Part 2 | Defining Your Hierarchy - Identify Your Functional Areas

What is a Functional Area?

Functional Areas are the highest level of your hierarchy and allow you to group departments by their value to the organization. These are very wide categories that should allow you to roll up major areas within your company. You will use Function Areas to determine where resources are being concentrated.?

I typically use Revenue Generation, Product Delivery, Administration, Influencers, and Systems as my go-to Functional Areas. However, you should use whatever makes sense for your organization.

Functional Areas are a very simple organizational structure without ownership or direct deliverables.?

Properties of a Function Area

There are only two properties for Functional Areas.

• Name – The name of the functional area.
• Description – A robust description of the functional area’s focus.

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Here are some examples of my most commonly used Functional Areas.

• Revenue Generation - Departments that generate revenue.? Typically, these include Sales and Marketing.
• Product Delivery - Departments that deliver the product to the customer.? Consider departments like Assembly Lines, Technical Configuration, Purchasing, and Support.
• Administration - Departments that support business operations.? I usually include Accounting and Finance in this one.
• Influencers - Anything outside the company that may affect the company’s success.? These include third-party vendors, government regulators, and customers. I'll provide more information on this later.
• Systems - Any technology, platform, or process utilized to conduct business.? Think of this as the computer systems and platforms such as SAP, Service Now, ConnectWise, QuickBooks, etc. There will be more on this later also.

Influencers

Influencers are any entity outside of your organization that may affect your ability to operate.? These entities include things like Vendors, Partners, and Customers. Influencers differ slightly from other Function Areas as they require an additional property for proper classification.

Properties of an Influencer:

• Name - Name of the Influencer.
• Description - A robust description of the Influencer and information depicting their impact on the organization.
• Type - The type of Influencer. These typically include things like Vendor, Customer, Partner, and Regulator.

Here are some examples of Influencers I’ve dealt with in the past.

• Vendor: IBM - Provides hardware and platform that runs several applications within the organization. Costs and availability of products directly affect our ability to service customers.
• Partner: Ingram Micro - Distributor used in the ordering of products for both customers and internal use. Delays in order fulfillment directly affect our ability to service customers.
• Customer: Retail Customers - Customers that have multiple locations that provide a uniform product. Provides 20% of company revenue and utilizes 15% of company human resources.
• Regulator: OSHA - Government agency responsible for workplace safety. Provides regulatory oversight for plant operations and dictates safety procedures.

Systems

Systems are all the electronic and 3rd party applications that are used in delivering your product or service.? These can include things like Enterprise Management Software, Operations Software, US Postal Service Applications, and Governmental Oversight Practices. Like Influencers, Systems require additional properties for proper classification.

Properties of a System:

• Name - The name of the System.
• Description - A robust description of what the system is used for.
• Type - The type of System. These typically include Software Platform, 3rd Party Services, and Applications.
• Usage Area - The area within the company that has ownership or primary usage of the System.

Here is an example of a few System definitions.

• Software Platform: Salesforce: Sales - CRM toolset and system or record for all customer-related information.
• Software Platform: Moovila: PMO - Project Management platform and system of record for all project-related activities.
• Software Platform: Office 365: All Company - Office toolset for word processing, spreadsheets, email, and general communication.

Conclusion

Identifying functional areas in this way provides focus on what each area of the company is trying to accomplish.