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5 Steps to Building a Functional Structure for Your SMB

July 20, 2022

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This is a guest post by Trainual Certified Consultant Greg Gunther. Greg is the director and founder of Your Business Momentum, a business coaching firm that helps companies systemize their operations and scale their teams.

Imagine this: You start a business and hit the ground running. But as things get busier, you realize you need help if you’re going to grow. So, you hire staff members, beginning with the department that screams for help the loudest. As you hire more and more people, you’re also trying to work out who manages the new staff — because you can’t do it all by yourself. But now your staff is getting direction from too many people. And as a result, productivity plummets — your business is less efficient and growth is stalling.

After a while, your team starts to get frustrated with this mismanagement and their place in the company. Does this sound familiar?

It’s a classic situation. More often than not, it happens when the company grows from the top-down. However, hiring more people for your business should be a strategic function, and it should be easier to clearly establish who does what — as opposed to just creating generic job positions. This is where a functional business structure comes into play.

What is a functional business structure?

A functional structure organizes your business based on the skills and tasks of each person within the company.

Most businesses have an organizational structure, but is it considered functional? Having a structure that simply outlines the “managers” or names of each person within the business means that it isn’t. When your organizational structure is set up that way, it doesn’t provide a ton of context for what each person actually does.

A man looking up from a set of documents saying, "What am I looking at?"

Here’s an example: Instead of mapping your accounting department as having one senior accountant and then two associate accountants underneath them, you can have the two reportees noted as “payroll” and “auditing”. That way, it clearly shows that even though the people have the same titles, they take care of different parts of the business.

In short, an organizational structure outlines the hierarchy of an organization or business. Whereas a functional structure is based on different functional areas of a business and how they interact with each other.

Why should you use a functional structure?

A functional structure allows you to develop and grow your business to its true potential — it helps your team get super clear on what everyone does and how they do it. From there, your team benefits because:

  • Team members' skills are more effectively utilized across the business.
  • The business hierarchy is more defined, and everyone knows who they should direct their questions or feedback to (as opposed to running everything through the owner or manager).
  • Work isn’t duplicated, as all departments have defined responsibilities.
  • Every person in the business fully understands their role and responsibilities, which facilitates improved accountability for workflow across the entire business.

Gratuitous shout-out: Trainual allows you to add responsibilities to each of your roles within its app. And it uses an AI-powered system to suggest what roles and responsibilities may be best for your business, making it easier than ever to create a functional structure.

The biggest benefit of a functional structure

The best functional structure for your business is one that will enable you to step back from the day-to-day operations and delegate key tasks to your employees.

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 those responsibilities.

Basically, it’s all about having the right people in the right seats within your business.

A girl holding a boy's hands and saying, "you've come to the right person."

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.

Either way, when you have the right people in the right roles, things move smoothly. The work gets done efficiently. And you don’t have to spend as much time in the weeds of your day-to-day operations because your team is knocking it out of the park. Meaning, you can shift your time to concentrate on what keeps the business growing.

How to create your business' functional structure

You’ve heard about what makes a functional structure so useful — now it’s time to bring one to life. Here’s how you can create your business’ functional structure:

Step 1: Identify all tasks.

When we say “all tasks,” we mean all of the tasks. You can’t assign responsibilities to your team without knowing what keeps your business running. So, get your team together, and make a list of everything that happens in your business.

As you’re documenting, you might find that some tasks are being covered by more than one person. There may also be tasks that no one is really in charge of. Writing everything down will also help you see how tasks become dependent on each other, thus creating a sequence of responsibilities.

In our practice, we often make use of post-it notes to list down all tasks identified. This makes it easier for us to categorize them later into groups.

A man wearing a mechanical helmet writing and surrounded by post it notes.

Step 2: Group similar tasks together.

Once all your tasks have been identified, it’s time to start grouping. By categorizing similar tasks together, you’ll be able to see a clearer picture of how different sequences work in your business.

Give each group a name in terms of functional areas (e.g. business administration, marketing, business planning, and so on).

Step 3: Categorize each group into three main functional areas.

After grouping the tasks together, it will become more evident how task groups belong in three different business categories. We call these the three functional areas:

  • Business management: tasks that focus on future revenue.  
  • Business operations: tasks that focus on present revenue.  
  • Business support: tasks that have zero revenue value, but are essential to your business.

