Subject: Business
Objective: At the end of these lessons (Socratically-led across two days of open discussion in modern contexts with think-pair-share breaks), students should understand the core common focused conceptual constructs and functions which a modern business structures its roles and responsibilities/objectives around.
The Essential Focuses and Functions of a Business
Intro
While we’ve briefly touched upon terms like “sole proprietor” and “corporation” in class, eluding to individual entrepreneurs working by themselves and massive famous organizations such as Google, Coca-Cola, or other (in)famous ones like formerly Enron, across them all there are a number of critical core concepts/constructs which are common to nearly all businesses - regardless of whether or not they are goods or services-based. Those core concepts are referred to as the Functions of a Business.
I will cover them all here in no particular order, but realize that not all of them will necessarily apply to every form of business. For instance, a service-based business such as one where intellectual expertise are applied such as legal practitioners (lawyers), who may have little to no supply chain considerations, and thus no purchasing per se. It should also be mentioned that sometimes in a small business one person or a small group may handle more than one of these functions - in a really small startup it may just be one person managing every function! Generally the ideal goal is to shift towards a scenario where responsibility is effectively delegated to respective professionals, but that is for later lessons to explore.
Also, kindly remember that this represents business as it is understood presently. The nature of the business world has been changing dramatically lately. To a degree we explored this in our lesson on the five organizational structures where they have traditionally been taught as three (where in reality those three were more like 2.1). Anyways, these may shift with future trending towards online domains, legislative restrictions, geopolitical… etc., etc., etc. All to say they are what they are at the time this is written.
Customer Service
It likely goes without saying that the consumer or customer needs to have some sort of interaction with the business - even if indirectly through an outsourced point of contact. Smaller businesses may not need to have as much a focus on customer service in that their interactions may be few and far between. Yet, as a business grows, customer service becomes more and more its own function enabling not only things like retention, but also (if managed effectively) providing valuable insight in the way of feedback or analytics which serve other functions such as marketing, sales, and research and development.
“Profit in business comes from repeat customers, customers ... that bring friends with them.”
Information Technologies
“One thing I’ve learned is that you can’t push technology. It has to be pulled.”
It seemed the most fitting to start with given that I’m typing this online into a website. Information Technologies (IT) refers to the use of computers, networks, storage, digital and physical infrastructures, and the associated hardware, software, and data to create, adapt, archive and distribute information. Businesses need to have an IT function very effectively integrated in modern businesses environments, as it is difficult to exist without one now. Unless a business is specifically in a tech sector with specialists in its employ, generally smaller scale businesses will not manage their own IT from the outset and will opt to outsource (to obtain goods - or services in this instance, from an outside provider) until such time that it makes sense from a financial or situations demand it such as in the case of a client/partner/R&D confidentiality perspective.
Sales
“I will build a car for the great multitude... [that] will be so low in price that no man making a good salary will be unable to own one.”
Sales is the function which concerns itself with the effective conversion of potential avenues of revenue to actualized revenue. Another way of saying it would be to say that the Sales function is the art of closing the potential deal. As a result of its need to target effectively, it has a tendency to be intertwined with the marketing function, as marketing is frequently employed as a tool to enable sales. Traditionally marketing and sales were much more independent, but now we find them much more difficult to isolate. While marketing surely has other applications, sales tends to be the critical function which enable a business to continue to be able to exist for any extended measure of time, so it is understandably afforded a measure of precedence. Cumulatively it’s more often than not one of the largest influxes a business has in its bookkeeping.
Legal
“ignorantia juris non excusat”
The legal function pertains to different considerations entirely depending on the nature/application of your good/service, your market, your industry, and the scale of your business. Typically this is outsourced in startups or smaller businesses unless it is a function of the business itself, it is still a critical as it encompasses a wide breadth of applications. From disclosure agreements, to contracts, to taxation, purchasing, insurance, to so much more. To ensure that your business is satisfying its requirements by law you need to ensure that you have someone or a team which is capable and qualified.
Accounting/Finances
“Keeping of costs with a reasonable degree of accuracy can be made a matter of very great profit to the company.”
This is arguably the primary function of a business in that without it, a business cannot engage in the mart of commerce. When we covered the fundamentals of accounting we touched upon how critical it is to have systems which are reliable, consistent, and comparable with regards to the inflows and outflows of funds in a business. The management of money is critical, but equally so is ensuring that your data is relevant and applicable. Without some function dedicated to focusing on maintaining revenues and tending to expenses, as well as budgeting and tracking transactions and other finances to a standard which serves both the interests of your shareholders, your business needs, as well as the government, then you are most certainly bound for trouble. It also should be noted that standards (particularly when it comes to taxation) are notoriously complex and dynamic and have a tendency to change, so management isn’t simply a process of employing someone - or a team of people, it’s a process of employing someone competent (ideally qualified) and capable, or a team of such people.
“Without continual growth and progress, such words as improvement, achievement and success have no meaning.”
Research and Development
A business which is not growing is often a business which is dying. Though this may not require a full team assigned to research and develop new goods or services to satisfy marked demands (perhaps your market has no new demands), it should be at a minimum a concept which merits review from time to time. Every business can improve from feedback if that feedback is concise, applicable, achievable, and within organizational objectives, so recognize the roles and applications if research and development (R&D) can bring to your business.
Leadership
“It’s kind of fun to do the impossible.”
