We don't have functionality for moderation over a group of users. A moderator can basically moderate everyone. The best way to have what you're wanting is to move away from departments managing the core Joomla/CB user and instead managing users within a smaller scope.

I'd recommend CB GroupJive for that. Each department would have a Group. There they can invite users to join the group, participate in discussions (either via CB Activity or CB GroupJive Wall or CB GroupJive Forums), share media (photos, videos, files), and more. This has the added benefit of allowing users to join multiple departments if you'd want that functionality. Department heads can also appoint admins and moderators within their group for additional management support. Below is a link to CB GroupJive on our demo site.

demo.cbdemosites.com/community/groups

Note groups can also be entirely private if you so choose as there's several group types available.

As for removing users from the intranet it self that's typically something someone higher up does or HR. I wouldn't leave that task to department heads personally, but if needed you'd need to give them backend access OR implement a custom solution using CB Auto Actions (e.g. you could have them be deleted from the site if they're removed from their GJ group).

This is just one possible solution though as it's doable within GJ, but I think GJ would be a good fit. You'd need to provide some more details for me to suggest some other possible solutions.