Departmentalization refers to the process of grouping activities into departments.

Division of labour creates specialists who need coordination. This coordination is facilitated by grouping specialists together in departments.

Common Types of Departmentalization

• Functional departmentalization - Grouping activities by functions performed.
• Product departmentalization - Grouping activities by product line.
• Customer departmentalization - Grouping activities on the basis of common customers.
• Geographic departmentalization - Grouping activities on the basis of territory.
• Process departmentalization - Grouping activities on the basis of product or customer flow.

Owing to the complexity of tasks and the competitive environment in which organisations operate, they often use a combination of the above-mentioned methods in departmentalization.

Recent Trends in Departmentalization

• The customer departmentalization has become increasingly emphasized.
• Rigid departmentalization is being complemented by the use of teams that cross over traditional departmental lines.