DEPARTMENTATION. 1. Introduction

Transcription

1 DEPARTMENTATION 1. Introduction Dear students welcome to lecture series on principles of business management. Today we are going to discuss departmentation. As you are well aware that planning is the first and the foremost function for the business management and in the planning we decide the objectives to be achieved by the management. Along with that we decide what is to be done? When is to be done? Where is to be done? How is to be done? In planning we are trying to bridge the gap between the present and the future. But this can be achieved by performing another function and that is known as organization. The organizing function of management follows the planning function and involves the identification of the activities, grouping of the activities and assignment of the task to the job position, defining the roles and relationship among the superiors and subordinates. Now after identifying the activities and delegating the authority to the subordinates so that we can achieve the objective which we have laid down in the planning is an exercise performed in the organization. When we are purposely performing this exercise, this process results into the organization structure. The organization structure which is deliberately designed, which is deliberately framed, is known as formal organization structure. The formal organization structure can be designed in two parts. The modern organization structure and the traditional organization structure, but one of another form of the organization structure is known as the departmentation. In departmentation we are going to study the bases of the departmentation, because there are number of ways in which we can departmentalize the activities in the organization. 2. Concept of Departmentalization The departmentation is always done according to the nature of the organization, according to size of the organization, according to the complexity of the organization. The concept of departmentalization is one of the important steps in designing of the formal structure of an organization. The activities are identified, Page 1 of 11

2 they are segregated and then again they are integrated. The departmentation so created have the lateral relationship. As we know that organization has the combination of two things. One is authority structure as well as the activity structure. So when we are talking about the authority structure it means the authority flows from top to bottom and that indicates towards the vertical structure of the organization. When there is an activity structure, the activity structure gives birth to the lateral form of the organization and that is known as the departmentation. Thus departmentation creates the lateral or horizontal activity cluster like manufacturing, engineering, marketing, finance, accounting and so on. The need of the departmentation arises, because when organization grows beyond a limit of a person to control it effectively and efficiently. We all know that when a business house or business organization or business unit is small in size then one man can handle all the activities in a business unit or in a business house even he can handle the clerical activities and he can handle the manual activities. But even in small organization when he is handling the manual activity and the clerical activity there also he has to create the departments. But the need is not so urgent or so immediate that he can go for the crystal clear form of the departmentation. But when an organization grows, its activities are one of the means of achieving the goals of the organization, and the key activities are to identify, therefore when an organization goes beyond the limit, beyond his control he has to create the departments. Departmentation have an important implication for the organization s performance and effectiveness. It virtually influences the pattern and pace of the workflow in the organization. It helps the process of determining the size, composition, skills and capabilities of the personnel required and thus a man power planning and control. Accordingly we have to delegate the authority to the subordinates so that they can achieve the desired objective. 3. Forms of Departmentation Now coming to the basic point of the discussion and that is the departmentation. I would like to mention there are several alternative ways in which the organization activities are grouped in a work unit. They are called the bases or the forms of departmentation. Organization makes choices of one or more forms of the Page 2 of 11

3 departmentation out of the alternatives. The major bases of the forms are the function, the process of equipment, product, customer, and the geographical areas. Today we will discuss two forms of departmentation which is sometimes known as I mentioned it Departmentalization also. The first form of departmentation is functional form of departmentation and the next is or the second one will be the process or the equipment form of departmentation. 4. Functional Departmentation The first and the foremost bases of forms of departmentation is the functional departmentation. Jobs can be grouped together according to functions of the organization. The word function stands here for the marketing, finance, production, human resource rather than the functions like planning, organizing, directing and controlling. So when we talk about the functional form of departmentation, at the out set it should be clear in your mind that when we are talking about the functional form of departmentation we should not confuse it with the functions of the management because they are known as the planning, organizing, directing and controlling but here the word function stand for the activities which are conducted in the organization. The nature of the function carried out by different form of the organization is different. For example, hospital consists of function as surgery, housekeeping, and pharmacy, personnel and nursing. A bank performs the function of borrowing, lending, trust, investment and marketing. A business house performs the function like finance, like production, human resource, marketing and research and development. It is recognized that different functions call for different type of the expertise, experience and orientations. They are specialization in their own way in the sense that the cluster of irater skills, processes and abilities. Now I would like to mention here that when a function is performed for example, marketing function is performed by a business house then sub function is also performed in that particular department. For example, in a marketing department we can perform the sub function known as marketing research. Now I would like to explain this departmentation with the help of a diagram, within this function there are several other functions. For example within the marketing function there are sub functions Page 3 of 11

