Once jobs have been divided through work specialization, they must be grouped so common tasks can be coordinated. The basis by which jobs are grouped is called departmentalization. One of the most popular ways to group activities is by the functions performed. A hospital might have departments for research, surgery, intensive care, accounting, and so forth.

The major advantage of this type of functional departmentalization is efficiencies gained from putting specialists that focus on similar areas together. We can also departmentalize jobs by the type of product or service the organization produces. Departmentalizing based on geography or regions is valuable when an organization’s customers are scattered over a large geographic area and have similar needs within their locations. Organizations do not always stay with the basis of departmentalization they first adopt.