Introduction

The typically hierarchical arrangement of lines of authority, communications, rights

and duties of an organization. Organizational structure determines how the roles, power and
responsibilities are assigned, controlled, and coordinated, and how information flows
between the different levels of management. A structure depends on the organization's
objectives and strategy. In a centralized structure, the top layer of management has most of
the decision making power and has tight control over departments and divisions. In a
decentralized structure, the decision making power is distributed and the departments and
divisions may have different degrees of independence.
Read more: http://www.businessdictionary.com/definition/organizational-structure.html
An organizational structure defines how activities such as task allocation, coordination and
supervision are directed toward the achievement of organizational aims.[1] It can also be
considered as the viewing glass or perspective through which individuals see their
organization and its environment.[2]
Organizations are a variant of clustered entities.[citation needed]
An organization can be structured in many different ways, depending on its objectives. The
structure of an organization will determine the modes in which it operates and performs.
Organizational structure allows the expressed allocation of responsibilities for different
functions and processes to different entities such as
the branch, department, workgroup and individual.
https://en.wikipedia.org/wiki/Organizational_structure

Organizational structure refers to the way that an organization arranges people and jobs so
that its work can be performed and its goals can be met. When a work group is very small and
face-to-face communication is frequent, formal structure may be unnecessary, but in a larger
organization decisions have to be made about the delegation of various tasks. Thus,
procedures are established that assign responsibilities for various functions. It is these
decisions that determine the organizational structure.

In an organization of any size or complexity, employees' responsibilities typically are defined

by what they do, who they report to, and for managers, who reports to them. Over time these
definitions are assigned to positions in the organization rather than to specific individuals.
The relationships among these positions are illustrated graphically in an organizational chart
(see Figures 1a and 1b). The best organizational structure for any organization depends on
many factors including the work it does; its size in terms of employees, revenue, and the
geographic dispersion of its facilities; and the range of its businesses (the degree to which it is
diversified across markets).
There are multiple structural variations that organizations can take on, but there are a few
basic principles that apply and a small number of common patterns. The following sections
explain these patterns and provide the historical context from which some of them arose. The
first section addresses organizational structure in thetwentieth century. The second section
provides additional details of traditional, vertically-arranged organizational structures. This is
followed by descriptions of several alternate organizational structures including those
arranged by product, function, and geographical or product markets. Next is a discussion of
combination structures, or matrix organizations. The discussion concludes by addressing
emerging and potential future organizational structure

Read more: http://www.referenceforbusiness.com/management/Ob-Or/OrganizationalStructure.html#ixzz4FX49TSVz

Thesis statement
Pejabatanan atau departmentalization melibatkan aktivti membahagikan sesuatu organisasi
kepada beberapa jabatan lain yang lebih kecil. Jabatan-jabatan ini menjalankan tugas-tugas
yang telah diberikan kepada mereka mengikut keperluan dan juga kepakaran kepada
sesebuah organisasi. Kedua-dua sektor, swasta mahupun kerajaan mengunakan cara ini untuk
mengoptimumkan struktur organisasi mereka. Pejabatanan

adalah penting bagi sesuatu

organisasi untuk membolehkan sesebuah jabatan diurus dan ditadbir dengan baik, dan juga
mengoptimumkan kepakaran. Kebarangkalian untuk sesuatu organisasi, syarikat untuk

berkembang adalah tinggi jikalau aktivti, dan juga ahli diletakkan didalam sesuatu kumpulan
atau jabatan mengikut kepakaran masing-masing. Ini boleh mengelakkan pertindihan
perkerjaan berlaku.

Content
Answer
a.

Functional departmentalizationjobs are grouped by the functions (i.e., marketing,

finance, human resources) performed. This approach can be used in all types of
organizations, although the functions change to reflect the organizations objectives and work
activities.

b.

Product departmentalizationjobs are grouped by product line. In this approach, each

major product area is placed under the authority of a manager whos a specialist in, and is
responsible for, everything having to do with that product line.

c.

Geographical departmentalizationjobs are grouped on the basis of a territory or

geography such as southern, midwestern, or northwestern regions for an organization

operating only in the United States; or for a global company, maybe U.S., European,
Canadian, and Asian-Pacific regions.

d.

Process departmentalizationthis method groups jobs on the basis of product or

customer flow. In this approach, work activities follow a natural processing flow of product
or even customers.

e.

