What is a functional structure and why do you need one?

Imagine this. Five years ago you started a business and you were excited to get things going. When your business started to grow and as things got busier, you realised you needed some help so you hired Sam, your first staff member. You worked well together and managed to do all the tasks at hand.

A few years later, a second partner, Maree, joins the business so you can increase your turnover. So now the business is being managed by you and Maree, with Sam doing all the groundwork.

Eventually Sam is overwhelmed with all the work you and Maree produce, so you hire another staff member, Kerrie. So what does Kerrie do? Whatever Sam doesn’t want to do!

You and Maree are now both giving instructions to Sam and Kerrie. Things are getting messy so you decide to add another support person to help everyone out, so you hired Mike.

After a while you realise your team isn’t working efficiently (less productive than you think they should be) and they are getting frustrated about the uncertainty of what their roles actually are. Does this sound familiar?

In the example above, it can be daunting for Sam, Kerrie and Mike to be getting directions from several different people. This disrupts staff productivity which can hurt your operational efficiency in the long run.

It’s a classic situation. More often than not, in a company that has grown from the top down, owners unconsciously structure their businesses. As the business expands, they hire staff. And usually the people they hire are for the department that screams the loudest. Businesses don’t grow in an orderly, methodical way. Growth turns up in lumpy chunks and the key to your success is how you manage those chunks.

Resourcing a business should be a strategic function and not one that is dictated from the bottom up. This is where a functional business structure comes into play.

What is a functional business structure?

A functional structure is a business structure that is based on the function of each position within the business and the knowledge and skills of the team members that perform each role.

Most businesses have an organisational structure for their business, but is it functional? Chances are that it isn’t. Having an organisational structure that simply outlines the ‘managers’ or names of each person within the business doesn’t provide a lot of value to your business.

What is the difference between an organisational structure and a functional structure?

An organisational structure outlines the hierarchy of an organisation or business, in comparison to a functional structure which is based on different functional areas of a business and they interact with each other.

Why organisational structures don’t work

There are a number of reasons why organisational structures don’t work, including:

• Being based on a hierarchy structure
• They’re often confusing and don’t explain how the team works together to get different tasks in the business completed
• They don’t foster accountability for all staff

In addition to the above reasons, there can also be a number of implications that an organisational structure imposes on a business, including:

• No clarity around job roles/positions
• Team members not taking responsibility
• The right people not sitting in the right seats

This ultimately leads to inefficiency and causes many issues within an organisation or business.

Issues you may be facing in your own business

There are a range of issues that are commonly faced by business owners. Which of the following issues can you relate to?

• The business owner or managers completing tasks that should be done by others in the business. Or as we like to put it, the $1000 per hour staff, completing $30 per hour work.
• There isn’t enough time or energy spent working on the “future revenue” of the business.
• There are skill gaps in the business which are impacting the growth potential.
• You don’t have faith that your staff can run your business without you.
• Business is not bad, but it is much harder work than you thought it would be.
• You want to get out of the daily running of the business (or simply get rid of it) but don’t feel like you can and wouldn’t be confident in making that happen.
• You’re constantly interrupted by staff who are not empowered or able to make decisions.
• Everyone in the business comes to you, so there’s a high expectation for you to get things done. But you experience low productivity because of constant interruptions.
• You understand that accountability for you and the team is critical to moving your business forward (and you would like some support in creating the frameworks required to increase this in the business).
• You continue to work long hours wearing multiple hats within the business.
• You would like to free up your time and would like to grow and develop your people, ensuring that they are accountable and executing agreed actions.
• Your business is growing rapidly in numbers and as more people come in, roles and expectations may not be that clear.
• You’re looking to develop a structure to work within and ensure that your business functions efficiently through a high-performing, well-aligned team.

What are the advantages of using a functional structure for your business?

The advantages of using a functional structure for your business is that it allows you to develop and grow your business into it’s true potential. A functional business structure improves your business by:

• Team members skills are more effectively utilised across the business.
• The business hierarchy is more defined, and everyone in the business knows who they should direct their questions or feedback to, rather than everything going to the owner or manager.
• Work is not duplicated, as all departments have defined responsibilities.
• Every person in the business fully understands their role and responsibilities, as they are fixed, which facilitates improved accountability for workflow across the entire business.

Do you think your business is systemised? Take the systems strength test to discover your score! Click here to take the test.

It’s all about having the right people in the right seats in your business

The best functional structure for your business is one that will enable you to step back from a fully operational role and maximise the talents of your employees and operate at maximum profitability.

This means assessing which job functions and activities are really needed and then allocating roles to the people who are most appropriately skilled or experienced for that job.

It’s all about having the right people in the right seats in your business.

And you may well find that the most appropriate person is located in another part of the business, or you might have to bring in some training to develop a skill that the business needs.

Are you ready to map out and create your own business structure?

If you're ready to improve the efficiency and productivity of your business and prepare for future growth, then you need to get ahead of the game now and download our 4 steps to mapping your business structure.

This guide will help you to create a business structure that will improve accountability, empower your team and free up more time so that you can focus on doing the things that you enjoy.

Need expert guidance to develop your business structure?

Feel overwhelmed thinking about creating your own business or functional structure? Invest in a tailored coaching session with one of our business coaches who can expertly guide you through the process. Learn more about our functionality workshop.