What is a Department?

A department is a separate functional area within an entity that has its own organizational structure. A department typically has its own manager and operating budget. Departments may be classified as cost centers, revenue centers, or investment centers. Examples of departments are the accounting department, production department, and sales department.

Advantages of Departments

Departments tend to result in higher levels of process efficiency, because they are staffed with specialists that have a solid understanding of how those processes are supposed to function.

Disadvantages of Departments

There are a few disadvantages to the use of departments, which are as follows:

Minimal inter-departmental interactions. The existence of a departmental structure tends to reduce the amount of interaction among the employees of different departments. This can result in sub-optimal solutions that are designed to benefit individual departments, rather than the organization as a whole.
Extra expenses. Department managers may acquire extra staff to deal with administrative functions that could be conducted more cheaply at a corporate level. For example, a sales department might run its own sales management software on a local server, when a better approach would be to use the sales management function within a company-wide ERP system.