Departmentalization – Meaning, Objectives, Importance and Types

Published by: Madhubala Minda

& Last updated:

What is Departmentalization?

Departmentalization (or departmentalization) means making different departments for handling various divisions in an organizational structure. When work gets divided, it makes space for experts who have to co-operate. The co-operation is best done by bringing them into functional departments.

Departmentation or Departmentalization is where various functions are brought together into departments according to the field of expertise. The aim is to meet the company’s targets. There are thus multiple sections of the company.

These departments have staff whose tasks share a lot of commonalities. This involves the participation of the marketing department, senior executives, marketing specialists, etc.

Objectives of Departmentalization

Departmentalization’s aims are listed below-

  1. Making the functions of the organization more manageable.
  2. Keeping control over things
  3. Bringing various group activities under the same rubric
  4. Making the company more accountable and make it more proactive
  5. Making the company and its leadership more effective

Importance of Departmentalization

Importance of Departmentalization

Departmentalization is a productive way of bringing together work that allows the organization to function effectively. Managing various responsibilities in one department is simpler. Departmentalization allows the task to be consolidated and offers the following leverage

1. Provides an economic edge

Departmentalization ensures a cost-effective method of functioning by taking advantage of the local environment.

2. Makes training easier

Makes use of training and expertise to increase the efficiency of the staff and the whole organization.

Marketing Course

Departmentalization allows the firm to utilize specialization.

There is more independence. The supervisor has more authority in decision-making.

3. Enables expansion and growth

The staff has complete clarity over what their tasks are and what they are supposed to do. Departmentalization allows for this distribution of responsibility.

Since departments have a particular role, the staff get training and improve on that area. Departmentalization also functions as on-field training. The supervisor can also find an employee who might need particular training, and this can be then carried out.

The distribution of responsibility means the manager’s performance can be assessed better.

Popular types of Departmentalization

1. Functional departmentalization

A function is work being carried out. Functional departmentalization involves selecting tasks according to function. Using function as a basis for effective grouping allows for economies of scale. This common knowledge could include engineering, logistics, manufacturing, accounting, IT, and human resources. Such departmentalization is applicable in various places as it brings together tasks according to the organization’s functions.

2. Product departmentalization

This involves departmentalization based on the product. This means that the functions relating to a product or service come under the banner of one manager or department.

Strategy Course

In addition, there are product departments for multiple product lines or independent lines. So, all the product areas have one overseeing manager who is an expert. This person is answerable for every development in the entire product line.

3. Customer departmentalization

This involves creating several departments for catering to some customers or a set of customers. The tasks are brought together based on the sort of customer the company caters to. The idea is that customers often have shared issues, which are best catered to by experts. For example, the sales function of a company can be split into government, wholesale and retail teams.

4. Geographic departmentalization

This involves departmentalization according to the area. Sometimes, the customer base of a company can belong to multiple areas. In a scenario like this, the departmentalization can be carried out according to the basis of the location of the entire group of customers.

5. Process departmentalization

This is departmentalization according to the processes involved in a customer flow, production processes, or a product. This means that responsibilities that are similar in their nature and need the same expertise are grouped together. An example would be a person getting a government verification from a public administration. This would require various departments having to approve the application before it is finalized.

6. Divisional departmentalization

There are companies that take separate business ventures and assign separate departments to them. This is known as divisional departmentalization or also M-FORM. This helps the company reap better profits.

Factors in Departmentalization

Factors in Departmentalization

Departmentalization has the effect of making an organization more effective and productive. There are several things that contribute to this:

1. Control

Effective control allows the organization to meet the targets it has set financially. The departments should enable action on time so that performance is maximized.

Branding Course

2. Co-ordination

Multiple groups’ actions should be should be done in a cooperative manner. They have to be brought under one department.

3. Specialization

Specialization can allow several employees to gain skills and shared knowledge in what they do to become more productive. So departmentalization must be carried out such that it aids the employees to become experts in their field so that it can maximize efficiency. This dramatically improves the operations.

4. Proper Attention

Proper attention is crucial to departmentalization. This way, processes are not repeated, and the company can pay heed to important aspects.

5. Human Quotient

Departments can come into fruition after crucial aspects such as employee cultural patterns, attitude, and ambition are taken into account.

6. Macro Environment

A department can only be formed after taking the environment into account along with resources. There are features of the immediate geographic location that must be accounted for before beginning the process of departmentalization.

7. Economical

An increase in the number of departments also causes an increase in the space, equipment, and staff in the organization. All companies should try to make the most of physical resources to make the department’s function as economically efficient as possible.

Example of Departmentalization


Amazon has divided its operations into three parts. These are Amazon Web Services, International, and North America.

Leadership Course


Departmentalization means the act of grouping the activities and responsibilities of an organization into departments. E.g., human resources, accounting department, etc. These responsibilities, processes, etc., share certain similarities, and it can benefit the company to have one manager presiding over the activities in a department.

Such managers are also given a relatively greater share in the decision-making process. Also known as departmentation, it allows companies to exert greater control, improve profitability, make processes simpler, etc. Departmentation can be done on the basis of geographical area, similar processes, similar customer types, for the same product or service, or for entirely separate business ventures that serve as almost autonomous companies.

The company needs to take into account the specialization of the staff involved before starting the departmentalization process. The resources available to the companies must also be considered, along with the immediate environment in which the company is functioning.

The overall economic scenario must be taken into account. The organization must exercise some control over the department’s processes and also encourage co-operation between them. Ultimately. the success of several organizational structures depends on efficient departmentalization.

Digiaide Courses
Photo of author

Article by:

Madhubala Minda

Madhubala Minda is a content writer for Digiaide. She writes unique and research-driven content on various Brands, Competitors, Management topics and wellness. With years of content writing under her belt, Madhu Bala is one of the strengthening pillars of Digiaide content team.