Today we will look at part 2 of increasing accountability in your business.
In particular we will talk about understanding and implementing a functional structure.
It is very common in the businesses that we work with, to have an organizational structure. Yet this is quite different from a functional structure.
The difference between the two is that an organizational structure typically tells us what each members role is, and where they sit within a hierarchy.
A functional structure helps us understand all the different things that we do and how they come together to make our business work.
It also helps us understand where you and your key people are spending their time, which allows you to determine if this is the most valuable use of that time.
In a typical functional structure we have three main areas.
The Black function – which is all the activities that drive future Dollars or Revenue. An example of this would be Strategy development and business development.
Next we have the blue functions which is all the operations. This would include activities such as customer service or product delivery. Everything that drives your “current” revenue
The third functional area is the Red function and this does not generate any revenue. However, it typically forms the foundation of every business. An example of this might be administration, bookkeeping or human Resources.
To make this even more visual we could allocate costs to each functional area. For example, the Black activities could be $1000 / hour work, Blue $200 / hour and Red is $30 per hour.
You can then see that it is really important to understand where you are spending your time. It is quite common to see business owners spending far too much time in the Blue or Red functions. Someone should always be focusing on the activities that generate future revenue and growth for the business.
Irrespective of the size, we suggest that every business should complete a functional structure exercise. It could end up saving you or making you 1000’s of dollars in revenue.