Functional or Hybrid Methods of Organizing Your Business: Why Baking Core Processes into Your Business is Important to Your Success

In this post, I’ll give a brief overview of why I believe a Matrix organized business will give you, the small business owner, greater chances for success.

Functionally Organized Business

Organizing a business by functional area is one of the most common ways to build out your company. The work and processes are grouped by functional specialty, for example, sales, finance, marketing and so forth. Sometimes, this is referred to as a “silo” method of organizing your company. Communication is generally limited within the silo with department heads communicating for cross-functional needs. Silos tend to have independent KPIs, foci, strategies and processes.

In a functionally organized company, projects tend to be focused on current initiatives with cross-functional processes tending to feel “foreign” to those who work within the functional areas. The current projects tend to be strategically based and grounded in the mission and vision plans of the organization.

Matrix Organized Business

In a Matrix organized business, the functions are built around the core processes of the organization. The processes are not thought to be cross-functional – instead, the processes themselves are the core of the organization. Because process improvement is all about delivering a greater customer experience at a lower process cost, “customers” can be defined as internal consumers of the outputs of the process or actual customers who purchase products and services from the company.

In a matrix organization, you’ll have a process owner with supplemental managers. The process owner will work to ensure the process is working well, managing the measurements against the expected KPIs and working with the supplemental managers to ensure the process is doing what it is designed to accomplish.

Take traditionally accepted silos and turning them into core processes in your organization could do wonders for your business. Here are two examples.

Get rid of your sales manager and instead, have a Process Owner for Revenue. Why do this? Think about the difference. If I’m in charge of sales, then my only goal is to increase sales. Do I really care what happens in production? No. Do I really care what happens with customer service? Not my problem. I’m measured on sales. So I’m going to sell, sell, sell! But if I’m in charge of Revenue, think about the touch points that is required to maximize revenue: sales, customer service (so there are as few returns as possible), marketing (that aligns with sales), product quality and so forth. There are many things that can positively or negatively impact revenue, so now I become concerned with all those touch points because I’m concerned with maximizing revenue.

Have a Process Owner for Cash Flow. If you do this, then you’ll find this individual is greatly concerned with both receivables and payables as well as being concerned with short-term investments and budgeting. By making one individual ultimately responsible for cash flow (and for blowing the whistle well in advance of when cash is going to be short), then you give yourself an excellent opportunity to have cash evened out. This person will be incentivized to have low cost, but effective vendors, sales contracts that negotiate aggressive payment schedules and the like. Managing cash well is one of the greatest avenues to profitability you’ll ever have at your fingertips.

Summary

There is much more to this topic than meets the eye, but in our opinion, it is well worth your while to look at identifying your 5-10 core processes and then staffing for those processes first, then staffing for the functional areas that will support those processes.

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