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Organizational Chart

Functional Departmentation

This is the simplest form of Departmentation when grouping of departments is done on the basis of functions such as production finance marketing sales purchase and personnel etc, it is known as functional Departmentation. Further sub divisions of the functions may be formed like marketing can be divided in to advertisement sales and after sales service. So we can classify functions into two parts. Basic functions i.e. Production Marketing Finance and Personnel Secondary Functions: - These are further parts of basic functions according to the organizational needs or operations like Production: - Product planning, R&D, Quality control and material handling Functional departmentation is useful where there is production of single product or similar kind of product, for example TV Computer monitor or TFT.

Merits & Demerits of Functional Departmentation

Functional structure is the grouping of workers into departments based on similar skills, expertise, or resource use. A company might have, for example, a production department, a transportation department, and a finance department. Departmentalization by function enables employees to specialize and work together efficiently. It may also save costs. Other advantages include the following: Functional Departmentation is a Logical and Time-Tested Method. Employees can develop skills in depth and can progress within a department as they master those skills. The company can achieve economies of scale in that it can centralize all the resources it needs and locate various experts in that area. Theres good coordination within the function, and top management can easily direct and control various departments activities. It is suitable and convenient for creating major departments. It facilitates intra-departmental coordination. It also promotes and provides the benefits of occupational specialization. It facilitates performance appraisal and control of departments.

In functional departmentation, the decision making process is delayed due to specialization. It is not conducive to overall organizational strength and survival. Functional Departmentation may not be suitable when the area covered by business activities is rather wide. Conflicts between departments are possible if proper mechanism for cooperation and coordination is not instituted. There may be a lack of communication among the different departments. For example, production may be so isolated from marketing that the people making the product do not get the proper feedback from customers. Individual employees may begin to identify with their department and its goals rather than with the goals of the organization as a whole. For example, the purchasing department may find a good value somewhere and buy a huge volume of goods that have to be stored at a high cost to the firm. Such a deal may make the purchasing department look good, but it hurts the overall profitability of the firm.

The companys response to external changes may be slow. People may not be trained to take different managerial responsibilities; rather, they tend to become narrow specialists. People in the same department tend to think alike (engage in groupthink) and may need input from outside the department to become more creative.