonal relationships do not appear in formal charts; they are ‘de facto’ situations.
Mechanistic vs. Organic Organizational Structures
Organizational Structure
- The way an organization groups its material and human resources and establishes its relationships: hierarchical, communication, authority, and responsibility.
- Organizational structure may be studied from two different views:
- Departmental structure.
- Authority relationships.
Departmental Structure
- Grouping homogeneous jobs into organizational units.
- Groups of two or more persons who perform a homogeneous activity under a manager’s supervision.
- This is done to coordinate and control different activities and functions to achieve organizational objectives.