Customer departmentalizationjobs are grouped on the basis of common customers

who have common needs or problems that can best be met by having specialists for each.
http://myllurmanagement.blogspot.my/2012/12/organizational-design-list-and-discuss.html

Departmentalization is an aspect of organizational design that includes the subdivision of a

business into units based on their function or other criteria. Most companies, including
restaurants, are likely to use two or more types of departmentalization simultaneously. Some
of the standard methods of departmentalization include grouping jobs by functional activities,
product types, customer groups, geography or location, processes, and chain of command.
Ads by Google
Free Org Chart Maker
Make an organizational chart & work w/ others online. Free 7-day trial
www.lucidchart.com/org-chart-maker
Location
A restaurant is likely to use a combination of different groupings. Location is likely to be
used in a restaurant chain, where more than one branch of the same chain exists in a region,
city or county. For example, the 25 percent of McDonalds restaurants that are not franchises
are managed by a hierarchy of staff, including area supervisors. Each area supervisor is
responsible for the performance of a group of stores in a specific geographical area.
Function
Functional departmentalization in a restaurant could operate by separation of sales and
marketing versus operations. Operations in the restaurant context apply to the preparation of
food, while sales would apply to the serving of customers. In this scenario, management may
have difficulty deciding where to include staff that makes and serves drinks at the restaurants
bar, because they are involved in both activities.
Related Reading: The Importance of Organizational Structure
Product
The departmentalization according to product type could work in a licensed restaurant, by
separating the activities and costs related to the preparation and serving of food from those
that applied to preparing and serving drinks. In this type of departmentalization, the bar
becomes a separate department from the dining area, a logical method of categorization in
this industry.

Chain of Command
Chain of command departmentalization works when the restaurant is large enough to require
more than one management division. For example, if a management role for one or more
people exists on the same level as another management role that oversees different staff or
customer groups, such as the operations and the finance, then these can be said to be
departmentalized by chain of command.
Customer
Customer departmentalization works by dividing the organization around the different types
of customers. In a restaurant environment, this could take the form of individual customers
versus catering for corporate clients and group events. One group of staff may handle the
day-to-day operations of the restaurant, while a separate group manages the catering arm of
the company, whether on the premises or outside. Departmentalization like this would
effectively also be functional and possibly chain-of-command departmentalization at the
same time.
Combined Departmentalization
Depending on the size of a restaurant, it may use two or more types of departmentalization. A
chain may split its operation along the lines of both product and chain of command by having
a food department and a beverage department, with food reporting to the chef while beverage
reports to the licensee. A smaller restaurant may use functional departmentalization, such as
kitchen

operations

versus

customer

service,

and

combine

this

with

process

departmentalization. This would result in operational kitchen staff already defined by

function being further departmentalized into preparation of ingredients versus actual cooking
http://smallbusiness.chron.com/two-types-departmentalization-would-used-restaurant38424.html

Types of Departmentalization
Departmentalization by function
This is common and popular basis of departmentalization of an enterprise. Under this form,
various departments are created on the basis of nature of functions to be performed like
production, marketing, finance, personnel etc. A departmental head or manager is appointed

to supervise and control the activities of the concerned department. All departmental heads
are specialists and experts in their own area of business. When workload of a particular
department becomes more, a department may again be classified into sub departments. Since
the members working in a department have similar background and interest, it gives rise to
specialization which makes manpower more efficient and skilled.
Advantages of Departmentalization by Function

It is most logical and natural form of departmentalization.

It brings about specialization which makes optimum utilization of human resources.

It lays emphasis on each and every activity.

It enables top management to exercise control over a number of functions.

It facilitates delegation of authority and therefore, reduces the work burden of top
manager.

It eliminates the duplication of effort which brings efficiency.

Disadvantages of Departmentalization by Function

There may be conflict between departments as the responsibilities are inter

dependent.

There may be difficulty in coordinating the activities of different departments.

There is over emphasis on specialization.

It maximizes supervision cost.

It is non responsive to environmental changes.

It does not promote innovation and creativity.

