Departmental Organisation | Meaning, Features, Advantages & Disadvantages

What is Departmental Organization?

Departmental organization is the oldest form of business organization and is common in many countries. In those days, no distinction was made between the routine functions of the Government and that of the public enterprises. Therefore, most of the early state owned enterprises were organized in the same way as any other Government department.

Departmental Organization
Departmental Organization – Meaning, Features, Advantages, Disadvantages

One of the best examples of the departmental form of organization is the post office. In India, Railways, Defence Industries, Radio, Public Utility services etc. are being run on departmental basis.

Features of the Departmental Organization

The following are some of the important features of departmental organization.

1. The enterprise is managed by a Government department with a Minister at the top responsible to the Parliament for its operations.

2. The downward delegation of authority is effected from the top executive to every part of the organization i.e. it represents the line type of authority relationship between the executives at various levels.

3. It is financed through annual budget appropriations made by the legislature and its revenues are directly paid to the treasury.

4. For procedures as to budgeting, accounting and auditing, it is treated at par with other Government departments.

5. Since it is an integral part of the Government, the staff of the enterprise is treated at par with other civil servants for all purposes.

6. It enjoys the sovereign immunity of the state. Hence, it can be used only by following the specified procedure.

Merits of Departmental Organization

The following are some of the advantages of departmental organization.

1. Control over the enterprise is direct and absolute in departmental organization..

2. The revenues of the enterprise directly go to the Government in a Departmental Organization..

3. The personnel are generally low salaried. Hence, the administrative overhead charges are less in a departmental organization..

4. Since these undertakings are subject ta strict control, chances for misuse of funds are remote in departmental organization..

Demerits of Departmental Organization

The following are some of the disadvantages of departmental organization.

This type of organization is severely criticized by many authors because of the several defects in it. Some of them are given below:

1. Excessive centralization of control leads to delay in action. Redtapism and bureaucracy have become the illuminating features of these organizations.

2. The Government officials who are in the helm of affairs generally lacks business acumen. They run the departments in their own fashion without considering the sovereignty of the consumers.

3. There is no scope for the initiative and skill as the procedures and policies are subject to criticism in the Parliament.

4. It lacks flexibility, which is fundamental for the success of any business.

5. Treasury holds the financial strings of the concern. The profits, if any, are mostly used to give relief to the taxpayers rather than the consumers. Similarly, the losses are also not viewed with any seriousness.

6. For each and everything, the sanction of the Minister or the top executive is essential. The executives at the lower level cannot take any decision.

When is the Departmental Organization Suitable?

The demerits of this type of organization are many. Hence, for under takings, which are to be run on sound business line, departmental administration is completely unsuitable. However, there are a few categories of industries for which departmental management is best suited.

They are as follows:

1. If the Government must have strict and close control.

2. If the industry requires absolute secrecy (defence production).

3. If the basic objective is to procure funds for the Government.

4. If the projects are in the beginning stage and requires continuous flow of funds.