A few things...
You could use categories for each department and then assign the manager role at the category level. This would allow each department to manage only their area. However, to make the other categories totally invisible might be hard - each department would not be able to access anything in the other department's category but with some searching will probably be able to see the category listing. Playing with appearance of navigation and front page settings will limit this however.
You could create new moodle instances for each department but that will take additional work...
As for Wordpress SSO, I know that plugin is fairly new and I am not familiar with it totally. I run SSO from Joomla website and am able to sync Joomla groups to cohorts and also integrate with some of the ECommerce plugins to sell courses so hopefully the Wordpress plugin has similar functionality. Then you could create a cohort of managers for each department and hopefully sync users across that way.