Departmentation, Authority, Responsibility and Accountability

Subject: Business Studies

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Overview

Departmentation is the process to identify and group the task into jobs, jobs into effective works and works into departments. It is the process of grouping related activities into different units. Departmentation further is the process of arranging, dividing and analyzing the activities in such a way so that they will be managed properly. It is the way of dividing the long and complex organization into smaller administrative units.

Departmentation, Authority, Responsibility and Accountability

Departmentation

The process of making departments in the organization is known as departmentation. It is the process of grouping related activities into different units. Departmentation further is the process of arranging, dividing and analyzing the activities in such a way so that they will be managed properly. It is the way of dividing long and complex organizations into smaller administrative units.

The department is an important task in defining the organizational structure. The department in the organization may be known by different names such as unit, division, section, etc.

Departmentation basically increases the operating skill and efficiency of the organization. It provides various benefits such as division of work, specialization, fixation of responsibility, evaluation of performance, development of manager, freedom, job satisfaction, motivation, administrative and financial control and so on. Departmentation may be done on the basis of product, function, territory, consumer, etc. Departmentation is the logical process of grouping similar nature activities into manageable units. It is the process of combining jobs into groups.

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Types / Methods of Departmentation

  • Departmentation by Function:
    It is a common and popular method of departmentation. Under this method, total organizational work can be divided into different functions such as the production department, finance department, marketing department, human resource, etc. Such departmentation is essential for the survival and maintenance of the organization. The departmental managers are responsible for controlling the activity of their department and all these departmental heads are experts and specialize in their own area of work. They can formulate the process for the betterment of their own department. The following figure makes us clear about departmentation by function.
Departmentation by function
Departmentation by function
Source:www.allsubjects4you.com

Advantages:

1) Efficiencies from putting together similar specialist and people with common skills, knowledge, and orientations

2) Coordination within the functional area

3) In-depth specialization

Disadvantages:

1) Poor communication across functional areas

2) Limited view of organizational goals

 

  • Departmentation by Product or Service:
    It is another suitable method of departmentation for an organization producing a variety of products. Under this method, the product or product line forms the basis of departmentation. All the major functions such as production, marketing, finance, etc. are brought under a particular product for proper management. This is essential for proper evaluation of the product. The departmentation by-product is shown below:

 

Departmentation by product
Departmentation by product
Source:www.allsubjects4you.com

Advantages:

1) Allows specialization in particular products and services

2) Managers can become experts in their industry

3) Closer to customers

Disadvantages:

1) Duplication of functions

2) Limited view of organizational goals

 

  • Departmentation by Territory:
    It is the other method of departmentation for an organization having business in different territories or location. It is appropriate for a large-scale organization that is geographically spread out in many locations like a bank, insurance companies, transport companies, etc. Under this method, the location may be selected according to the requirements of the organization. It may be district wise, zone wise, country wise, development region-wise, etc. Regions are the basis for departmentation under such a method. This method is suitable for the evaluation of the business in terms of location, A chief looking after a particular location becomes responsible for the business in the given area. Its example is shown below:

 

Departmentation by territory
Departmentation by territory
Source:www.allsubjects4you.com

Advantages:

1) More effective and efficient handling of specific regional issues that arise

2) Serve needs of unique geographic markets better

3) Local customer priority

4) Environmental adoption

Disadvantages:

1) Duplication of functions

2) Can feel isolated from other organizational areas

 

  • Departmentation by Customers:
    Departmentation by customers is that method of departmentation in which enterprise is divided into a number of departments on the basis of customers that it serves. Usually, it is observed that the enterprise deals with a variety of customers, especially big and large organizations provide special services in different types of customers. That’s why, under this method of departmentation, activities are grouped on the basis of types of customers it serves, handles contracts and deals.Departmentation by customer
Departmentation by customer
Source:www.allsubjects4you.com

Advantage:

1) Customers' needs and problems can be met by specialist

Disadvantages:

1) Duplication of functions

2) Limited view of organizational goals

 

  • Departmentation by Process: Under this form, departmentation is done on the basis of several discrete processes or technologies involved in the manufacturing process of a product. Hence, the activities are grouped on the basis of such a process. For example, a vegetable oil processing and manufacturing enterprise may have a separate section in its processing and manufacturing department such as crushing, refining, finishing and packing sections in which the process, as well as equipment used, are found different.
Departmentation by process
Departmentation by process
Source:www.allsubjects4you.com

Advantage:

1) The more efficient flow of work activities

Disadvantage:

2) Can only be used with certain types of products

 

  • Departmentation by Time: In this method of departmentation, activities are grouped on the basis of the timing of their performance. This is the oldest form of departmentation generally used at lower levels of the organization. If it is the case of the production department of any manufacturing department, the production function can be divided into different shifts like morning shift, day shift, and night shift. Even an educational institution may have a separate department for the day, evening and correspondence courses to impart education to full-time students, locally employed students, and outstation students respectively.

