Enterprise function model

The Enterprise Function Model is generic and applies to all enterprises in every industry, both product-driven and service-driven. It represents the highest level functions within an enterprise.

This material provides background on the model and includes:

  • Overview of functions
  • Functional responsibilities
  • Terminology

Overview of functions

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The Enterprise Function Model is generic and applies to all enterprises in every industry, both product-driven and service-driven. It represents the highest level functions within an enterprise.

A function is a group of knowledge-related (subject area) activities that have a purpose.

The model includes a manufacturing function, for which there is usually an equivalent in non-manufacturing industries. In its de minimis form, it consists of assembling and packaging. In its most significant form, it comprises fabrication, with all of the related processes, such as cutting, milling, and machining of metals, glass, plastics, and wood.

For example, the equivalent in the food services industry is the food preparation function. The equivalent in the construction industry is the project management function. Even the gift wrapping activity within a department store, with both assembly and packaging activities, is equivalent to a manufacturing function.

The equivalent in non-product industries is delivering the service itself. For example, in airline industry, the equivalent is providing the transportation, and all of the support that accompanies it, such as managing baggage and serving meals. In the hospitality industry, the equivalent is providing the accommodation, with all the support, such as room service, newspapers, internet, etc.

In both product-driven and service-driven industries, there is always a service function within the business development activities related to the sale itself, such as handling complaints, exchanges, returns, etc.

It makes no difference whether the functions are insourced or outsourced – they are all represented within the Enterprise Function Model.

The scope of the functions varies by industry.

Whereas all enterprises have a research and development function to some extent, those in industries that are heavily dependent upon intellectual property will have a more extensive function than those that don’t.

For example, in a lifestyle business enterprise, the owner may perform most research on their own or with limited assistance; in an upwardly mobile enterprise in the pharmaceutical industry, entire departments will perform research. Nevertheless, for the enterprise to be sustainable, there must always be some form of research and development.

The Enterprise Function Model is intended to provoke thoughts on how functions should be deployed.

Functional responsibilities

  • Governance (board of directors and chief executive offer or equivalents in business entities other than corporations)
  • Administrative functions

    • Enterprise (support to the Governance function)

      • Planning and policy development
      • Performance measurement
      • Investor relations
      • Government affairs
      • Brand management
      • Community relationships
      • Real estate
      • Philanthropy
      • Ombudsman (segregated duty)
      • Internal audit (segregated duty)
    • Legal
    • Finance

      • Treasury – liquidity and capital management
      • Controller – accounting and reporting
    • Human resources
    • Information technology
  • Operational functions

    • Research and Development (market, product, infrastructure)

      • Program management
      • Engineering
    • Operations

      • Procurement
      • Manufacturing (or industry equivalent)
      • Distribution
    • Business Development

      • Marketing
      • Sales
      • Service

The research and development activity is both a process and a function. It is a process because it has end-to-end activities; it is a function because of the depth and breadth of functional knowledge and technical skills necessary within the discipline.

Research and development is a cross-functional activity that involves stewards from all disciplines. The only full-time members of a research and development function are program/project managers and engineers.

Note: the terms “engineer” and “engineering” are generic. In some industries, such as the pharmaceutical industry, the engineers include doctors and scientists.
All other participants are loaned from other areas within the enterprise. An assignment in the research and development should be part of any career development plan that involves rotation through various functions of the enterprise.

Large information technology projects should always be performed in the research and development Function because they affect markets, products, and infrastructure, and hence require cross-functional involvement.

In the early stages, the leadership of such projects can be a representative from an administrative function or an operational function depending upon scope and objectives.

In the latter stages, as the emphasis shifts to more technological disciplines, the leadership can shift to a representative from the Information Technology Function.

The leadership of such projects, should always include a cross-functional steering committee, that acts as a board of directors, and a program/project office that acts as a controller.

Very large initiatives, such as programs resulting from strategic plans, may have substantive market, product, and infrastructure components, of which information technology is only one component.

If systems development is not a core competency of the enterprise, which in most cases it is not, it should be outsourced to a systems integrator that has the pre-requisite knowledge and skills.

Terminology:“operating,” “operations,” and “operational”

As in so many cases, terminology is not used consistently in business between one discipline and another.

In this material, the term “operations” means the function that procures materials and supplies, manufactures products (or equivalent), and distributes them to channels.

In this material, the term “operational” means the activities of three functions:

        • Research and Development
        • Operations
        • Business Development

Consistent with accounting convention, the term operating is used in conjunction with cash flows from all activities except financing and investing – this includes all operational activities and all administrative activities. Cash flows from financing and investing activities relate to the funds flows, not the cost of the activity associated with generating the funds flow.

The Chief Operating Officer has responsibility for the operational activities (versus the administrative activities) of the enterprise. The Chief Operations Officer has responsibility for the procurement, manufacturing, or equivalent, and distribution activities of the enterprise.

Terminology:“distribution” and “delivery”

The term “distribution” means the movement of products between suppliers and plant and warehouse facilities of the enterprise, and channels.

The term “delivery” in the context of product and service delivery means providing products to customers and rendering service at the point of sale (or shortly thereafter).

 

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