4 such as advertising, sales administration, marketing research and physical distribution. Now I will show you a diagram: In which you will find that functions related to a business house are shown and they are finance, production, human resource, marketing and research and development. The first and the foremost advantage of this departmentation is that it is a very simple familiar way of grouping activities. Now why I say it is simple and familiar because whenever a function is required in an organization a business house can incorporate that function in this particular type of the departmentation. Say for example, in the above diagram, the purchasing function has not been shown. But if the management wants to decide the purchasing function is required to be performed, then management can add the purchasing function in this diagram or add this particular function in the departmentation. Therefore it is simple. The next advantage is that it appears to be logical form because activities are segmented by reference to their typical or unique contribution to overall organization goal. Here when we say the typical and unique contribution meaning thereby the finance department for example, is performing the unique activity that is only the finance activity is performed by the finance department. The third Page 4 of 11

5 advantage is that it permits the organization to build expertise and excellence around particular function and make them available to entire organization to promote efficiency. Now when we say it develops the expertise and excellence meaning thereby, a person who is performing the finance function in the organization. Look at the diagram and you will find a person who is performing the finance function or say for example production function at the while performing the finance function or the production function he become so expert in his area or her area that they are providing the expertise knowledge and expertise abilities, expertise skill to whole of the organization. The next advantage is it felicitates hiring, training and carrier advancement of personnel who are qualified and experienced in their respective field of specialization. When we say the career advancement of the personnel in the respective field meaning thereby, if a person is working in a finance department then he can after acquiring the expertise knowledge and getting the qualified skills in the department, he can move at the top of the ladder in the same department. Next advantage of this departmentation is top management attention could be focused on strengthening the key function which are critical to survival and success of the organization. As I have mentioned it in my earlier Page 5 of 11

6 lectures also that what is the meaning of the key function or the key activity? Key activity is an activity which is also known as critical activity and that is so important for an organization, that the success of the organization depends upon that activity, if there is a barrier or blockage in the activity it can hinder the performance of the organization. So in this type of departmentation, the biggest advantage for management is that management can identify the key activity which is required for the success of the organization and they can concentrate on those activities. So that they are able to achieve the desired result which they have laid down in the planning. The next advantage is, it is economical way of departmentation to the extent that a single department provide services for the entire organization without the need for duplication of similar function for say different product or geographical areas. For example, for a business enterprise which manufactures and sells a number of products, a single marketing department can undertake the marketing function for all the products instead of separating marketing unit for different products. The next advantage of this departmentation is functional departmentation appears to be most appropriate for small and medium size enterprises which handle a limited number of products. It is also useful base for grouping activities at primary level that is the first level below the chief executive or at the secondary level. 5. Functional Departmentation : Limitations Now I take up the limitations of the functional form of the departmentation. The first and the foremost limitation is, as an organization grows the size of the departments also increases. They tend to become unmanageable in spite of the fact that each department could be divided in terms of further subunits, serious problems of coordinating the range of sub functions within the department and also several larger functions department arises. Now when we discuss that it becomes unmanageable the focus in this limitation is that when organization grows it becomes unmanageable to manage this type of the departmentation. Because if you look at the diagram, you will find that in a marketing department when an organization grows in a marketing department when it is having the sub functions also like advertising, like physical distribution, like marketing research then it Page 6 of 11

7 becomes difficult for the management to coordinate among all the sub functions. Not only this, when organisation grows, and when it grows further and further then some more departments are to be added. As I mentioned in my lecture that suppose a purchasing department is to be added in it then if we keep on adding the departments according to the function it becomes unmanageable for the managers. The next limitation is, it is some what difficult to measure the contribution of the functional departments to overall organization in clear terms, to make valid judgement on their performance. They cannot be recognized into the profit centre in a formal sense. Now profit centre is a very prominent word in the field of management. The profit centre meaning thereby whatever the revenue we have earned, we have to deduct the expenditure out of the revenue and we had to find out either the department is giving us the profit or not. In this type of the department if you again look at the diagram you will find the person in a finance department is performing his job, a person sitting in marketing department he is performing the job, the person sitting in human resources department is performing his job. But when it comes to the point of the contribution given by them to the whole of the organization, when it comes to the point of measuring their performance, their contribution in terms of total organization, it becomes very difficult to pinpoint who has contributed how much. Now this is the biggest disadvantage in the functional form of departmentation. Now I take up the third limitation, a serious failure or deficiency in single functional department say manufacturing or purchasing or marketing tends to weaken the entire organization and may even lead to its collapse. This is because the functional units are highly interdependent. The organization s fate is tied to the smooth functioning of all the departments. Now if you look at the diagram you will realise you will be able to draw a point out of it, that finance department is very much attached with the marketing department, marketing department is attached with human resource department, human resource department is attached with the purchasing department and purchasing department is attached with the research and development department. When we say a serious failure in one department can affect the other department. Another example, to understand this point is suppose the purchasing department has not purchased the raw material in time, now that will be a biggest problem for the production department to get the input from the Page 7 of 11

