Should business decision-making be function-based or business-based?

A functional structure is the most popular and familiar. It usually comprises several distinctive functions under specialised task names taken by sections or departments – purchasing, marketing, production, human resources, accounting and finance, etc. Employees working in a specific department are expected to be skilled in that area. For example, a purchasing officer in the purchasing department will be expert in material sourcing and negotiating the best price and trade terms. 

However, it sometimes occurs that each department/function is too narrowly focused to encompass the wider business point of view of the company. This can cause considerable conflict and confrontation between different departments.  

Without a well-designed shared key performance indicator (KPI), each department may try to meet its own target without considering the impact on others. Sometimes, a special request by another department might be denied just because it doesn’t have any benefits for the department asked. However, it would be meaningless if an individual department succeeds but the overall company fails. When this scenario threatens, it’s time to place more emphasis on the overall business’s targets so as to enhance the competitiveness of the company. Here are some examples of the waste, inefficiency and opportunity lost in an organisation where too much function-oriented operation exists:

_ A warehouse operator refuses to load products on the truck for an urgent order because he has already finished his scheduled work and has come to the end of his shift.

_ The production supervisor doesn’t care about cost associated with high inventory as long as he has enough materials for the production schedule.

_ The engineer’s request to buy devices for productivity improvement is rejected because it is over the approved budget.

_ The marketing department doesn’t get approval to launch a new promotion event because they fail to justify the cost and benefits.

_ The transportation section has no concern about missing the delivery time for products to allow a new store open.

It’s important for every employee in any department to understand how the business of the company should be run in order to be successful. An individual should understand how his/her actions can affect others in both positive and negative ways. At the very least, the basic business cycles – such as revenue and expense – should be known by everyone. How products and services are sold and provided to customers or how operating cost is incurred should be general knowledge for employees. Unfortunately, in some companies, the majority of employees cannot answer several important questions, for example: 

_ What are the strategies for this year’s business plan?

_ How many products does the company have?

_ What are the key success factors for the business? 

_ What are the weaknesses that need improvement?

_ How can the company compete with others? 

The company may be at risk if some members just focus on their own success. They may do everything possible to protect themselves or ensure their own achievement, even at the expense of the company as a whole. Non-urgent work may be shelved until the last minute, when the whole business is threatened. Comments like “this is not my business”, “he/she should take responsibility”, “it’s the company policy: we can’t do it”, and so on can be harmful to the business, and suggest that people are not encouraged to be proactive and creative in problem-solving. 

By looking at issues from the total-business point of view, the management and employees can work together and make more effective and efficient decisions to drive the business forward even in times of uncertainty. The right business actions come from a business-oriented mindset, not a function-oriented one!

 

Yanyong Thammatucharee is senior vice president for Accounting and Finance at Central Marketing Group.