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

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.