What are the factors which have to be considered while selecting suitable basis of departmentation?

The are necessarily considered for arriving at a decision for departmentation of an organization.

Function Base: Functional departmentation is done at the basis of various functions which are well defined. Functional departmentation is most natural and easiest base for departmentation. It helps in delegation of authority and fixation of responsibility. Every functional department makes its own specific contribution. It tends to cause conflicts among other function and departments.

Product Base: Departmentation can be based on production or product line which contribute large chunk of revenue to the organization and have the potential of expansion. It helps in focusing attention on a product or product line and helps reduce the problem of control and coordination. It may lead to duplication of physical facilities.

Territorial Base: In large all India organization with field sales in different territories it is advisable to have a territorial departmentation. It helps in overcoming supply chain management problems and can help in better logistics.

Customer Base Departmentation: This departmentation is good where the organization has a very wide and diversified customer base with different requirement. It helps in developing custom made products.

Process Or Equipment Departmentation: As and when a specialized process or equipment is used for production a separate department can be created on process or equipment basis. This leads to specialization, economic and efficient production.