Departmentalization by Product/Service
This method of departmentalization is used specially by those manufacturing firms that
involve in large scale and various lines of products or services. A separate department is
created for a single product or product line and all functions like production, finance,
marketing, personnel etc. of one department are brought together under the concerned

department. Each department is independent and responsible to improve and expand its
business performance. The department manager is responsible for its expenses, revenue,
profits, failure and success. Therefore, it facilitates to measure the managerial as well as
operational result and contribution of each product line to whole organization.
Advantages of Departmentalization by Product/Services

It is suitable for the organization having various lines of products or services. It brings
about specialization in a product or service which makes optimum utilization of
human resources.

It directs attention toward specific product line and service.

It facilitates to monitor and evaluate the performance of each production or service

department.

Product/service managers can be held accountable for the profitability of each

product/service.

It permits maximum use of specialized production/services facilities.

Disadvantages of Departmentalization by Product/Services

There may be conflict between production/service and other departments as the

responsibilities are inter dependent.

There may be under utilization of plant capacity if the demand of the product/service
is not sufficient.

It creates the problem of effective control over production divisions by the top
management.

It maximizes administrative cost.

The product/service manager may ignore overall objective of the organization.

Departmentalization by Customers
This type of departmentalization is applied by those organization which deal differently with
different types of customers. Types of customers are the key basis of departmentalization of
the enterprise. Banking organization create departments on the basis of customer service like

deposit, cash withdrawal, letter of credit, loan etc. Similarly, a business organization may be
divided into industrial product buyers and consumers product buyers. Likewise, consumer
product buyers again may be sub classified into wholesaler buyers, retailer and final
consumers.
Advantages of Departmentalization by Customer

It is suitable for the organization dealing with various types of customers.

Management can concentrate on clearly identified and potential customers.

It considers the environmental changes.

Special attention can be given to the taste and preference of customers.

It provides the benefit of specialization.

Disadvantages of Departmentalization by Customer

It may be difficult to maintain coordination.

There may be under utilization of facilities especially during the period of low
demand.

There may be possibility of duplication of activities.

There is possibility of conflict between departments due to over emphasis of own

department by departmental managers.

Over emphasis of on customers may lead to wastage of resources.

Departmentalization by Territory
This form of departmentalization is applied specially in those organization that involve in
business activities in different geographical locations. It is also appropriate for large scale
enterprise which are geographically spread out in many locations like insurance company,
bank, transport company, chain store or a product which is distributed throughout the nation.
All activities of specified territory are assigned to a particular department or regional
managers. Activities are grouped into regions, zones, district, branches etc. In such
departmentalization, the local customers are served by the divisional manager while the plans
and policies are formulated at the head offices.

Advantages of Departmentalization by Territory

It helps to achieve local operations.

It facilitates the expansion of business into various regions.

It considers the environmental changes.

There is better coordination of activities through the setting up of regional divisions.

It can meet the local demands more effectively.

Disadvantages of Departmentalization by Territory

There may be a problem of integration of various regional offices.

There is the possibility of duplication of physical facilities.

It is more difficult to maintain central control over regional departments.

There may be lack of skilled and efficient persons to take charge of regional
departments.

It is costly method of departmentalization.

Departmentalization by Process
This method of departmentalization is applicable to those organizations where production
activities need some distinct process. Specially, this method is used in large scale
manufacturing concerns such as textile, cement, chemical, medicine etc. The activities are
grouped on the basis of process. The activities of each process are assigned to a departmental
head who is responsible for all the functions of concerned department. This is made to
maintain working efficiency of each process and to economize productivity. For instance,
department of a textile industry may be formed into ginning, spinning, weaving, dyeing and
finishing department.
Advantages of Departmentalization by Process

There is proper division of work into different processes.

It facilitates coordination by grouping products.

It ensures effective utilization of specialized skills and equipments.

It provides full responsibility to process head to complete process activities which

improves product efficiency.

It helps to make appropriate use of resources and facilities.

Disadvantages of Departmentalization By process

It is appropriate only for manufacturing organizations.

The technical problem is one process may create problem for the whole process.

There is possibility of conflict among managers of different process.

It is more difficult to maintain coordination among different process.

The responsibility of total profit cannot be assigned to process departments.

Departmentalization by Time
Time is also a basis of departmentalization in may organization, especially, those that involve
in public utility, production or service. Generally, hospitals, hotels, telecommunication and
other public utility organization which work around the clock from departments on the basis
of time shift such as day, evening and night shifts. Therefore, a separate department is created
on the basis of shift and a departmental head of appointed for each shift to maintain control
the activities of concerned shift.
Advantages of Departmentalization By Time

There is proper division of works into different shifts.