 

Departmentation by time
Departmentation by time
Source:www.allsubjects4you.com

 

 

Authority 

Authority
Source:bestofpicture.com

It is a formal right of the superior to command and compel his subordinates to perform the works assigned to them. Authority is a kind of right and power –even though the authority is different from power – to guide and direct the actions of others so that the organizational goals could be achieved. Authority is vested in a particular position not to the person, because, authority is given by an institution and is, therefore, legitimate or legal. Thus, authority denotes those legal, conventional and systematized rights and power through which any person, authorized or empowered, can perform his duty and responsibility, can compel other to perform the duty, order or direct the subordinates, motivate the people belonging to the organization and makes the organization legally responsible towards the third party for his action. Thus, we can understand the term ‘authority’ as the power to direct, issue orders, compel obedience, guide and utilize the organizational resources.

Henry Foyal – "Authority is the right to give orders and the power to exact obedience."

Responsibility

Source: attheintersectionblog.com
Source: attheintersectionblog.com

Just as the authority is the right/ power of a superior to issue a command or compel the subordinates to do or not to do, responsibility is the obligation of the subordinates to obey those commands. It means, when superior assigns any works to subordinates, it becomes a responsibility to perform the same. The responsibility is an obligation to perform a certain function assigned to achieve certain results in the organization.

Responsibility has two dimensions. One may be expressed as, ‘Responsibility for’ and another as ‘Responsibility to’. ‘Responsibility for’ relates to an obligation to perform certain duties written or given in his job description. Particularly, in an organization, two types of responsibilities are found, they are operating responsibility and ultimate responsibility. The subordinates assigned to them, where the superior retains ultimate responsibility for getting the job done. If the subordinates fail to perform the job (operating responsibility), the superior is held responsible for the failure.

Theo Heimann- "Responsibility is the obligation of a subordinate to perform the duty or required by his superior."

Accountability

Accountability
Source:www.gdrc.org

Accountability is related to both authority and responsibility. It is neither authority nor responsibility. The obligation of an individual or organization to account for its activities, accept responsibility for them, and to disclose the results in a transparent manner. Accountability is something more than responsibility. It refers that a subordinate is answerable under his obligation. An accountant is accountable for the integrity and accuracy of the financial statements even if errors were not made by them. Managers of a company may try to manipulate their company's financial statements without the accountant knowing. There are clear incentives for the managers to do this, as their pay is usually tied to company performance. This is why independent outside accountants must review the financial statement, and accountability forces them to be careful and knowledgeable in their review.

 

Stephen P. Robbins- "Accountability is the obligation to one's superior to carry out the assignment in a satisfactory manner."

 

 

References:

Pokhrel, Dhurb Raj et.al., Business Studies-XII, Asmita Book Publication, Kathmandu

Poudyal, Santosh Raj et.al., Business Studies-XII, Asmita Book Publication, Kathmandu

Bhandari, Kedar Prasad, Business Studies-XII, Bundipuran Prakashan, Kathmandu

 

 

 

Things to remember

The main purpose of departmentation is to operate, manage and administer the enterprise in the best possible manner. It increases the operating skill and efficiency of an enterprise.

Under departmentation by function, total organizational work can be divided into different functions.

Under departmentation by-product, the product or product line from the basis of departmentation.

Under departmentation by the process, departmentation is done on the basis of several discrete processes.

Authority is the right to give orders and the power to exact obedience.

Responsibility is the obligation of a subordinate to perform the duty or required by his superior.

Accountability is the obligation of a subordinate to report back to the superior that the agreement/assignment has been complex as per the directives were given satisfactorily.