Step 4: Assign people to each functional area.

Time to assign roles and responsibilities! First, identify the best person to coordinate each functional area.

The person you choose is accountable for their functional area, but not necessarily responsible for each associated task. Meaning, you can assign a person the functional area of accounting, which includes payroll and auditing. But, that specific person may not be totally in charge of payroll, since one of their direct reports handles that.

For a small business, you might see yourself handling at least two areas. But as the business grows, you’ll need to allocate your new hires specific roles so they can focus their attention on specific areas in your business.

A cartoon crab saying, "I've got a special assignment for you."

For example, you may assign both marketing and sales to the same person, simply because your team is lean. As your business scales, you’ll probably need to hire an additional person or two (or even three — sky’s the limit!) to solely handle the sales or marketing functions. From there, that new hire is responsible for that given area.

Step 5: Document and communicate the new structure to the team.

Often team members can feel confronted by change, or be unwilling to give up tasks that they have become accustomed to doing. So, it’s important to set clear expectations for your employees. Let your people know their responsibilities, and open the door to hear their feedback.

If those people are unwilling to give up the tasks or jobs that they are doing, see if you can find a way to still have them involved with those tasks. Or work with the  person who's been assigned the tasks to see if a switch can be made.

Either way, when you're rolling out the change, create clear systems and process documentation and use appropriate software to delegate to keep your employees accountable and engaged. That way, their new duties and roles are clearly put in writing. And they can review the priorities of their positions whenever they need to align on the most important things they need to get done. 

Plus, it allows them to deliver what you expect of them in terms of work performance, without constantly having to monitor their progress. Managing this through clear communication, accountability, and execution is very important.

So, with a functional structure, it’s not just about the “who” in the business. It’s also about the “what” and the “how”. You fully lay out the foundation of what your people actually do and where their skills are being utilized. And the result? A business that clearly knows where their responsibilities lie, what needs to be delegated, and what can be easily systemized to scale up.

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Article

5 Steps to Building a Functional Structure for Your SMB

July 20, 2022

Jump to a section
Share it!
Sign up for our newsletter
You're all signed up! Look out for the next edition of The Manual Weekly coming Wednesday am!
Oops! Something went wrong while submitting the form.

This is a guest post by Trainual Certified Consultant Greg Gunther. Greg is the director and founder of Your Business Momentum, a business coaching firm that helps companies systemize their operations and scale their teams.

Imagine this: You start a business and hit the ground running. But as things get busier, you realize you need help if you’re going to grow. So, you hire staff members, beginning with the department that screams for help the loudest. As you hire more and more people, you’re also trying to work out who manages the new staff — because you can’t do it all by yourself. But now your staff is getting direction from too many people. And as a result, productivity plummets — your business is less efficient and growth is stalling.

After a while, your team starts to get frustrated with this mismanagement and their place in the company. Does this sound familiar?

It’s a classic situation. More often than not, it happens when the company grows from the top-down. However, hiring more people for your business should be a strategic function, and it should be easier to clearly establish who does what — as opposed to just creating generic job positions. This is where a functional business structure comes into play.

What is a functional business structure?

A functional structure organizes your business based on the skills and tasks of each person within the company.

Most businesses have an organizational structure, but is it considered functional? Having a structure that simply outlines the “managers” or names of each person within the business means that it isn’t. When your organizational structure is set up that way, it doesn’t provide a ton of context for what each person actually does.

A man looking up from a set of documents saying, "What am I looking at?"

Here’s an example: Instead of mapping your accounting department as having one senior accountant and then two associate accountants underneath them, you can have the two reportees noted as “payroll” and “auditing”. That way, it clearly shows that even though the people have the same titles, they take care of different parts of the business.

In short, an organizational structure outlines the hierarchy of an organization or business. Whereas a functional structure is based on different functional areas of a business and how they interact with each other.

Why should you use a functional structure?

A functional structure allows you to develop and grow your business to its true potential — it helps your team get super clear on what everyone does and how they do it. From there, your team benefits because:

  • Team members' skills are more effectively utilized across the business.
  • The business hierarchy is more defined, and everyone knows who they should direct their questions or feedback to (as opposed to running everything through the owner or manager).
  • Work isn’t duplicated, as all departments have defined responsibilities.
  • Every person in the business fully understands their role and responsibilities, which facilitates improved accountability for workflow across the entire business.

