Business functions refer to all the various activities carried out by a business as it seeks to meet its goals and provide its goods or services to the public. Business functions are generally performed by specific departments that are each devoted to a particular function. Business functions common to most companies include governance (management), finance (accounting, payroll, budgeting, audits), marketing (pricing, promotions, and sales), production (manufacturing), human resources (hiring and employee relations), customer service (customer relations), research and development (product and service improvement), information technology (computer management), and quality control (product testing and problem solving).
All of these functions must work together if a business is to be successful. The best way to illustrate this claim to think about a couple scenarios in which a breakdown occurs in one function or another that affects the entire company. A slowdown in production might, for instance, affect customer service as employees there scramble to address consumer complaints and marketing as that department must roll out a new advertising campaign to renew consumer enthusiasm. Even the finance department might have to make changes to the company's budget if the slowdown continues for some time and if sales subsequently slow down. Quality control also might have to step in and find out what has happened to make production less efficient. If all of these departments do their jobs, however, they can help to offset the problem in production and support the company's continuing success.
We can also imagine what might happen if a company's finance department fails to keep the company's books in order or makes mistakes in payroll. Other departments, like production or research and development or marketing, might quickly discover that they no longer have enough resources to function at their highest levels. Human resources would have to deal with complaints from disgruntled employees who find that their paychecks do not show the proper amounts. All departments would likely be affected by employees quitting their jobs, and most likely governance would have to step in and investigate the problem, as letting such a breakdown continue would most certainly negatively affect the success of the company as a whole.
We can see, then, how necessary it is for the various functions of a business to work together smoothly if a company is to meet its goals.
The scope of departments that could be added to a list of “business functions” is broad. From purchasing and accounts to marketing, production and distribution, every function plays an important role in a company’s efforts towards productivity and profitability. In a medium-sized or large company, there will typically be a department responsible for each function. For example, there will be a marketing department, a human resources department, and a finance department.
In terms of how the interrelationships between these various functions or departments work, I would argue that the action of any one department has a knock-on effect in other departments. For example, if those responsible for the human resources function were to hire an incompetent graphic designer, then the marketing department will bear the brunt of this mistake. In the same way, if the procurement department brings in substandard raw materials, the operations department would likely produce an unsatisfactory end product.
There is no avoiding the fact that the actions and reactions of the various business functions have an impact on each other. It is therefore imperative to keep the channels of communication between the different departments open. One of the marks of a good general manager is the ability to create and sustain cohesion between the various departments that he/she oversees. The various business functions work together to create a chain, and if there is one broken link in the chain, the business’s operations and output will be compromised.
In order for business success to be enhanced, the various departments or functions need to understand the challenges faced in other areas of the business. They need to understand how their actions have either a positive or negative impact on other parts of the company.
There are four main business functions: marketing, personnel management, financial management, and operational management.
A business has to market its products and services if it wants to make sales and profits. A business also has to take care of its employees since they are what keeps the business running. Human resource management deals with employee training, compensation, recruitment, and rewards.
Operational management involves the day-to-day running of the business. The management has to make sure that the resources that are made available to the business are used efficiently and effectively. Financial management deals with the allocation and disbursement of funds within the organization.
Here is how the interrelationship of these four functions leads to the success of the business. Suppose the business wants to expand to a new market. The marketing department will do market research and decide on the appropriate promotion strategy. In case they need more employees to help them with the promotion, they will ask the human resources department for help.
The personnel manager may have to recruit more people to assist the marketing team. In that case, they involve the financial department since recruitment is a costly affair. The finance department then involves the operations team to make sure that the funds are used properly by both teams.
Given that the business environment of the 21st century is defined by rapid changes and innovation, it is essential for any organization, regardless of size, to create interrelationships between its different business departments. In fact, several leading business figures argue that the key to remaining competitive in today's marketplace is to create synergy. The only way to essentially create synergy in an organization is to allow different business functions to share information and collaborate with one another. However, this idea must be preached from top-level executives in order for it to trickle throughout the organization and take effect.
While most of us are familiar with the classic "hierarchy model", this particular structure is becoming less effective for many corporations as it isolates business functions and consequently, prevents the creation of synergy. As a result, more and more organizations are adopting "flatter" structures that enable their various departments to share resources and enhance overall organizational performance. For example, while departments such as Finance and Marketing were traditionally viewed as polar opposites, many organizations are now creating interrelationships between these two departments to improve the efficiency of their marketing methods (e.g. using financial tools to analyze the return on investment of particular marketing campaigns, assessing the financial viability of certain products).