 

  • It includes every relationship which established among the people.
  • There can be more than one community in a society. Community smaller than society.
  • It is a network of social relationships which cannot see or touched.
  • common interests and common objectives are not necessary for society.
Questions and Answers

Different types of activities are performed in a business enterprises. Those activities must be divided into the various unit. Then business enterprises can achieve ts pre-determined goal. In simple word, departmentation is the activities of dividing different activities into manageable units. Works or activities are divided on the basis of specific nature, specialized. Departmentation divides the large and complex functions and activities into smaller and flexible unit for efficient handling. 

According to y.k.Bhusan, "Departmentation is the process of grouping the activities into units for the purpose of administration." 

In conclusion, the activities of logical grouping of the closely related function activities into manageable units for the purpose of co-ordination is called departmentation.

The departmentation by function is explained as below:

It is the common and popular method of departmentation. Large size business enterprises perform different function. If the departments are created according to a various function that is called departmentation by function. Departments are created on the basis of function like production function staff function and human resources function and so on. The departmental managers are responsible for controlling the activity of their department and all these departmental heads are expert and specialize in their own area of work. The following figure makes us clear about departmentation by function.

Departmentation by function

Fig: Departmentation by function
Source:www.allsubjects4you.com

 

 

Departmentation by function: It is the common and popular method of departmentation. Large size business enterprises perform a different function. If the departments are created according to a various function that is called departmentation by function. Departments are created on the basis of function like production function staff function and human resources function and so on. The departmental managers are responsible for controlling the activity of their department and all these departmental heads are expert and specialize in their own area of work. The following figure makes us clear about departmentation by function.

Departmentation by function

Fig: Departmentation by function
Source:www.allsubjects4you.com

Departmental head is appointed to conduct the activities of function department. All departmental head are an expert in their own areas.

Advantages:

1) Efficiencies from putting together similar specialties and people with common skills, knowledge, and orientations

2) Coordination within functional area

3) In-depth specialization

Disadvantages:

1) Poor communication across functional areas

2) Limited view of organizational goals

Departmentation by Products: The enterprises which produce different types of product (product line) and criteria of the department in the product is called departmentation by product. This is useful for such enterprises which produce product line. All the major functions such as production, marketing, finance, etc. are brought under a particular product for the proper management. This is essential for proper evaluation of the product. The departmentation by product is shown below:

Departmentation by product
Departmentation by product
Source:www.allsubjects4you.com

Each department is independent to conduct business activities. Departmental manager or head is responsible for conducting the activities of concern department. Success and the failure of each department can be measured by top level management.

Advantages:

1) Allows specialization in particular products and services

2) Managers can become experts in their industry

3) Closer to customers

Disadvantages:

1) Duplication of functions

2) Limited view of organizational goals

Departmentation by customers: This type of departmentation is created by such enterprises which deal with different types of customers or buyers. Types of buyers are the major basis of departmentation. This departmentation brings simplicity to deal with different types of buyers.

Departmentation by customer
Departmentation by customer
Source:www.allsubjects4you.com

Advantage:

1) Customers' needs and problems can be met by specialist

Disadvantages:

1) Duplication of functions

2) Limited view of organizational goals

Departmentation by territory: This departmentation is appropriate for large size business enterprises. If the business activities are scattered in different regions then this type of departmentation is made. Generally, banking, insurance, multinational company or large size business are making this type of departmentation.

Departmentation by territory
Departmentation by territory
Source:www.allsubjects4you.com

Advantages:

1) More effective and efficient handling of specific regional issues that arise

2) Serve needs of unique geographic markets better

3) Local customer priority

4) Environmental adoption

Disadvantages:

1) Duplication of functions

2) Can feel isolated from other organizational areas

Departmentation by process: This type of departmentation is exercised by such business enterprise which requires specific process. The process is major basis of the departmentation. Same nature and closely related activities are grouped under related department and the departmental head is responsible for conducting the activities. For example, a vegetable oil processing and manufacturing enterprise may have a separate section in its processing and manufacturing department such as crushing, refining, finishing and packing sections in which the process, as well as equipment used, are found different.

Departmentation by process
Departmentation by process
Source:www.allsubjects4you.com

Advantage:

1) More efficient flow of work activities

Disadvantage:

2) Can only be used with certain types of products

Departmentation by time: The enterprise which provides 24 hours service that creates departments by time. Basically, hotels, restaurants, hospital exercised such departments. This is the oldest form of departmentation generally used at lower levels of the organization. If it is the case of production department of any manufacturing department, the production function can be divided into different shifts like morning shift, day shift, and night shift.

