Question

Could the three levels of an organization—corporate, business unit, and functional unit—each have a different organizational structure? Why or why not?

Answer 1

Yes, the three levels of an organization (corporate, business unit, and functional unit) each have a different organizational structure.

At first, the notion of three different levels for a company may seem confusing. After all, doesn’t an organization have one overriding goal: to grow and to make money? That’s true, of course, but a company is a complex operation with a clear hierarchy. Yet corporate, business and functional strategies enable us to focus on individual aspects of our company. What's more, these strategies help us take a top-down view when setting goals. The end result is synergy throughout our organization. This synergy can in turn enable us to grow.

The Power of Strategy
As a leader, our first task is to ask ourself how will we ensure that our company thrives. How can we make sure that our business flourishes? This question will orient us as we consider the levels of strategy. A strategy is a plan of action we take to achieve a specific goal.

The Top-Level View
The three levels of service that are:

• The corporate level - answering a fundamental question: what do we want to achieve?
• The business level - deciding which industries we will operate in and how we will compete with competitors
• The functional level - deciding how to organize our company and how much delegation we want to do

The Corporate Level
The corporate level is the highest level of business strategy, and it is the broadest. We should craft our corporate-level strategy with our main purpose in mind. This is the place to set lofty, long-term goals. These goals impact the other two levels. Put another way, our business and functional goals should relate to our corporate goals and vice versa.

It’s at this level that we craft our mission and vision statements. To craft the best corporate strategy we can, clarify our mission. With our mission statement, we describe what our company does and how it differs from the competition. With our vision statement, we state how we want our company to be operating at a specific time in the future. It’s not uncommon for business owners to craft vision statements for the next five, 10, 15 or even 20 years.

We will also want to create our corporate objectives at this level. Here, we should state targeted, high-level goals. Focus on specific financial, internal, customer and growth goals.

The Business Unit Level
Here we would define separate strategies for the various industries we operate in. Business owners who operate in many different niches must decide which to focus on most, and that may change over time. At the business unit level, we may decide to make a graceful exit from an under-performing market. Or, we may even decide to sell off individual business units.

If we operate only in one industry or niche, we might not find much to do here. That said, there is work we can do. For one thing, it’s at this level that we decide how we will differentiate ourself from the competition. What is it that makes our business special? How is our product or service superior? Now is the time to poke our head up and perform SWOT analysis: strengths, weaknesses, opportunities and threats.

The strategies we define here should specify objectives that both support each business unit and the company as a whole. This keeps costs low and also ensures that the original business unit continues to perform well.

The Functional Level
When we craft functional level strategy, we are concerned with smooth internal operation. This involves how departments operate and interact, and how they support our corporate level strategy day in and day out. Typically, our department heads would craft and carry out our functional level strategy. But if we are a startup, we may need to take the reigns here, too. If we do have department heads, our functional-level strategy will help them keep things running smoothly. Whether we have departments or not, it’s never too early to start working on our functional strategy.

It’s at this level that the rubber meets the road. If projects aren’t created and efficiently executed, our entire business will suffer. So, our functional level strategy should provide ways of measuring progress. We as a team, or our department heads, should be able to answer these questions at all times:

• How close are we to meeting our current objectives?
• What are the most important steps we can take right now to meet these objectives?

In other words, while we will have objectives, projects and goals at every level of our organization, they should be particularly granular at the functional level.

We want to ensure that the goals at the functional level align with our goals at the corporate level. For instance, all departments in our organization should focus on creating a quality product, and all departments should be concerned with delivering stellar customer service. The difference is that at the functional level, our teams should be creating specific plans to achieve these goals.

Perhaps the most important takeaway is that our strategy at all three levels should align. If it does not, we will be trying to move in three directions at once. As the saying goes, a house divided against itself cannot stand. Build a sturdy foundation today by working on all three levels of business strategy.