Division of Labor

Division of Labor

Division of Labor Jonathan Poland

The process of dividing work into specific roles, tasks, and steps is known as division of labor. This allows individuals to develop specialized skills and become more efficient in their roles. Additionally, division of labor enables organizations to effectively tackle large projects and handle high levels of business by assigning tasks to multiple individuals.

The division of labor is a key concept in economics that underpins the efficiency of an economy. By specializing in specific tasks or roles, individuals can become more proficient and valuable to their organizations. This can lead to higher salaries and increased value to the firm. From the perspective of the firm, the division of labor is an effective way to increase efficiency and scale operations.

The division of labor can create a high level of reliance on a specific employee or partner. From the employee’s perspective, specializing in a particular task or role may lead to repetitive or monotonous work. Additionally, employees who specialize in a specific process or technology may face challenges if those technologies or processes become outdated. In general, individuals who have a broad range of skills and experience, known as generalists, tend to have more career flexibility than those who specialize in a specific area, known as specialists. The following are illustrative examples of the division of labor.


Trade between nations can be considered a division of labor. If one nation is efficient at producing steel and another efficient at producing wood, it makes sense for these nations to trade steel for wood.

Supply Chain

The process of procuring goods and services from partners is a type of division of labor. For example, a firm that purchases cloud computing services is essentially assigning work to the provider of such services.


Outsourcing business processes is a division of labor. For example, a fashion brand that outsources manufacturing and logistics to a partner.

Organizational Structure

Dividing an organization into units and teams each with its own mandate.


A firm that hires people to perform different roles. This allows the firm to recruit people with different knowledge and abilities who are productive at each role.


Assigning responsibilities is a common way to divide labor and allow individuals to focus on areas of strength.


Setting goals and objectives for teams and individual contributors. For example, one marketing manager who has the objective of improving brand recognition while another is given a target to improve customer loyalty.


Assigning different tasks to different people. For example, a project that identifies hundreds of tasks that are assigned to dozens of employees.


The steps in a process may be assigned to different people or teams. For example, a production process implemented as a series of workstations. This allows the team at each workstation to become highly productive at their set of process steps.

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