1. What Is the Difference Between Function and Capability in Business?
2. The Role of Business Functions
3. Terms Used in Defining Business Functions
4. Why Defining Business Function Is Necessary
5. Components of a Business Process

What is function in business? It is a concept that represents what type of work an organization conducts or its role within the business community. In fact, the entire structure of the organization typically depends upon its intended business functions.

What Is the Difference Between Function and Capability in Business?

The functions of a business are more stable than the structure of the organization, which can change according to its needs. One unit of an organization may be responsible for more than one business function. However, a business function will only be carried out by one unit of the organization.

Some examples of business functions are:

  • Customer relationship management.
  • Financial management.
  • Marketing.
  • Operations.
  • Product management.
  • Supply chain management.

A capability, on the other hand, describes an organization unit's ability to perform a specific task and is based upon its skills, expertise, and work capacity. Unlike business function, it is associated with the domain of strategic planning. Through planning, an organization can make changes so that it has the capability it needs.

Some examples of changes that are made to address capability needs include:

  • Application components and services.
  • Company infrastructure.
  • Components of the infrastructure.
  • Organization units.
  • Processes of the business.

Capabilities include:

  • Achieving delivery objectives.
  • Conducting research.
  • E-Commerce.
  • Mergers and acquisitions.
  • Preparing for unknown challenges in the future.
  • Selling products.
  • Survival during difficult economic situations.

The Role of Business Functions

Business functions provide the vocabulary and framework needed to provide an enterprise-wide view of the business activities. They help to identify the main activities of the organization.

Defining business functions includes the creation of a hierarchical list of responsibility areas that each organizational unit manages. These areas, or functions, do not overlap or cross over into other areas.

Business functions are determined by analyzing data and organizational structure, the company's line of business, business processes, and any other relevant information. Business functions and organization structure are not necessarily related. They are also independent of the product or service so that when business needs change, the company can quickly adapt to a changing market or develop new products.

Since business functions remain consistent across multiple organizational units or areas, training needs are reduced, and clients can have a single point of contact. Defining functions also reduces data inconsistency and redundancy, improving the quality of all data that is collected in the course of operating the business.

Having business functions that exist independently from organizational units or processes helps a business avoid the need for duplicating the same functions in more than one department.

Terms Used in Defining Business Functions

When defining business functions, it is helpful to deconstruct the organization using the following vocabulary terms and concepts:

  • Activities: Actions that are performed to fulfill a requirement in operating the business.
  • Resources: Humans and equipment that execute the business functions.
  • Triggers: Incidents or events that initiate activities. By considering a trigger, it is possible to predict the activity that will take place as a result.
  • Verbs: Words used to name the services, tasks, and processes; these always require a combination of a verb and noun.

Why Defining Business Function Is Necessary

Both capability and business function are methods of viewing the organization along with its processes and resources, and both provide insight into the overall efficiency of the business. Business functions may be considered as a means to deliver capabilities. Conversely, capabilities may be used to describe what is needed to meet the goals for business function and create a desired outcome.

One of the most important uses for defined business function is managing business resources and the execution of processes within the business. This is because it may encompass more than one organizational unit or capability. For example, managing a company's payroll may be a capability of the Human Resources department, but in a larger perspective, it falls under Financial Management.

Components of a Business Process

The business process is a larger set of activities that may involve multiple business functions and even multiple organizations. It has the following components:

  • Flow: The order in which work is completed, from a work order or sale to the point of getting paid.
  • Communication: A chain of command helps to ensure the proper communication to each person who is involved.
  • Financial Accountability: Organizing the process of billing, collections, payroll, expenses, and accounts payable.

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