Ans: It is the basis on which jobs are grouped.
1) One of the most popular ways to group activities is by functions performed, (departmentalization by function) only the function change to reflect the organization’s objectives and activities.
2) The departmentalization of tasks according to the kind of product the company creates is another option. Procter and Gamble, for instance, is organized along these lines. Increased accountability for product performance is the main benefit of this kind of grouping, as a single manager oversees all operations about a certain product.
3) If an organization’s activities are service rather than product related, each service would be autonomously grouped.
4) Another way to departmentalize is based on geography or territory.
5) Process Departmentalization- each department specializes in one specific phase in total output production.
6) Utilising the specific customer type the company hopes to attract is the final departmentalization category. Microsoft, for instance, has changed its organizational structure to focus on four types of clients: consumers, big organizations, software developers, and small businesses. The premise behind customer departmentalization is that each department’s customers have a shared set of issues and requirements that are best served by having specialists for each.