In order to decie upon the method of grouping or division of work, the main objectives of the BUSINESS must be considered. The grouping of functions or tasks is referred to as departmentation.

This is the most widely used basis of departmentation. Three main categories occur in most enterprises, i.e., production (the creation of, or addition to utility of, a good or service), selling (finding customers for goods and services at a price), and finance (obtaining and EXPENDING funds). As types of enterprise vary, department names vary, e.g., a wholesaler does not produce, he BUYS, and therefore his departments may be buying, selling and finance. Often the amount of money spent may determine the department and the chief business activity are usually made a separate unit, e.g., the auditing department in an accountancy firm.

Advantages :

1. This method is easy and logical to decide and usually effective in practice.
2. It follows the principle of specialization and economies result.

Disadvantages :

1. Functions may not be so important as the area covered by the organization, e.g., the territory may be widespread and another grouping (geographical) may be better.
2. Such specialization may invoke NARROWNESS of outlook, i.e., inability to see the business as a whole.
3. Management positions need of wide experience and this is not readily available in a rigid department system which affords POOR training grounds for managers.

In order to decie upon the method of grouping or division of work, the main objectives of the business must be considered. The grouping of functions or tasks is referred to as departmentation.

This is the most widely used basis of departmentation. Three main categories occur in most enterprises, i.e., production (the creation of, or addition to utility of, a good or service), selling (finding customers for goods and services at a price), and finance (obtaining and expending funds). As types of enterprise vary, department names vary, e.g., a wholesaler does not produce, he buys, and therefore his departments may be buying, selling and finance. Often the amount of money spent may determine the department and the chief business activity are usually made a separate unit, e.g., the auditing department in an accountancy firm.

Advantages :

Disadvantages :