An entrepreneur employs 20 people, which he personally supervises.However, the company will likely employ over 200 people in production, sales, engineering and administration within a few years due to the growing success of the company's new products.The entrepreneur likes the current structure and wants to avoid other forms of departmentalization.Explain to the entrepreneur why his company would be more effective through forms of departmentalization as it grows larger.

As an organization grows, departmentalization into a functional or divisional form becomes necessary to better coordinate work activities as the number of employees increases.Most other forms of departmentalization (e.g.functional, divisional, matrix, hybrid) form departments that establish a system of common supervision among positions and units within the organization.Departmentalization typically determines which positions and units must share resources.Thus, it establishes interdependencies among employees and subunits.Departmentalization usually creates common measures of performance.Members of the same department, for example, share the same departmental or team goals.Common budgets and other resources also provide a means by which the performance of subunits may be compared.Departmentalization encourages coordination through informal communication among people and subunits.With common supervision and resources, members within each configuration typically work in close proximity.This encourages frequent, informal communication among employees so that they may coordinate work activities.