Factors Affecting Formation of Departments

Departmentalization (or Departmentation)

Departmentalization refers to the formation of departments in a business organization, into small units or departments. For example – the division of an organization into production department, marketing department, finance department, etc. Departmentalization is done based on the nature of the business and at the time of departmentalization, each department is specified clearly about its activities and area of work. The main aim of departmentalization is to take the benefits of specialization.

Factors Affecting Formation of Departments

During the formation of departments within an organization, it’s essential to ensure specialization by assigning tasks to individuals with the appropriate expertise. Coordination between departments is crucial to avoid performance hurdles. Expenses should be controlled, ensuring that the benefits of departmentation outweigh the costs. Effective control mechanisms should be in place to monitor departmental activities and ensure they align with organizational goals. Additionally, local conditions and the availability of the labor force should be considered to make necessary adjustments for optimal functioning.

The following things or principles should be kept in mind while selecting the method of departmentation

1. Specialization

   No matter on what basis, departmentation is done, it should necessarily possess the quality of specialization.
   Specialization means granting each work to the person who is specialized in that work. It should also be kept in mind at the time of departmentation that activities are properly divided and then distributed to departments.

2. Coordination

   At the time of departmentation care
   should be taken that there is mutual coordination between different departments and no hurdles arise in the performance of their activities.

3. Control in Expenses

   It is necessary to keep in mind at the time of departmentation that expenses are also under control because at the time of departmentation, various types of expenses have to be incurred. Thus, a department should be established only when the profits attained from it are sufficiently greater than the expenses incurred on it.

4. Easy Control

   After departmentation, attention should be paid, to whether all the activities of various departments are being carried out according to plans and whether the desired results are achieved or not. Departmentation of a business organization may make the activity of control easier or more difficult. Thus, at the time of the departmentation of an organization, its functions should be properly divided among the departments, and provisions for surprise checks and supervision should be made so that control of the organization becomes easier.

5. Sufficient Consideration of Local Conditions

   Sufficient attention should be paid to the local conditions at the time of formation of departments. As far as possible, adjustments in the organization or office should be made according to the available labor force or workers.