It facilitates coordination by grouping members into shifts.

It ensures effective utilization of specialized skills and equipments.

It provides full responsibility to the shift head to complete activities which improves
product/service efficiency.

It helps in the appropriate use of resources and facilities.

Disadvantages of Departmentalization by Time

It is appropriate only for public utility enterprise where the work is round the clock.

The technical problem is one shift may create problems for the entire shift.

There is possibility of conflict among managers of different shifts.

It is more difficult to maintain coordination among different shift mangers.

The responsibility of total profit cannot be assigned to a shift department.

http://www.wisenepali.com/2015/01/departmentalization-importance.html
http://www.openlearningworld.com/books/Organisation/Organizations/Types%20of
%20Departmentation.html

Function wise Departmentation

Under each of these five managers, there will be subordinate managers and under them, the
subordinate staff.
The advantages of this type of structure are as follows:
(i)

It is a logical reflection of functions.

(ii)

It follows the principle of specialisation.

(iii)

Maintains power and prestige of major functions.

(iv)

Inter-departmental co-ordination is facilitated.

(v)

The structure is simple, logical and easy to understand.

(vi)

Provides a good means of control at the top.

There are also some disadvantages:

(i)

Responsibility for profits tends to be at the top.

(ii)

There may be chances of heavy centralisation in decision-making.

(iii)

Where geographical centralisation is desirable or required, this form becomes

unsuitable.
(iv)

This is not very suitable where product lines have to be emphasized.

(v)

There is a lower potential for manager development.

Product wise Departmentation

The advantages of this type of structure are:
(i)

Places greater effort on individual product line.

(ii)

Better customer service arising from greater product knowledge.

(iii)

Simplifies departmentation of profitability of each product line. Responsibility for

profits is at the Division level.

(iv)

Improves co-ordination of functional activities.

(v)

New department may be added without difficulty. Permits growth and diversity of

products and services.

(vi)

Detailed information on markets for specific products will be generated.

(vii)

Extremely suitable where product lines are complex or vary greatly.

(viii)

Furnishes measurable training ground for Managers.

Some of the disadvantages inherent in such departmentation are:

(i)

A customer has to deal with different salesmen or managers for different products of

the same company.

(ii)

Extra costs of maintaining separate sales force for each product.

(iii)

Duplication of costs on travel, etc.

(iv)

Tends to make maintenance of economical central services difficult.

(v)

Results in increased problems of the top management control.

Territorial or Geographical Departmentation

The advantages of such departmentation are:
(i)

Regional expertise is generated and managers can tackle customers or competition

better. Places responsibility at lower levels.

(ii)

Proximity will reduce costs of operation and administration.

(iii)

Places emphasis on local markets and problems. Local conditions might warrant

different types of selling. This is possible only in territorial departmentation.

(iv)

Improves co-ordination at the regional level.

(v)

Better face-to-face communication with local interests in mind.

(vi)

Better manager development.

Some disadvantages are listed as follows:

(i)

Involves higher costs of co-ordination and control from headquarters.

(ii)

Results in more managerial levels which increases overhead costs.

(iii)

Unsuitable for departments like Finance, where no gains are possible by specialisation

on local factors.
(iv)

Increases problems of the top management control.

Departmentation by Customers
Some advantages of this type of structure are:
(i)

Greater specialized customer service.

(ii)

Where marketing channels are considerably different for various types of customers,

this type of structure is very useful.

Some disadvantages of this type are:

(i)

May not be enough work for certain types of customers. Hence, under employment of

facilities and manpower specialized in terms of customer groups.

(ii)

Problems of co-ordination might pose difficulties.

