After reviewing the plans, usually the first step in the organizing
process is departmentalization. Once jobs have been classified through work specialization, they are grouped so those common
tasks can be coordinated. Departmentalization is the basis on which work or individuals are grouped into manageable
units. There are five traditional methods for grouping work activities.
· Departmentalization by function organizes by the functions to be performed. The functions reflect the nature of the business. The advantage of this
type of grouping is obtaining efficiencies from consolidating similar specialties and people with common skills, knowledge
and orientations together in common units.
· Departmentalization by product assembles all functions needed to make and market a particular product are placed under one executive. For instance,
major department stores are structured around product groups such as home accessories, appliances, women's clothing, men's
clothing, and children's clothing.
· Departmentalization by geographical
regions groups jobs on the basis of territory or geography. For example, Merck, a major pharmaceutical
company, has its domestic sales departmentalized by regions such as Northeast, Southeast, Midwest, Southwest, and Northwest.
· Departmentalization by process groups jobs on the basis of product or customer flow. Each process requires particular skills and offers a basis for
homogeneous categorizing of work activities. A patient preparing for an operation would first engage in preliminary diagnostic
tests, then go through the admitting process, undergo a procedure in surgery, receive post operative care, be discharged and
perhaps receive out-patient attention. These services are each administered by different departments.
· Departmentalization by customer groups jobs on the basis of a common set of needs or problems of specific customers. For instance,
a plumbing firm may group its work according to whether it is serving private sector, public sector, government, or not-for-profit
organizations. A current departmentalization trend is to structure work according to customer, using cross-functional teams.
This group is chosen from different functions to work together across various departments to interdependently create new products
or services. For example, a cross-functional team consisting of managers from accounting, finance, and marketing is created
to prepare a technology plan.