Departmentation by time
Departmentation by time
Source:www.allsubjects4you.com

 Here, separate departments are created on the basis of shift (time( and separate head are appointed for each shift (time).

 

Authority is the fundamental concept of formal organizations. It is the relationship between the superior and the subordinate. Authority is the power and right to give order and instruction to the subordinates. It is the power of the superior to command the subordinates to do or not to do certain things. Authority is vested in a particular position not to the person, because, authority is given by an institution and is, therefore, legitimate or legal. Thus, authority denotes those legal, conventional and systematized rights and power through which any person, authorized or empowered, can perform his duty and responsibility.

According to Henry Fayol, "Authority is the right to give orders and the power to exact obedience"

According to Koontz and Donnell, "Authority is legal or rightful power, or right to command or to act."

In conclusion, the authority can be defined as the right and power to make decisions and determine that they are carried out in the right way at the right time.

The characteristics of authority:

  1. It is the right to influence others.
  2. It is the right to make decisions and use resources.
  3. It is maximum at the top level and minimum at the bottom level of management.
  4. It is related with the position in the organizational hierarchy.

 

 

Responsibility:

Responsibility is the obligation to do something. It is closely related to authority and power. The responsibility is an obligation to perform the certain function assigned to achieve certain results in the organization. It is the obligation of an individual to perform the assigned duty to the best of his ability or as desired by the superior. It arises from superior-subordinate relationship.  A manager can delegate his authority but responsibility cannot be delegated. Responsibility flows upward from subordinate to superior. Responsibility has two dimensions. One may be expressed as, ‘Responsibility for’ and another as ‘Responsibility to’. 

According to Koontz and Donnell, "Responsibility may be defined as the obligation of a sub-ordinate to whom a duty has been assigned to perform."

According to Theo Haimann, "Responsibility is the obligation of a subordinate to perform the duty or required by his superior."

In conclusion, responsibility is an obligation of an individual to do assigned job satisfactory to the best of his ability. 

The characteristics of responsibility are:

  1. Responsibility is the obligation to do the work as desired and directed by the superior.
  2. It arises from superior-subordinate relationship.
  3. Responsibility always flows from subordinate to superior.
  4. A person cannot become free from responsibility even if he delegates the authority to others.

Accountability:

Accountability is the personal answerability for decisions, actions and result of a subordinate to his superior. It is the obligation to carry out responsibility and exercise authority in terms of established standards of performance. Accountability is something more than responsibility. It refers that a subordinate is answerable under his obligation. An accountant is accountable for the integrity and accuracy of the financial statements even if errors were not made by them. It flows from downward to upward.

According to Stephen P.Robbins, "Accountability is the obligation to one's superior to carry out the assignment in a satisfactory manner."

According to Mc Farland, "Accountability is the obligation of an individual to report formally to his superior about the work he has done to discharge the responsibility."

In conclusion, accountability is the obligation to carry out responsibility and exercise authority in terms of established standards of performance. 

The characteristics of accountability:

  1. Accountability can be neither shared nor delegated.
  2. It moves from a subordinate to the superior.
  3. It requires a formal report by a subordinate to his superior.
  4. The extent of accountability depends upon the extent of responsibility and authority.

 

 

Responsibility is defined as the obligation of an individual to do the assigned job. It is the duty of a subordinate to perform the assigned task to the best of his/ her ability. It is a personal obligation of a subordinate to perform the duty as required by his/ her superior.

According to Theo Haimann, "Responsibility is the obligation of a subordinate to perform the duty as required by his superior."

Accountability is defined as the obligation of a subordinate to complete the task and report back to his/ her superior about the detail work entrusted to him/ her. It is a responsibility of a subordinate to complete the assigned job according to the standard set by the superior when he/ she assigns a certain job to a subordinate and delegates his/ her necessary authority to complete the task.

McFarland, "Accountability is the obligation of an individual to report formally to his superior about the work he has done to discharge the responsibility."

