Thursday, August 5, 2010

Departmentalizing and Functional Decomposition

An important step is to create a spreadsheet, departmentalizing your business. For example:

XYZ Convenience Stores

 

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Corporate Division

 

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General Accounting

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Accounts Receivable

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Accounts Payable

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Legal

  

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Marketing

 

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Personnel

 

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Human Resources

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Payroll

 

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Planning

 

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Stores

   

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Store Management

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Store#1

 

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Inventory

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Audits

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Purchases

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Sales

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Maintenance

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Store#2

 

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Inventory

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Audits

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Purchases

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Sales

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Maintenance


 

Start off simple and expand it as needed. Eventually, we will expand each line in the spreadsheet to identify location, goals, and critical success factors.

Functional decomposition is the process of resolving a functional relationship into its constituent parts so that it may be reconstructed. A 'function' is defined as what has to be done to operate a business while 'procedures' define how it is done. Procedures may change as technology changes while functions might not. Processes are accomplished by procedures. A function may be carried out by many departments and a department may carry out many functions.

A functional area might be described as 'inventory' while a business function might be described as 'purchasing'. Going down the scale we may determine the processes involved in the business function 'purchasing' are 'creating purchase orders' and 'maintaining supplier information', while 'maintaining supplier information' might be further decomposed as 'recording supplier performance data', 'analyzing supplier performance' and 'selecting a supplier'.

If at this point you are thinking, 'how in the dickens can anyone keep track of all this?' —think about it. Somewhere in your organization at this very minute, people are doing all of these things, but how they are accomplishing these tasks may be a complete mystery to you. In fact, it may be a complete mystery to them, and when they get sick, retire or die, because no documentation exist to spell out exactly what processes they were using to accomplish these task, you might find yourself it hot water.

Preparing a matrix of business functions against top management is an excellent way in determining who's responsible for, involved in, has authority over or has technical expertise in specific business functions. A few examples of business functions in a convenience store operation might be: Planning, research, forecasting, territory management, selling, administration, ordering, purchasing, receiving and inventory control.

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