Department formation

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The formation of departments is first and foremost a means of coordination , and it can be seen from two aspects:

  • As a delegation process (top-down approach) : In this case, departments are formed from top to bottom. The reason for creating departments in this case is that an instance has limited management capacities. The more positions are assigned to an instance, i.e. the greater its line span , the more difficult it is to coordinate and monitor the assigned positions. Therefore, additional instances are set up, which are subordinate to the instance in question, which in turn now coordinate several of the bodies previously directly subordinate to this instance.
  • As a summary (bottom-up approach) : In this case, several positions are brought together under one management, which creates relatively closed areas of responsibility, so that coordination between the individual positions is simplified.

Departmental principles

When creating a department, there are essentially two organizational principles to be observed:

  • On the one hand, there is the principle of homogeneity , which means that a department brings together those positions whose tasks show a high degree of togetherness in order to minimize the necessary cross-departmental coordination. The higher the need for cross-departmental coordination, the more difficult it is to implement the delegation of coordination decisions, since a high level of interdependence forces the higher-level authorities to intervene frequently.
  • On the other hand, the controllability principle must be observed. According to this, only so many positions should be grouped into one department that the department head can fulfill his management duties. That is, the size of the department is determined by its line span. In practice, the line span is between 1 and 90 people. It is difficult to make statements about the maximum and optimal line span, but according to the controllability principle, it may only be so large that every superior can coordinate and control the area under his / her responsibility. The maximum line span depends on two main influencing factors. On the one hand from the qualitative and quantitative performance capacity of the superior, on the other hand from the use of management relationships.

Criteria for creating a department

The creation of a department requires the delegation of decisions . In order to effectively relieve an instance, coordination decisions and the related decisions must be able to be delegated to the subordinate department heads.

  • According to the top-down approach , the decisive criterion when forming a department is what significance the respective decision has for the company. A distinction is made between overall and departmental decisions.
    • Overall decisions affect the entire company and are therefore always made by top management. They cannot be delegated.
    • Division decisions come from a sub-division of the company. They are divided into pure departmental decisions, overarching departmental decisions, and comprehensive departmental decisions . Only pure and comprehensive departmental decisions can be delegated.
  • According to the bottom-up approach , positions can be grouped into departments according to different criteria :
    • according to functions
    • by products
    • according to customer groups
    • by region

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