8 purchase department and to produce the things at the desired level and at the desired time, simultaneously, this problem will travel to the marketing department. Because marketing department will not be able to meet the desired schedule of the demand, therefore this limitation which I have mentioned that the bottle neck in one department can create the collapse or can create the problem in total department. The next limitation is the functional form tends to hinder organizational unity and harmony because the heads and other members, the individual functional department tends to develop functional biases. They are likely to concentrate on the narrow specializum and departmental goal and interest. They tend to fail to integrate their specializum and interest within the overall organizational prospective. Conflicts and buff passing among different functional units are not uncommon. Now if you again look at the diagram you will find the functional biases develops in a person who is working in a marketing department. He or she would always like to project a picture that marketing department is doing very well. But the manager concern of the department will not take into the consideration the prospective of whole of the organization. Their action will not incorporate whatever has been designed at the top level. They will also not bother to look into the problems of their peer group of people. Now this functional bias which is going to create a narrow view point among the managers is another limitation in this form of the departmentation. The next limitation is the functional departments cannot serve as training ground for development of managers with the general or top manager prospective that is manager who are cross functional experiences, expertise and outlook. Now what happens if again you look into the diagram, you will find a person doing the work in research and development department throughout his life, when he or she worked in research and development department, when their view point become so narrow that they do not develop the holistic view of the other functional areas. When they do not have the holistic view about the other functional areas, therefore it is again causing a problem when they will be promoted at the top level later on in the future. They will not be able to understand the problems of the other departments. So these limitations are prominent limitations of the functional form of departmentation. Page 8 of 11

9 6. Process Departmentation The next form of the departmentation is process or equipment form. A variant of the functional form is the process or equipment form of departmentation that is grouping of activities in terms of various processes or phases through which material or the component goes through, here we will adopt this type of the departmentation because the nature of the business is such where a product when it comes in the finished form has to pass through number of processes. For example, a textile manufacturing unit could be divided into spinning, weaving and dyeing department which are distinct and sequential process. Now if we have taken the example of textile unit one department will be completely created for doing the spinning activities, that department will not do any other activity and after spinning the quarter that the finished product of the spinning department will become the raw material for another department that is known as weaving department. This is how the all departments are interrelated with the each other. The weaving department s finished product will be the raw material for the dyeing department. Now dyeing department when they will perform the dyeing work their particular finished work will be the raw material for another department. This is a befitting example because a product when cotton is to be converted into the cloth, it has passed through number of processes. Different organization adopts different set of processes to convert input into the output. Such process need careful managerial attention and coordination it will be logical to organize them into distinct department. Now each department requires a careful attention by the managers. Suppose there is a defect in a weaving department. Now that particular product will not be passed on next department or the spinning department requires a careful attention by the managers so that the better and better finished product goes into the weaving department that type of the attention is required so we will go for this form of department. When the attention is to an extent is desired by the manager that when product comes out of the finished product there is no defect in it. Now I will show you a diagram which will be related to a furniture workshop. I have elaborated and explained about a textile manufacturing unit. Page 9 of 11

10 But another example can be show with help of the diagram and in the furniture workshop diagram in that department also; in that unit also there are certain processes which are done. The first is the cutting, the second one is planning and the third one is assembling, the forth one is smoothing and the last one is polishing. Now when a wood is to be cut, we had to make furniture, wood is to be cut and when we are converting the wood by different processes into the furniture it has to pass through different processes and I have mentioned those processes to you and shown you in the diagram. Manufacturing and other related processes are performed through equipments or machinery it may sometime be possible to departmentalize on the bases of the type of the equipment used. Especially when the equipment used is highly sophisticated. We are calling it equipment or process meaning thereby when it is passing through the different processes we can call it process departmentation. But when a product has to pass through different highly sophisticated tools and technique it is known as the equipment base of the department. In such a system it is possible to ensure the effective utilization and maintenance of the equipment apart from allowing people to develop expertise in the use of the equipment. Now here when the processes are being performed equipment are to be used, this is the biggest advantage of this type of departmentation that we are utilising the equipment as well as we are Page 10 of 11

11 developing the people to that level of expertise where they know how to use the particular equipment. But in very brief I would like to mention that this type of the department shares most of the advantages and limitation of the functional form of departmentation which I have discussed earlier. Page 11 of 11