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Departmentalization


Division of labour creates specialists who need . This coordination is facilitated by grouping specialists together in departments.

Owing to the complexity of tasks and the competitive environment in which organisations operate, they often use a combination of the above-mentioned methods in departmentalization.

As March and Simon (1958) noted when tracing a first approach to departmentalization back to Aristotle (Politics, Book IV, Chap. 15), the problem of distributing work, authority and responsibility throughout an organization is hardly new. In modern times, Gulick and Urwick (1937) were the first to introduce a theory of different departmentalization strategies, which were referred to as departmentalization by purpose and departmentalization by process.

”First [organization by major process] ... by bringing together in a single office a large amount of each kind of work (technologically measured), makes it possible in the most effective divisions of work and specialization. Second, it makes possible also the economies of the maximum use of labor saving machinery and mass production.

... there is danger that an organization erected on the basis of purpose will fail to make use of the most up-to-date technical devices and specialists because ... there may not be enough work of a given technical sort to permit efficient subdivision.

Is there any advantage in placing specialized services like private secretaries or filing in [process departments]? In a very small organization, yes; in a large organization, no. In a small organization, where there is not a full-time job on some days for a secretary, it is better to have a central secretarial pool than to have a private secretary for each man. In a large organization, the reverse is true.” (Gulick & Urwick, 1937)

Studying the above characterizations of the two forms of departmentalization we note that purpose decentralization is concerned with building work around specific products, customers, or geographic locations, while process departmentalization encompasses the efficiency of ”production”. March and Simon (1958) described the basic difference between the two ways of departmentalization as following:

”Process departmentalization generally takes greater advantage of the potentialities for economy of specialization than does purpose departmentalization: purpose departmentalization leads to greater self-containment and lower coordination costs than process departmentalization.”

When taking a closer look at the three ways of departmentalization by purpose–product, customer, and location–we note that there are some specific advantages related to it.

First, self-containment tends to improve the ability for internal coordination within the unit. At the same time, the need for developing and maintaining extensive external coordination mechanisms is reduced.


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