Functional level strategy may sound like a difficult concept, but once you understand where it fits into the overall strategy of your business, you’ll have no problem developing functional level strategies that will drive your business toward success.
The 3 Types Of Business Strategy
Before we examine functional level strategy in more detail, it’s essential that you understand the other types of business strategy.
Why? Because you wouldn’t sit down with your food runners and give them the goal of increasing market share. That goal — that strategy — belongs at a higher level of your business.
1) Corporate Level Strategy
Think of your corporate strategy as the guiding force behind your business. These high-level strategies will define your company’s main purpose(s).
When you set your corporate strategy, it will directly affect the decision-making in every other part of your business. It will help you:
- Set priorities and common goals
- Focus the use of resources
- Specify the expected results or achievement
The strategy we mentioned earlier — increasing market share — belongs at the corporate level. Once you set that as your corporate level strategy, it automatically affects what happens at the next level.
2) Business Level Strategy
Business level strategies translate corporate strategies into more tangible actions. In essence, your business strategies will define the assignments and actions required to achieve your corporate strategy.
For example, building on the corporate strategy to increase market share, the business strategies that support this goal might be:
- Increasing the marketing budget
- Improving product quality
- Broadening exposure
Those strategies then trickle down to the next level of your business.
3) Functional Level Strategy
Functional level strategies are the actions and goals assigned to various departments that support your business level strategy and corporate level strategy. These strategies specify the outcomes you want to see achieved from the daily operations of specific departments (or functions) of your business.
Your functional level strategies should reflect the fact that corporate and business objectives typically require the involvement of multiple functional areas (e.g., HR, production, R&D, etc.). So, continuing with the corporate level strategy of increasing market share, your functional level strategy would then be:
- HR: increase hiring of highly-trained employees
- Marketing: improve brand identification
- Production: reduce rejections
Once these strategies are set, department managers can devise individual employee assignments to support the departmental goals.
Key Variables Of Functional Level Strategy
Your functional level strategy will have the most detail of the three strategy types. Of course, you’ll have the specific goals and actionable items for each department. But you’ll also have the various metrics through which you gauge the success of your team’s actions.
Functional level strategies should always align with the business level strategies and corporate level strategies above them.
For example, if your corporate strategy is to improve market share and your business strategy is to improve brand identification, you wouldn’t want one of your functional strategies to be for the marketing department to update their computer systems. Those goals are out of alignment.
You’ll ensure your success (and gain the support of high-level management) when all three strategy levels are pointed toward the same result.
When trying to measure your progress, it can be easy to include too much information and become inundated with data. It’s vital to keep in mind what your business level strategies and corporate level strategies are and only measure the aspects that help you determine if you’re progressing toward those goals.
4) Existing Resources
Every functional level strategy that you put in place should utilize the existing resources — both equipment and personnel — that each department has to offer.
Put another way, you don’t want to base your marketing department strategy on resources they don’t have. Doing so could seriously undermine the broader goals above it (at the business and corporate levels).
In addition to vertical alignment, functional level strategies should also be integrated horizontally within and among departments.
For example, coordinate purchasing, inventory, and shipping within your operations department, and those activities with any new processes in the production department. That way, actionable items in one department don’t put a speed bump in the actionable items of another department.
Now that you know what functional level strategy is and how it fits into the hierarchy of your business, let’s examine specific examples of goals that work at this level.
18 Examples Of Functional Level Strategy
By way of illustration, let’s imagine that Company X sets three corporate-level goals: efficiency, quality, and delivery. Here’s how those objectives would manifest as functional level strategy in each of six departments.
Reduce hiring and training expense by minimizing employee turnover.
Provide extensive training to decrease employee error.
Streamline acquisition and education of talent.
Maximize cost-effective targeting of advertising campaigns.
Provide an accurate assessment of customer product preference.
Detect and react to evolving market trends.
Negotiate purchase price to provide increased value.
Select vendors who are willing to become partners.
Manage deliveries to avoid extensive inventory.
Increase high-quality production.
Adapt to the latest production demands with minimal delay.
Simplify and automate the process of gathering information.
Reduce errors in data provided to other departments.
Provide access to information in real time.
Research & Development
Test the feasibility of concepts before producing full-scale prototypes.
Design products that integrate customer demands and production capabilities.
Speed up overall innovation using parallel design processes.
The Benefits Of Functional Level Strategy
Because functional level strategy is so specific, it is usually more difficult to set than your corporate and business strategy. But taking the time to hammer out the actionable strategies of each department can help you align your goals from the top of your organization all the way down to the individual employees.
This will help the managers throughout your organization get a better understanding of how their departments (and the employees that make them up) impact your business and corporate level strategy. And when all the pieces of your business are united in achieving a singular goal, success is inevitable.
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