(iii)

Unequal development of customer group

Discussion
he Importance of Organizational Design and Structure
RECOMMENDED

The Authentic Leadership Collection: Learn What It Takes to Master Your Leadership
Presence
LEADERSHIP & MANAGING PEOPLE BUNDLES
o

57.95 ADD TO CART

o

SAVE

SHARE

HBR's 10 Must Reads on Managing Yourself (with bonus article "How Will You
Measure Your Life?" by Clayton M. Christensen)
LEADERSHIP & MANAGING PEOPLE BOOK

o , Peter F. Drucker, Clayton M. Christensen, Daniel Goleman

24.95 ADD TO CART
o

SAVE

SHARE

HBR Guide to Leading Teams Ebook + Tools

LEADERSHIP & MANAGING PEOPLE BOOK
o Mary L. Shapiro
39.95 ADD TO CART
o

SAVE

SHARE

One of the wonderful things about being a coach is that I meet hundreds of executives who
freely share their business and leadership challenges with me. As well as helping me
understand how hard it is to run an organization, they show me how they are managing to
adapt or not to changing organizational structures.
A constant theme during meetings over the last three years has been how globalisation and
the economic crisis have forced organizations to rethink their strategies and change they way
they operate. From what I can gather, much of this has been on the hoof, with companies
switching their focus from markets to products or competitors, rather than looking at the big
picture. This can result in lots of piecemeal change initiatives rather than looking at the
overall organizational design.
I rarely come across leaders who advocate wholesale organizational redesign or use it as a
way to support their people and business. When organizational strategy changes, structures,
roles, and functions should be realigned with the new objectives. This doesnt always happen,
with the result that responsibilities can be overlooked, staffing can be inappropriate, and
people and even functions can work against each other.
Often, I see little more than a traditional hierarchy flattening out, perhaps broadening into
a matrix structure in parts of the organization. More often than not, though, the hierarchy
remains embedded in the new structure, which can cut across its effectiveness and leave
people confused. Worse, organizations rarely show people how to operate in a new structure,
which can also undermine effectiveness.
Many of my clients tell me that they find it increasingly difficult to operate within outdated or
dysfunctional structures. My prevailing impression is that organizations either overlook the
importance of organizational design or simply dont know what to do.
This isnt surprising since the subject is complex and often poorly explained by academics
and consultants, finding a practical approach to organizational design can be difficult,
although some business schools are attempting to simplify things (pdf).
It is also a pity since structure dictates the relationship of roles in an organization, and
therefore, how people function. An outdated structure can result in unnecessary ambiguity
and confusion and often a lack of accountability. Structures can be complicated: one British
bank where I coach has a clear hierarchy at the top but a complex matrix structure further

down which, according to my clients, allows some managers to dodge their responsibilities
while others can move troublesome staff around or exit them easily.
Poor organizational design and structure results in a bewildering morass of contradictions:
confusion within roles, a lack of co-ordination among functions, failure to share ideas, and
slow decision-making bring managers unnecessary complexity, stress, and conflict. Often
those at the top of an organization are oblivious to these problems or, worse, pass them off as
or challenges to overcome or opportunities to develop.
Here are some of the stories I have come across recently if you have experienced anything
similar or have different insights, it would be useful to hear them in the coming week. Any
suggestions for pushing back or reshaping unnecessarily complex or outdated organizational
structures are also welcome!
The unworkable job: a Swiss engineer told me that his boss had bolted on so many parts
to his original role that it was becoming impossible to do his work as one part of his role
contradicted the other. Moreover, he was stretched beyond his limits by the scope of the role
and the fact that he had to operate across several time zones.
Politics: a Hong Kong retail executive said his role was schizophrenic because he was
required to influence a group of internal stakeholders who had been instructed by their boss
not to co-operate with him. The anomaly was the result of historical turf wars between his
boss and his boss peer: the latter had used his influence to restructure the department and
bring it under his control.
Over-regulation: a British banker explained how he was required to get approval from so
many people for a major project that he wasted six months trying to get it off the ground,
severely limiting his ability to compete in the market.
Applying for your own job: a French executive of an international food company explained
how a new chief executive wanted to make his mark by restructuring the group. The exec
made people apply for their own jobs, and determine who was redundant.
Cultural clashes: I once worked in a consultancy firm where a sizeable group of people still
defined themselves by the organizational culture of a company that was taken over 20 years
before. This group made a point of working against the new culture and subverted the
company in small and far-reaching ways.

https://hbr.org/2011/02/the-importance-of-organization

http://www.mckinsey.com/business-functions/organization/our-insights/gettingorganizational-redesign-right

http://www.strategy-business.com/article/00318?gko=c7329
https://maximumchange.wordpress.com/2011/05/19/considering-five-emerging-globaltrends-and-their-impact-on-organizational-strategic-leadership/