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 utilise 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.