What is Departmentalization By Function?
Departmentalization by function, also called, functional departmentalization is the most common form of departmentation.
It is the process where one type of activity with a similar nature is grouped into one unit/department and other types of activities into other departments.
Functional departmentation promotes division of work and provides benefits of specialization at the job.
Under this, departments are created based on organizational functions rather than managerial functions (planning, organizing, staffing, etc.).
From company to company departments may differ but the most common departments created under functional departmentation include production, sales, marketing, human resource management, R&D, account, finance, procurement, customer service, etc.
Once the departments are created, in each department, a manager is appointed, called a department manager, who is responsible for managing and directing subordinates working under him/her.
The ultimate decision-making power remains at the top executives and all department managers should report their respective department’s performance to the executives.
Each department is given a specific task considering members’ skills, capacity, and experience in it.
All departments work independently but should contribute to the growth and expansion of the business.
Advantages of Departmentalization by Function
Functional departmentalization provides various benefits to the organization by which greater performance and productivity are achieved. However, it is not far from its disadvantages.
Some of the pros and cons of functional departmentation are mentioned below:
Specialization
Under departmentalization by function, the concept of division of work is followed.
As such, the complex task is broken down and employees are assigned only specific task that perfectly matches their interests and capability to perform.
Employees become more specialized when they do the same task repetitively.
Economies of Scale
Since specific employees only do specific tasks more productivity is achieved at minimum input.
Efficiency
Efficiency is a measure that determines how the work is completed at minimum time and minimum costs.
Because of the division of work, under this departmentalization method, workers’ efficiency and productivity are increased.
Better Resource Utilization
As it facilitates better coordination and assignment of the right task to the right employee along with human resources other organizational resources are optimally utilized in the direction of goal achievement.
Better Customer Service
Under departmentalization of function, some organizations also create a specific department usually named the customer service department which especially aims to better serve customers.
Related: Time Departmentalization
Disadvantages of Functional Departmentalization
Delay in Decision-Making
Because of the bureaucratic nature and centralized authority in functional departmentalization, there is a high possibility of delay in decision-making.
May Decrease Organizational Efficiency
Managers may tend to focus more attention only on their own departments. Competition between departments may decrease organizational efficiency.
May Increase Boredom
There is the possibility of boredom on the job when an employee has to do the same task daily.
Less Creativity and Innovation
Employees are not allowed to think beyond their repetitive tasks.
Their only job is to do the same job and return home. It does not promote creativity and innovation in the workplace.
Unresponsive to Changing Business Environment
Since functional departmentalization does not promote thinking out of the box, this method can not meet the demands of changing business settings.
Read Next: Territory Departmentalization
When To Use Functional Departmentalization?
The following are the 4 suitable conditions for using functional departmentalization in the workplace.
Organizations with Specialized Operations
Functional departmentalization is highly suitable for organizations that require specialized expertise in different functions.
For example, a manufacturing company may need distinct departments for production, sales, marketing, and finance.
By grouping similar tasks into one department, employees focus on what they do best, promoting specialization.
This ensures high-quality output as each department becomes proficient in its designated function, contributing to the organization’s overall efficiency and success.
Businesses Focused on Efficiency and Cost Optimization
Companies aiming to maximize productivity while minimizing costs can benefit from functional departmentalization.
This structure allows the organization to assign specific tasks to skilled employees who perform those tasks repetitively, leading to economies of scale.
For example, in a call center, grouping employees by their function (e.g., technical support or billing inquiries) allows for more efficient resource utilization and faster task completion.
Read More: Organic and Mechanistic Structures
Stable Environments with Predictable Workflows
Functional departmentalization works well in industries or companies operating in stable environments where tasks and workflows do not change frequently.
For instance, traditional manufacturing units or public service organizations thrive under this model as their operations are consistent.
The clarity of roles and well-defined communication channels ensure smooth operations in such settings.
Organizations with Centralized Decision-Making
Functional departmentalization is a good fit for organizations where top-level management retains decision-making power.
This approach provides a clear hierarchy and ensures that department managers report directly to top executives.
For example, in a bank, departments like loans, accounts, and customer service report to a central management team, enabling consistency in policies and decisions.
This structure ensures better control and alignment with organizational goals.
Read Next: Evolution of Marketing Philosophies
Sajan Kushmi is a content writer with more than 4 years of experience. He holds BIM Degree. He write on the topics related to Management, Marketing, and Entrepreneurship.