Departmentation by Enterprise Function/Advantages and Disadvantages

This form of departmentation is to group the activities being performed along the line of functions of the organization. Since every enterprises aims at creating or producing something that is desirable by others the basic enterprise functions are:

Production

Production is to add utility to goods or services. This means getting raw materials and transforming them into finished products or taking an idea and using it as a basis for providing service to others.

 Selling

This necessitates finding customers/clients who will agree to accept the product or service at a price.

Financing

This involves raising funds, safeguarding the funds against waste and expending the funds in a manner that will maximize the objectives of the organization. All these activities can logically be grouped into: engineering, production, marketing and finance departments. Note that there can be variation of names concerning these departments. For example there may be no engineering or production in a ministry or church. But appropriate names reflecting the major functions can still be used. See example of departmentation by enterprise function below: Fig. 7.1

 

 Showing departmentation by enterprise function The above departmentation is according to enterprise functions. This means that the activities are grouped according to the major functions being performed by this medium-size manufacturing company. There are obvious advantages associated with this form of departmentation. 

Advantages 

1. It shows in a logical manner the basic functions that are being performed in the organization. By merely glancing at the chart, one would quickly see these functions 
2.  Its main the power and prestige of the major functions. We have earlier discussed that positions should only be created if such positions have positive roles to play in the attainment of the organizations objectives. By looking at the diagrams one can see the departments and positions that are playing such roles. 
3. The form of departmentation again follows the principles of occupational specialization. These are in engineering, production, marketing and finance. As a result, any one that has a flair for any of these areas can move in to such area and contribute his quota toward the realization of the organization's objective. 
4. The form of departmentation simplifies training. This means that whenever there is a new employee on the job, training can be organized for such employee. The older person in the department can put him through in the fine rope of the department's job without moving outside the department. 

 Disadvantages

There are recognized disadvantages in this form of departmentation which are stated below.

• It tends to create over specialization. And when employees in a department over specialize, it tends to narrow their view points and orientations to the extent that problems of the other departments are not appreciated. 
• This form of departmentation makes the development of the specialist managers to be difficult. This is because as specialists, their view points are narrowed and can not readily be made a general manager because a general manager as the name implies is a generalist; as such, his mind is sufficiently broadened to take balanced decision for the overall interest of the organization. 
• Because managers see themselves along specialist lines, it makes coordination which is the essence of management to be difficult. Coordination demands that an activity should be linked logically to another activity and thereby making the entire organization to operate as a unit. But with over specialization which has strait jacketed managers. View points tend to reduce the unit of the whole enterprise. 
• The departmentation creates another limitation of preventing the to grow economically as a system. Each department tend to operate along its own area of specialization. But an organization is supposed to operate as a unit, to the extent that what affects a part will automatically have effect on other parts. Each part should support and cooperate with one another. Over specialization reduces this support and cooperation.