Departments of an organization may be formed on different basis. By keeping this point in view, explain the different types of departmentalization. Also explain the concept of delegation of authority.

 TYPES OF DEPARTMENTATION

There is no best way to design the departments in the organization. The choice and need of departmentation differ from organization organization. It should be based on the nature, size, mission, goals, etc. of the organization. Departments can be formed on the basis of functions, products, territory, customers, process, time, etc. Major departmentation methods are discussed as below:

1. Departmentation by function: The most common and popular basis for departmentation is the functions to be carried out in the organization. Under this method, separate departments are formed by combining the similar works to be performed within a functional unit. For this, first of all jobs are classified into functional areas such as production, sales, marketing, human resource management, research and development, account, finance, etc. Departments under functional departmentation are shown in figure below :

Advantages

• Division of work facilitates specialization and economies of scale. It facilitates workers' efficiency and performance.
• This is easier to supervise, communicate and coordinate the activities.
• Resources can be utilized at optimum level. Decision making and line of communication becomes simple and clear to understand.

Disadvantages

• Possibility of delay in decision making is high due to the centralized authority.
•  Managers may have tendency of focusing more attentions only to their own departments.
• Competition between departments may decrease the organizational efficiency.
• It becomes difficult to adapt in changing business environment.
•  Monitoring the performance various departments from single mechanism becomes difficult.

2. Departmentation by products: This is the departmentation of organization on the basis of goods or services producing and provided by the organization. This method involves in grouping and arranging activities around products and product processes. A separate department is created for single product or product line and functions. This type of departmentation is applicable in the organization which produces different line of products at large quantity. Department managers are responsible for expenses, income, profit, success and failure of the particular product under the department. Common departments under this type are shown in figure below:

Advantages

• It is suitable for multi-product complex organizations. 
• Each department can focus its resources only to a particular product so that departmental productivity and profitability can easily be increased
• All activities associated with each product can easily be integrated and coordinated.
• The speed and effectiveness of decision making can be enhanced. Monitoring and evaluation becomes easy and effective.

Disadvantages

• Departmental managers focus on their own product line rather than organizational overall activities. Thus, coordination becomes less effective.
• Administrative cost rises up due to the provision of functional specialist in each product department. 
• This reduces the profitability of organization.
• Communication and co-ordination across product lines or divisions becomes difficult in real practice.

3. Departmentation by geography/territory: It is the process of grouping the jobs to be done in different geographical territories. This method is suitable for large organizations having wide network of operation. Transportation related organizations, financial institution, travel and tour operators, multi-level operators, etc. can use such departmentation. Under this method, departments can be formed on the basis of geographical areas like country, region, continent, district, etc. depending upon their network or business operation. All the job responsibilities and concerned authority for a particular geographic area is assigned to a respective departmental manager. An example of departmentation by geography/territory in any company extending business in different provinces is shown in figure below: 

Advantages

• It creates local customers needs and focus to satisfy them.
• This method encourages co-ordination among the divisions.
•  The method of departmentation helps pinpoint the local level responsibility of an organization. 
• Such departmentation enables the organization to respond to the environmental changes in the various locations.

Disadvantages 

• It requires a large number of administrative staffs which increases administrative cost.
• Possibility of making duplications and overlapping of efforts and resources across divisions and departments remains high.
• Benefits of specialization cannot be realized through this method of departmentation.

4. Departmentation by time: Hospitals, hotels, airports, etc. need to operate for 24 hours of a day. So, departments in such organizations are formed on the basis of time like morning shift, afternoon shift and evening shift. Departments carryout the same functions in different shifts independently. A sample of departmentation by time in a hospital is shown in below figure.

• Advantages
• It creates employee satisfaction as the duty can be managed as per the need of employees. It helps increase the production capacity within the limited resources.
• It enables the customer satisfaction as organization can provide 24 hours service. 
• This method is flexible method of departmentation. So, organization can change the responsibility-authority relationship according to needs of organization and environmental change.

Disadvantages

• Coordination between various departments becomes challenging.
• Possibility of making duplications of efforts and resources across divisions and departments remains high.
• Chances of shifting responsibility of one department to another department remain high. Interdepartmental communication becomes less effective.

5. Departmentation by process: If departments are prepared on the basis of progress or working stages, the method is called departmentation by process. As you know, production process consists of different stages to produce the final product. Departments can be prepared on the basis of the stages of jobs production process if series of complex steps need to be followed to produce the final product. This method of departmentation becomes effective for manufacturing organizations like textile companies, cement companies, etc. Sample of departments under this method is shown in figure below:

Advantages

• This method creates job specification as departments are prepared according to process.
• Department managers become more loyal to the job output as the responsibility of accomplishment of particular process is fixed.
• Departments become dependent. So, communication and coordination becomes more effective.
• This method is flexible method of departmentation. So, adaptation in changing environment is possible.

Disadvantages

• This method is not suitable for service organizations where processes cannot be identified clearly.
• Delay in process or wrong production of one department affects to the performance of all other departments also.

6. Departmentation by types of customer. Organizations need to serve different types of customers on the basis of volume of sales or types of the products. So, it is better to prepare departments on the basis of customers to serve. In general, departmentation by customer is suitable for trading organizations like departmental stores. Common form of departments in banks under the customers is shown below:

Advantages

• It is suitable for those organizations dealing with different customers. 
• Customers' needs and wants can be easily recognized as they are treated separately.
• Good cooperation between customers and organization can be maintained.
• Customers help for promotion of the products and service because of high level of satisfaction. 

Disadvantages

• Customers' expectation can be increased because of close relation. 
• This creates challenge to satisfy their new needs and expectations.
• If the needs of customers belong to two or more departments at a time, it becomes difficult to serve them.

Delegation of Authority

Meaning/Concept of Delegation of Authority

Delegation of Authority Delegation is the process by which managers assign a certain portion of their works to others. Authority is the power that has been legitimated by the organization. Hence, delegation of authority means granting of power to subordinates to function within prescribed rules. It refers to the flow of authority and powers downwards to the subordinate. In a simple way, it is a managerial practice of getting things done through others by sharing authority with them.