Reaping Benefits, Mitigating Risks in Functional Structures

Many organizations choose to organize their work and their teams into functions.  Functions are usually created by grouping work and resources based on the type of work they do, the skill sets needed, or other shared characteristics that make it more advantageous for the company to have them working together for a common purpose.

Like any type of structure, the functional approach carries both advantages and disadvantages. Some of the core benefits of a good functional design is that it:

  • Creates groups of subject matter experts
  • Presents opportunities for doing work at scale and with lower costs due to pooling
  • Clarifies accountability for delivering certain outcomes or activities
  • Provides clear lines of reporting and responsibility
  • Develops deeper skills through cross-training and shared experiences
  • Reduces overlap across departments that might try to do the same work

However, a functional structure can also create silos. When functional teams operate in relative isolation from the rest of the organization, the functional design can lead to:

  • Unit leaders making decisions that are not well integrated with other parts of the organization
  • Inter-departmental confusion about where to look for direction and/or communication
  • Employees who struggle to see how their work and contributions fit with and enable the work of the rest of the organization
  • Slower decision-making when resources from outside the function are unavailable to move forward on time-sensitive projects
  • Bureaucracy that can slow innovation

Making the Most of Your Functional Structures

Weighing the benefits against the downsides of the functional structure raises a key question for business leaders: How do you mitigate the risks of the functional structure while still exploiting the benefits?

One good starting point when reviewing your functional structure is to determine what purpose each functional unit needs to fulfill on behalf of the company. “Strategy defines work, which should define structure,” we note in our app, 66 Organizational Alignment Tips for Executives to Accelerate Profit and Growth.” Since work is the building block upon which success can be delivered, it is critical to design structures and roles to enable the work to be done effectively and efficiently.”

Here are three typical scenarios where strategic purpose drives structure:

  • To ensure governance, adherence, and control. Examples include internal audits and legal functions.
  • To help enable one part of the business to do something that other parts of the business are not primarily equipped to do. Consider the talent acquisition function. Do we want everybody in the company trying to find, screen, and hire new employees.  Typically, the answer is no – we want one function that takes care of that for the entire company.
  • To provide mission critical activities that are highly customized to the needs of the business. Examples include R&D and sales.

To get the most from a function, be clear on its purpose and role. The function should operate within its defined scope. When focused, functions can be incredibly effective; however, if the function is not focused, it can struggle to deliver value, and it can leave it constituents unsatisfied and its budget lacking. For example, if you work in a function that serves as a governance role in the company, that function shouldn’t try to overstep its bounds. It should simply stick to performing governance and control functions.

Because functions can lead to silos, executives should take time to build linkages across organizational boundaries between different functions. Our book, Mastering the Cube, defines linkages as “mechanisms that bring people together who need to work across boundaries.” What are the connection points from each function to other parts of the organization? Use those interdependencies to make sure the different units work in harmony with one another, rather than operating within a silo and making decisions without considering the impacts to the rest of the organization.

Organizations should only invest in and provide resources for each function that are necessary for it to complete its purpose and mission. Unfortunately, functional units can do an amazing job of justifying their existence by finding ways to utilize all of the resources the organization dedicates to it. This enables those within that function to feel like they are always busy adding value, and to suggest they could use additional resources to add so much more value.

To avoid the pitfalls associated with functional structures and ensure that you’re maximizing the benefits, remember this – great functions are designed, resourced, and linked to enable value creation.

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