Departmentalization: Characteristics, Types, Importance, Examples

The departamentalización refers to the process by which a business activities are grouped according to a common base. These bases can be types of tasks, capacities, functionality or other stipulated guidelines according to what the organization wants.

That is, when several people carry out common work in a company they need to coordinate with each other. To facilitate this coordination, the common work is taken as a basis to group individuals, with which departments are created through labor specialization.

For example, sales people work in groups in the sales department, or accounting people work in groups in the accounting department.

There is a logic behind the groupings made, which allows employees to relate to a manager according to a certain plan. On the other hand, it is likely that most companies use two or more types of departmentalization at the same time.

Characteristics of the departmentalization of a company

Necessary to have an organizational structure

Departmentalization is one of the steps in creating an organizational structure. It is an aspect of organizational design in which a company divides its staff into smaller units with a logical arrangement that has a common base, depending on the tasks they perform within the company.

It is important to use departmentalization when an organization is growing. It becomes too complex and overwhelming for a single owner to manage all the situations that arise as the business grows to a certain size.

Growth and expansion

With many different departments in the organization, it can easily grow and expand. Otherwise it will remain small and static.


Each department performs a different function. This results in greater speed, efficiency and improvement in the quality and quantity of work.

Facilitates control

The organization is divided into small manageable departments. These departments can be easily supervised and controlled.

Establishment of responsibilities

The responsibility for a specific job is fixed in a particular department. Thus, if there is an error in the accounts, the accounting department will be responsible, if there is an error in production, the production department will be responsible.

Types of departmentalization

The departmentalization in organizations can take place according to different criteria:


The departments are grouped into independent and autonomous divisions based on a common base. It is based on diversity of skills, rather than similar skills.

Work teams are created to carry out specific tasks and coordinate the main departments. There may be work teams both in the office of the president of the company and in the maintenance workshop.


People are grouped into departments by common skills and activities, such as an engineering department or an accounting department.


The business becomes a small central office electronically connected to other businesses that perform vital functions.

Departments are independent services contracted by the head office to generate profit. These departments can be located anywhere in the world.


Instead of having a manager split across multiple geographic locations, there are specific managers for each location. For example, the sales function can serve different regions (west, south, north, east). Each of these regions is a geographically organized department.

This form of departmentalization can be valuable if a company’s customers are dispersed over large geographic areas and have similar needs based on their location.

By customer

Organize the work according to the client’s needs. This is critical in companies where an industrial customer and a general consumer may need simultaneous attention. The organization has personnel assigned to attend the particular needs of each type of client.

By product

It is broken down according to the type of output produced by each work team. Each product has its own departments. For example, each car model would have its own paint and finishing departments, interior and electronics departments, and so on.

By processes

Activities are grouped based on product flow. For example, in the process to apply for driver’s licenses, applicants go through several areas, such as data validation, license processing, and treasury, before receiving them.


Departmentalization carries the benefits of specialization. The jobs are divided into different departments depending on their nature, entrusting the responsibility to a qualified and efficient manager.

When a manager is involved in a specific function his experience and efficiency in that particular field increases. The performance standard of each department and the objectives to be achieved are planned.

When there is a deviation in actual performance from planned, corrective action is taken to remove obstacles.

Management Development

Managers are responsible for the work done by staff in their departments, also making it easy for the senior manager to direct and supervise the work done by middle managers.

Departmentalization helps develop new managers by giving them the opportunity to make decisions and initiatives independently. Thus, a highly qualified mid-level manager may have the opportunity to move up to the top level.

Market change management

Departmentalization allows better management of changes in the market, such as new consumer needs, government regulations and new technologies.

The department heads can meet, describe their problem areas, and find a solution as a group.

Evaluate employee performance

Supervisors can better assess the skills employees demonstrate, how they get along with other workers, and the compliance with which they do their jobs.


Geographic departmentalization

It helps to achieve the establishment of operations, by facilitating the expansion of business in various regions. By creating regional divisions there is better coordination of activities and local requirements can be met more effectively.

Functional departmentalization

It seeks to achieve economies of scale by placing people with similar abilities and orientations in the same units, producing a specialization.

It also allows senior management to exercise control over the set of functions, facilitating the delegation of authority. This eliminates duplication of efforts, bringing efficiency.

Departmentalization by client

It is suitable for organizations with various types of clients, because management will be able to focus on clearly identified clients and potential clients. In addition, special attention will be paid to the tastes and preferences of customers.

Departmentalization by product

There is greater responsibility for the performance of each product, because all activities related to a specific product are under the direction of a single manager. Managers take responsibility for the profitability of each product.

Departmentalization by process

The work is appropriately divided into different processes, facilitating coordination to ensure effective use of specialized skills and equipment. In this way, the manager is given responsibility for the entire process to complete the activities that improve the efficiency of the product.


Geographic departmentalization

– Physical facilities may be duplicated.

– There may be integration problems in the different regional offices.

– There may not be qualified and efficient people to take over the regional departments.

– It is more difficult to maintain centralized control over regional departments.

– It is an expensive method of departmentalization.

Functional departmentalization

– There is an overemphasis on specialization, maximizing the cost of supervision.

– There may be conflicts between departments, as responsibilities are interdependent. This creates difficulties in coordinating the activities of the departments.

Departmentalization by client

– There may be underutilization of facilities, especially during periods of low demand.

– It can be difficult to maintain good coordination.

– Duplication of activities is possible.

– There is the possibility of conflicts between departments due to the excessive emphasis on the clients of each department.

– An overemphasis on customers can lead to wasted resources.

Departmentalization by product

– Top management does not have effective control over the production divisions.

– There may be an underutilization of plant capacity if the demand for the product is not sufficient.

– The product manager could ignore the overall goal of the organization.

– Maximize the administrative cost.

Departmentalization by process

– There is the possibility of conflicts between the managers of the different processes.

– Some of the process activities can create problems for the entire process.

– It is more difficult to maintain coordination between the different processes.

Examples of departmentalization

Google and KFC

The sales department is a department that helps to get more customers and increase revenue. Google and KFC both have this department.

In addition, they have finance departments to provide financial support for new business strategies. This department also analyzes the business results.

Both companies have a marketing department, which generates the sale of their products and services. In addition, it ensures the necessary research to identify potential clients.

Google has a software engineering department, where it works on the development of new products. On the other hand, KFC has a quality control department, which maintains the color, taste and reliability in the quality of its products.

Additionally, KFC has a geographic department, making the units highly effective within the regions they serve. However, Google does not have a geographic department.

Geographic departmentalization

All fast food chains, grocery stores, supermarkets, Wal-Mart and others rely on this kind of departmentalization.

Departmentalization by product

Procter & Gamble is organized like this. Each product, such as Tide, Pampers, and Pringles, is placed under the authority of an executive, who has full responsibility for that product.

Departmentalization by client

Microsoft is organized around four customer markets: consumers, large corporations, small businesses, and software developers. In each department the needs of the clients are better satisfied, by having specialists for each type.


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