Fundamentals of Organizing

Departmentalization
departmentalization
The basis on which individuals
are grouped into departments and
departments into total
organizations.

Another fundamental characteristic of organization structure is

departmentalization, which is the basis for grouping position into
departments and departments into the total organization. Managers make
choices about how to use the chain of command to group people together to
perform their work. There are five approaches to structural design that reflect
different uses of the chain of command in departmentalization. The
functional, divisional, and matrix are traditional approaches that rely on the
chain of command to define departmental groupings and reporting
relationships along the hierarchy. Two approaches have emerged to meet
organizational needs in a highly competitive global environment. A brief
illustration of the five alternatives is presented in the chart on the other side
.
1. Vertical functional approach. People are grouped together in
departments by common skills and work activities, such as in an
engineering department and an accounting department.
2.

Divisional Approach. Departments are grouped together into separate,

self-contained divisions based in a common product, program, or
geographical region. Diverse skills rather than similar skills are the
basis of departmentalization.

3.

Horizontal matrix approach. Functional and divisional chains of

command are implemented simultaneously and overlay one another in
the same departments. Two chains of command exist, and some
employees report to two bosses.

4.

Team-based approach. The organization creates a series of teams to

accomplish specific tasks and to coordinate major departments. Teams
can exist from the office of the president all the way down to the shop
floor.

5.

Network Approach. The organization becomes a small, central hub

electronically connected to other organizations that perform vital
functions. Departments are independent, contracting services to the
central hub for a profit. Departments can be located anywhere in the
world.

Each approach to structure serves a distinct purpose for the organization,

and each has advantages and disadvantages. The basic difference among
structures is the way in which employees are departmentalized and to whom
they report. The differences in structure illustrated here have major
consequences for employee goals and motivation. Let us now turn to each of
the five structural designs and examine their implications for managers.

Daft, Richard L., Management, 5th ED, Dryden 2000