Driving Revenues (Get comfortable with a process perspective by applying the concepts in your reading to an actual organization)

Functional Organizations

Think of an organization you know well. How is it organized? What departments does it have?  Larger organizations will have more departments than smaller ones.  For example, smaller organizations may have one or two people doing all the accounting activities. Large organizations may have five or often more employees working on just Accounts Payable! Organizations of any size are primarily structured according to business functions. These traditional areas of expertise should sound familiar:

Key Functions of a Business

Finance & accounting:  The primary function of the finance and accounting department is to make sure that resources are accountable to the people they serve. Accounting deals with accounts receivable, accounts payable, and basically balance the company’s checkbook. Finance assists other business units in pricing products and creating financial models.

Marketing & sales:  Marketing can be characterized as the process of planning, pricing, promoting, and distributing goods and services to satisfy organizational objectives. The Sales function is responsible for selling the products that marketers market to the consumers

Operations:  Makes sure that the goods and services are delivered to the customers. Productivity, costs, delivery, and performance are primary responsibilities of this function.

Information technology: Provides the means and tools for the company to use its information.

Ideally, all functions operate to support the firm’s overall strategy.  

A functional organization is organized around areas of expertise and that provides its advantages.  First, functional organization makes management easier because most managers have the same expertise as the employees they manage.  Second, within a department, training and new information is easily shared and in that way proficiency in the function, such as Human Resources or Marketing grows.  However, this focus on functional expertise brings issues of its own.

Most of the disadvantages of a functional organization can be described in one expression, “The left-hand doesn’t know what the right hand is doing”.   If you’ve ever worked in a fast-growing company, you’ll recognize this is especially true as the organization grows larger. 

A focus on function leads to unreasonable expectations and poor service between departments.  For example, a hiring department may be frustrated with how long the HR function takes to complete their part of the hiring process and exert pressure to bypass some very important and sometimes legally crucial steps.  Or the sales staff may provide late or incomplete sales information to the accounting department which results in delayed or incorrect billing to the client.

However the primary disadvantage to emphasizing functions in an organization is the impact it has on external customers.  As you’ll see in the remainder of MGMT 310 Driving Customers, customers don’t see departments.  They see the service or the product.  The total experience either does something for them or it doesn’t.  What if the sales experience is great, the product is fantastic, but the billing experience is a nightmare?

A process perspective is another way to view organizations that overcomes some of these disadvantages of a functional organization.

Process Perspective

A business process or business method is a collection of related, structured activities or tasks that produce a specific service or product for a particular customer or customers.

There are three types of business processes:

1. Management processes, the processes that govern the operation of a system. The most common management process is Strategic Management, or the process by which managers determine a set of strategies for the organization that will enable it to achieve better performance and higher profits.

2. Operational processes, processes that constitute the core business and create the primary value stream. Typical operational processes are Purchasing, Manufacturing, Advertising and Marketing, and Sales.

3.  Supporting processes, which support the core processes. Examples include Accounting, Recruitment, Call center, Technical support.

A business process begins with a mission objective and ends with achievement of the business objective. Process-oriented organizations break down the barriers of structural departments and try to avoid functional silos.

Business Processes are designed to add value for the customer and should not include unnecessary activities. The outcome of a well-designed business process is increased effectiveness (value for the customer) and increased efficiency (less costs for the company).

A process perspective of an organization means looking beyond a single function. Think of a process as a collection of related tasks to achieve a defined business outcome.  These tasks cross traditional functional boundaries and sometimes, depending on a company’s size and relationships with other companies, cross boundaries between organizations as well!  Some primary processes in a business include:

• Managing customer relationships (Driving a company’s revenues)

• Meeting customer demand for goods or services

• Getting necessary resources (including insourcing/outsourcing decisions)

• Innovating

• Developing strategy (The Big Picture)

Within each of these primary processes are sub-processes.  For example, selling to new customers is a sub-process within managing customer relationships primary process; or making a decision to insource or outsource a raw material is a sub-process within the getting necessary resources primary process. 

Remember that organization you thought of at the beginning of this reading?  Instead of considering its functions, think of one of the above processes.  How many departments are involved in managing the relationships with customers?  For example, who’s involved in getting the right raw materials and/or supplies at the right place and at the right time?  As you answer those questions, reflect on the departments, the people and the information necessary to complete the activities in each process.  And consider how the fast-developing capabilities of technology have made this process perspective a reality.

Why Is the Process Perspective So Important?

The following link leads you to an electronic book in the Champlain library that explains how and why this transition from functional to process perspective occurred and why it’s increasingly important for today’s organizations. You’ll notice the description of the current business environment was written in 2007.  A lot has happened in the past five years.  If you have any thoughts about any of those changes, jot them down and feel free to post them to this week’s discussion forum. Business Process Management and the Balanced Scorecard: Using Processes as Strategic Drivers

 (Links to an external site.)

Links to an external site.

   Read to the end of Chapter 1 .

Process Perspective in the Business Curriculum

Your CPS business curriculum has a series of courses that will take a closer look at the above processes.  They will ask you to look at organizations using systems thinking, in other words understanding how elements influence one another within the process.  People and information in a system are the primary drivers of influence and you’ll find that effective organizations have mechanisms in place so that information and people can cross boundaries between functional departments to better coordinate activities and meet company goals.  Done well, they’ll meet these goals effectively and cost efficiently.

The following courses, designed around the processes above, are part of your Business Management Program.

MGMT 310 Driving Revenues:  Successful organizations identify new customers while continuing to satisfy existing ones. Building on information from their marketing course, students study this key business process. Topics include lead generation, customer relationship management, customer service support and related performance measurements and technologies.

MGMT 335 Meeting Customer Demand:  Companies must effectively and efficiently deliver goods or services to fulfill customer demands.  Students study the trade-offs across activities, such as the order process and managing inventory, managing human resources and delivery of the product or service.

MGMT 360 Acquiring Resources:  The resource acquisition (supply management) process is instrumental in fulfilling an organization's strategic goals. Students learn about the relationship between supply management and other areas in the organization, such as product and service development, the production/service process, and marketing.

Innovation/Product Development:  New product or service development is a creative process. When done well, it creates a culture of innovation identified by interaction among multiple organizational functions. Students are introduced to the complexity of the process and to the systems needed to manage it.

Summary

Businesses are primarily organized around departmental functions and they gain efficiencies by doing so. However, organizations can be more effective successful if they also focus on business processes. These processes are a set of related tasks to achieve a defined business outcome.  The tasks in a process cross boundaries between departments and even across organizations.