Leadership is likely the most contentious function in this list in that it has been argued and defined in differing ways for as long as it has existed. For the purposes of this course I’m going to adapt the one most thoroughly familiar to me and we’ll define leadership as directing, motivating, and enabling others to accomplish objective(s) professionally and ethically, while developing or improving capabilities that contribute to achieving the objective(s) and embodying business vision, mission, and values. Leaders have a critical task in that they absolutely need to communicate their vision concisely and in a way that wins the team’s support. The manner of achieving that support does not necessarily have to be one which the team particularly enjoys, but rather that it actively complies with. We can’t forget that in less ethically-aligned definitions of leadership even tyrants have led effectively through wielding and applying a heavy fist. More modern definitions, however, tend to favour a perspective of one where a leader empowers the organization, establishing healthy company cultures, and achieving its objectives through positive means - intent to build up rather than tear down its workers and teams.
Marketing
While often tied to sales, marketing should stand alone. In future lessons we’ll explore the four (or five) pillars, namely: Product, Promotion, Price, and Place - with the fifth being People. However, for the purposes of simply introducing the core functions we will say that marketing is focused on the management of market consciousness and engagement relative to a business’ product or service. Or to put it simply, it involves taking the pulse of the market while it develops and creates interest or promotes awareness about whatever the business is offering - be it good or service.
“Marketing takes a day to learn. Unfortunately it takes a lifetime to master.”
In application this can be seen in brand management, the creation of physical or digital domain advertisement media such as Google Ads or other forms of social media platform engagement, etc., however it also includes the assessment of data and application of research findings relative to those advertisements. For this reason and others, marketing tends to be very intricately tied to the financial functions, specifically the sales function, as it draws insight from things like trend analysis relative to sales performance during marketing campaigns.
Management
“The universe rewards action, not thought.”
The managers are the ones who hold much of the power of functional decision-making, and ultimately the associated responsibility as well. Where the saying may be that leadership develops a vision, but it’s management who implements it, realistically management and visions are scaled to their application and roles relative to their teams. Back in 1977 US professor Abraham Zaleznik published an important article asking “Managers and Leaders: Are They Different?” The short answer is that leaders are the ones who see the need for change, who press for change in light of demanding contexts, and who develop a vision; whereas managers are those who implement said vision. Scott Adams, the creator of the Dilbert comics, once said “goals are for losers, systems are for winners,” something very much in league with an applied managerial approach; if a vision remains simply an abstract goal for too long, then it will fail. Managers exist to change the vision’s goal into tangible systematic achievements, and see it through.
Management can take many different forms, and can be scaled to reflect both sweeping amounts of responsibility and influence, as well as marginal amounts. One thing which should be clearly noted though is that leadership and management are indeed distinctly different skill sets, and success in one domain does not mean that a person will necessarily be neither successful nor even strong in the other. Think of them as if they are individual Venn diagrams unique to the individual, their organization, and the contexts, where sometimes there is a substantial overlap between the abilities, and other times the circles seem as far as the earth’s poles.
Distributions
Distributions encompasses everything along the supply chain from your business to its customers - be they consumers or wholesalers/retailers. The management of these channels is one where the losses can be enough to sideline or capsize a smaller organization who is ill-prepared, or does not have the equity/insurance to offset an unforeseen difficulty. It is best to ensure that you have an appropriate and responsive reflection relative to the size of your organization to manage your business needs. If not, you risk compromising your revenues as clients seek more competent suppliers.
Operations
The Operations Management function of a business concerns itself with the nuts and bolts of how, where, when, why, and who both inside and outside of the business. This is the process management function of the business, where efficiency and quality are their domains and metrics of choice. Purchasing and distributions are often directly managed through operations when it pertains to supply chain management, as they tend to have a particular in-depth understanding of the management of such operational concerns. These are the people after all who concern themselves with the elements surrounding the integration of change or vision in line with organizational direction or CEO’s vision/market demand.
Administrations
The true power of bureaucracy often lies in administrators. As gifted and inspiring as the leader may be, as qualified, experienced, and capable as the managerial teams may also be at the various stages of a hierarchy, if the i’s aren’t dotted, and the t’s aren’t crossed when the paperwork hits the legal team - or worse heads to litigation, then the business is in trouble. Administrators often make the world spin round for many businesses. They enable the success of projects, the processes of teams such as human resources, and the interactions with external agencies. Their familiarity with the due process of a business’ day-to-day on-goings is the lifeblood of everything from customer contracts, to payroll, to leave requests, etc.
Human Resources
“Diversity management isn’t merely nice to have, it’s a business must.”
Here’s where we see the management of our human… resources. The people. Human resources (HR) does things like workflow analyses, job analyses, to find out what needs to be done, which suitable tasks can be paired, who is available and suited/qualified for such jobs - as well as in line with organization standards (hiring), then takes action to ensure standardized training and professional development. Further, they tend to the details which include compensation, so in this respect they are tied to the accounting/finances function.
Beyond those functions, HR is concerned with payroll, labour relations (unions), Human Resrouces Information System (HRIS) and safety. They often review (particularly in union environments) organizational developments and requirements, then review for application of skills learned, and check for engagement among workers.
Assignment
Regardless of the size of your business, you should be able to identify the core focuses and functions here listed in your own business, or in a business you select and research. At this point, you should practice defining the specific roles relative to the aforementioned business through developing an organizational chart. An organizational chart is a visual representation of an organization which details the internal structure (staffing) relative to the distribution of staff in their respective departments, hierarchical rankings, specific positions, purview(s) of responsibility, etc. You may wish to use a software such as Mindomo, Lucidchart or even just design one in a GoogleDoc. Please refer to the Hapara Workspace to upload the link to your final project.