The different methods of departmentation are explained as follow:

  • Departmentation by Function: 
    It is a common and popular method of departmentation. Under this method, total organizational work can be divided into different functions such as the production department, finance department, marketing department, human resource, etc. Such departmentation is essential for the survival and maintenance of the organization. The departmental managers are responsible for controlling the activity of their department and all these departmental heads are expert and specialize in their own area of work. They can formulate the process for the betterment of their own department. The following figure makes us clear about departmentation by function.
Departmentation by function
Departmentation by function
Source:www.allsubjects4you.com

Advantages:

1) Efficiencies from putting together similar specialist and people with common skills, knowledge, and orientations

2) Coordination within the functional area

3) In-depth specialization

Disadvantages:

1) Poor communication across functional areas

2) Limited view of organizational goals

 

  • Departmentation by Product or Service: 
    It is another suitable method of departmentation for an organization producing a variety of product. Under this method, the product or product line form the basis of departmentation. All the major functions such as production, marketing, finance, etc. are brought under a particular product for proper management. This is essential for proper evaluation of the product. The departmentation by product is shown below:

 

Departmentation by product
Departmentation by product
Source:www.allsubjects4you.com

Advantages:

1) Allows specialization in particular products and services

2) Managers can become experts in their industry

3) Closer to customers

Disadvantages:

1Duplication of functions

2) Limited view of organizational goals

 

  • Departmentation by Territory: 
    It is the other method of departmentation for an organization having business in different territories or location. It is appropriate for a large-scale organization which is geographically spread out in many locations like a bank, insurance companies, transport companies, etc. Under this method, the location may be selected according to the requirements of the organization. It may be district wise, zone wise, country wise, development region wise, etc. Regions are the basis for departmentation under such method. This method is suitable for evaluation of business in terms of location, A chief looking after a particular location becomes responsible for the business in the given area. Its example is shown below:

 

Departmentation by territory
Departmentation by territory
Source:www.allsubjects4you.com

Advantages:

1) More effective and efficient handling of specific regional issues that arise

2) Serve needs of unique geographic markets better

3) Local customer priority

4) Environmental adoption

Disadvantages:

1) Duplication of functions

2) Can feel isolated from other organizational areas

 

  • Departmentation by Customers: 
    Departmentation by customers is that method of departmentation in which enterprise is divided into a number of departments on the basis of customers that it serves. Usually, it is observed that the enterprise deals with a variety of customers, especially big and large organization provide special services in different types of customers. That’s why, under this method of departmentation, activities are grouped on the basis of types of customer it serves, handles contract and deals.Departmentation by customer
Departmentation by customer
Source:www.allsubjects4you.com

Advantage:

1) Customers' needs and problems can be met by specialist

Disadvantages:

1) Duplication of functions

2) Limited view of organizational goals

 

  • Departmentation by Process: Under this form, departmentation is done on the basis of several discrete processes or technologies involved in the manufacturing process of a product. Hence, the activities are grouped on the basis of such a process. For example, a vegetable oil processing and manufacturing enterprise may have a separate section in its processing and manufacturing department such as crushing, refining, finishing and packing sections in which the process, as well as equipment used, are found different.
Departmentation by process
Departmentation by process
Source:www.allsubjects4you.com

Advantage:

1) The more efficient flow of work activities

Disadvantage:

2) Can only be used with certain types of products

 

  • Departmentation by Time: In this method of departmentation, activities are grouped on the basis of the timing of their performance. This is the oldest form of departmentation generally used at lower levels of the organization. If it is the case of the production department of any manufacturing department, the production function can be divided into different shifts like morning shift, day shift, and night shift. Even an educational institution may have a separate department for the day, evening and correspondence courses to impart education to full-time students, locally employed students, and outstation students respectively.

 

Departmentation by time
Departmentation by time
Source:www.allsubjects4you.com

 

The major importance of departmentation are listed below in points:

  1. Simplify administration
    Departmentation helps to divide the work in a systematic way. Experts can be appointed in order to handle a specific work which helps to administer the work progress easily.
  2. Increase in efficiency
    Departmentation helps to delegate the authority to the department heads which makes them accountable for the work of the whole department. It results in high efficiency of work in the organization.
  3. Right person at right place
    The main focus of departmentation is to keep the right person in the right place. All the necessary activities of the organization are kept in one place and the work is divided as per need. It helps to increase the efficiency and productivity of the organization.
  4. Performance appraisal
    Departmentation helps to allocate the job, authority, responsibility, and accountability among the subordinate. It aids to measure the accurate performance of the employees and appraise their work.
  5. Economy
    Departmentation helps in increasing the productivity of the organization with a reduced cost. It helps in controlling the unnecessary expenses of the organization. SO, the organization can perform its activities at a minimum cost.

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