The process by which the activities of an enterprise are grouped homogenously into different groups. Departmentation is an important process of office management. This is otherwise termed as divisionalisation because it divides the organization into different divisions or groups.

Thus, departmentation means the process of grouping the various activities into separate unit. It has also been viewed as the process of specializing the work of the management according to place, product, patronage and process.

Departmentation is needed because of the following reasons :

(a) Departmentation facilitates fixation of responsibility as it divides the work into different departments and making each departmental head responsible.


(b) The grouping of similar activities into departments is needed by a large business house.

(c) A supervisor can-not supervise subordinates to an unlimited extent. This necessitates the introduction of departmentation.

(d) Departmentation is needed where occupational specialization is desired.

Bases of Departmentations

The bases of departmentation vary from organization to organization as the nature of business differs. But the most commonly adopted bases of departmentation are:

  1. Functional Departmentation
  2. Customer Departmentation
  3. Product Departmeniation
  4. Territorial Departmeniation
  5. Process Departmentation

Functional Departmentation


This is the most common basis of departmentation, under this the departmentation takes place on the basis of the basic functions of the enterprise. So production, distribution, marketing and finance departments come to picture. Within the office the departmentation may takes place on functional basis like typing department and filing department. The instances of functional departmentation are production office, purchase office, sales office and accounts section.

Customer Departmentation

Under this basis of departmentation, the business is divided into a number of departments on the basis of customers. The business has three categories of customers like wholesaler, retailer and consumer. Thus there may be wholesale department, retail department and consumer departmental in an organization.

Product Departmentation

Under this basis of departmentation, the business is divided into a number of departments on the basis of product handled by the firm. Departmentation on the basis of product is made where the business has produced a number of products. For example an automobile producer may have a truck division, a car division and a separate office which will look after all these divisions.

Territorial Departmentation

Territorial bases of departmentation is found in those business where the units are located at different places. Here departmentation is done on the basis of geographical area of operation of the enterprise. This type of departmentation is found in service industries and business like banks, insurance etc.

Process Departmentation


Process departmentation is found in those industries which involve different processes of production. In this type of departmentation the finished product of one process becomes raw material in another process. Process departmentation is found in chemical industries and composite textile mills.