Gratuitous shout-out: Trainual allows you to add responsibilities to each of your roles within its app. And it uses an AI-powered system to suggest what roles and responsibilities may be best for your business, making it easier than ever to create a functional structure.

The biggest benefit of a functional structure

The best functional structure for your business is one that will enable you to step back from the day-to-day operations and delegate key tasks to your employees.

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 those responsibilities.

Basically, it’s all about having the right people in the right seats within your business.

A girl holding a boy's hands and saying, "you've come to the right person."

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.

Either way, when you have the right people in the right roles, things move smoothly. The work gets done efficiently. And you don’t have to spend as much time in the weeds of your day-to-day operations because your team is knocking it out of the park. Meaning, you can shift your time to concentrate on what keeps the business growing.

How to create your business' functional structure

You’ve heard about what makes a functional structure so useful — now it’s time to bring one to life. Here’s how you can create your business’ functional structure:

Step 1: Identify all tasks.

When we say “all tasks,” we mean all of the tasks. You can’t assign responsibilities to your team without knowing what keeps your business running. So, get your team together, and make a list of everything that happens in your business.

As you’re documenting, you might find that some tasks are being covered by more than one person. There may also be tasks that no one is really in charge of. Writing everything down will also help you see how tasks become dependent on each other, thus creating a sequence of responsibilities.

In our practice, we often make use of post-it notes to list down all tasks identified. This makes it easier for us to categorize them later into groups.

A man wearing a mechanical helmet writing and surrounded by post it notes.

Step 2: Group similar tasks together.

Once all your tasks have been identified, it’s time to start grouping. By categorizing similar tasks together, you’ll be able to see a clearer picture of how different sequences work in your business.

Give each group a name in terms of functional areas (e.g. business administration, marketing, business planning, and so on).

Step 3: Categorize each group into three main functional areas.

After grouping the tasks together, it will become more evident how task groups belong in three different business categories. We call these the three functional areas:

  • Business management: tasks that focus on future revenue.  
  • Business operations: tasks that focus on present revenue.  
  • Business support: tasks that have zero revenue value, but are essential to your business.

Step 4: Assign people to each functional area.

Time to assign roles and responsibilities! First, identify the best person to coordinate each functional area.

The person you choose is accountable for their functional area, but not necessarily responsible for each associated task. Meaning, you can assign a person the functional area of accounting, which includes payroll and auditing. But, that specific person may not be totally in charge of payroll, since one of their direct reports handles that.

For a small business, you might see yourself handling at least two areas. But as the business grows, you’ll need to allocate your new hires specific roles so they can focus their attention on specific areas in your business.

A cartoon crab saying, "I've got a special assignment for you."

For example, you may assign both marketing and sales to the same person, simply because your team is lean. As your business scales, you’ll probably need to hire an additional person or two (or even three — sky’s the limit!) to solely handle the sales or marketing functions. From there, that new hire is responsible for that given area.

Step 5: Document and communicate the new structure to the team.

Often team members can feel confronted by change, or be unwilling to give up tasks that they have become accustomed to doing. So, it’s important to set clear expectations for your employees. Let your people know their responsibilities, and open the door to hear their feedback.

If those people are unwilling to give up the tasks or jobs that they are doing, see if you can find a way to still have them involved with those tasks. Or work with the  person who's been assigned the tasks to see if a switch can be made.

Either way, when you're rolling out the change, create clear systems and process documentation and use appropriate software to delegate to keep your employees accountable and engaged. That way, their new duties and roles are clearly put in writing. And they can review the priorities of their positions whenever they need to align on the most important things they need to get done. 

Plus, it allows them to deliver what you expect of them in terms of work performance, without constantly having to monitor their progress. Managing this through clear communication, accountability, and execution is very important.

So, with a functional structure, it’s not just about the “who” in the business. It’s also about the “what” and the “how”. You fully lay out the foundation of what your people actually do and where their skills are being utilized. And the result? A business that clearly knows where their responsibilities lie, what needs to be delegated, and what can be easily systemized to scale up.

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5 Steps to Building a Functional Structure for Your SMB

July 20, 2022

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