This is simply an informational field, there is no functionality associated with this. User groups are hierarchical (you can have sub groups and sub-sub groups) so I don't really see a need to use this field at all.
What is Organizational Unit?
What is Organizational Unit? I see its a toggle. No pick list. And cannot find a definition for this item. What is the business case for using this?
Is there a way to connect my org's people into units that could correspond to our org units? I see that for a customer, we can specify a unit within an org. But, I'm not understanding how to do that within my own organization. I would imagine this would be a big barrier for large corporations in using this system if that isn't possible since you could potentially have thousands of users lumped into one category.
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What was its original purpose?
We added this field before we even had the ability to add in custom fields. It was used to determine which groups were part of org structure versus region, external teams, special function groups, etc. I would say it is fairly archaic now, and you can hide it from your views.