ARTICLE TABLE OF CONTENTS
This is about core business processes and their functions.
Every organization relies on a series of processes to reach goals.
You’ll learn what core business processes and their functions are, plus what drives the processes you employ every day.
Let’s get started!
Core Business Processes and Their Functions Demystified
Have you ever thought about what drives your day-to-day business?
Be honest, who hasn’t received a company-wide memo detailing changes to a process and wondered why?
Every organization relies on a series of processes to reach goals. Sometimes they make sense at every level, and other times you may scratch your head because it seems like a waste of time.
Successful businesses refine their processes to benefit the company as a whole. They cut away the waste and streamline each step to maximize profits and keep the machine of industry running smoothly.
If you ever wondered what drives the processes you employ every day, this article might be able to help.
The article got answers about what a core business process is and how they function in the business world.
What Is a Business Process?
In short, a business process is everything your business or organization does over the course of a day, week, or month. While the concept sounds simple enough, it involves an intricate balance of input, output, and methodology.
Business processes apply to everything from answering phones to delivering goods, but not all actions are equally important.
Some processes are core or essential, while others serve supporting roles.
Understanding the difference between core processes and supporting processes is the first step in understanding how businesses work.
Companies and organizations that can separate and refine operational roles function more efficiently.
The success of a business depends on the efficiency of its core business processes.
Supporting processes may enhance essential processes, but if they don’t change, the business doesn’t suffer. This explanation oversimplifies things, so let’s dig a little deeper.
What Is a Core Business Process?
Core business processes are also known as operational, primary, or essential processes. These terms all refer to the actions, capabilities, and activities that a business needs to create and deliver a product or service.
Though core business processes do many things for a company, the primary objective is to deliver value to customers or business partners.
The core processes need to work together to achieve a common goal in the most efficient way to maximize profits.
It’s necessary to understand that a company’s ability to identify and manage its core business processes efficiently is critical to success. If one core process fails, it puts the entire organization at risk.
Core Business Process vs. Core Business Function
Before we press on, we wanted to point out some key distinctions between core business processes and core business functions.
While they sound interchangeable, processes and functions are two different approaches to organization, coordination, optimization, and planning.
Differentiating between business processes and business functions across these four domains is helpful because it explains the foundation of most companies.
After all, how can you identify, refine, or optimize your business if you don’t know which model to adopt?
Each approach has pros and cons, so determining which model to choose depends on your company’s goals.
The primary difference between these methods is independence (function-driven) versus cohesiveness (process-driven), but like most things in business, it’s not that simple.
Organizational Differences
Businesses organized by core business functions usually resemble a hierarchy where each function works independently of the others. This approach means each level can deliver outstanding results, but their output may not integrate well.
Conversely, a company organized by core business processes strives to optimize the organization as a whole. It doesn’t draw lines between processes, so every department works together for the benefit of the company.
Coordination by Function or Process
Function-oriented companies have no direct path for coordinating between departments. Each one has many activities that they carry out independently and without overlap.
The department managers coordinate the input and output of individual departments.
Process-oriented companies thrive on coordination because they embrace it throughout the company. These firms encourage departments to interact, cooperate, and create streamlined approaches for the greatest good.
Optimizing Function vs. Process
Optimization is possibly the most challenging domain for function-based companies. If you embrace this approach, your sales team may oversell a product that your manufacturing team can’t possibly deliver on. The results can be disastrous in some cases.
Process-driven companies approach optimization as a company to deliver maximum volume without overtaxing an individual department.
The cooperation prevents a sales department from overselling because they receive information about the production team’s abilities and limits.
Functional Planning vs. Process Planning
Strategic planning is an essential step in building any business.
For function-based organizations, management assigns goals to individual departments. Each department works toward their goals with no regard for other functions.
Managers of process-based companies assign goals based on the work to be done. Planning focuses on the activities within each process, and teams work together to reach the goals.
As you can see, companies that build foundations on core business processes tend to be collaborative and cohesive at every level. Their cooperative approach opens many doors and can achieve higher production standards, but only if done correctly.
How to Identify and Organize Core Business Processes
Primary business processes vary because no company or organization is exactly the same. Some companies consider accounting essential, while others treat it as a supporting process.
To achieve success, companies need to develop efficient, cohesive core business processes.
Shown below are the major operational challenges for organizations in multiple cloud environments. Around 35 percent of respondents stated that consistent security is an obstacle in reaching their organizational goals:
When a business struggles to reach its goals, it’s often related to a fault in one or more core processes because they are all interconnected.
You can’t organize your firm or refine your core business processes until you identify them.
Most companies identify four to eight core processes and arrange the other secondary or supporting processes around them.
Core Business Process Examples
Where do you even start with core business processes?
Every company has a unique set of core business processes, but there is plenty of overlap because most companies rely on the same basic departments.
For example, a music label may determine they have five core business processes.
While each process may have several supporting processes, these are the five they want to focus on as essential.
- Marketing is how the label communicates with listeners. They need to find the best outlets to reach their desired audience.
- Sales, one of the most common core business processes, involves selling the music.
- Manufacturing, in this case, recording music, is essential.
- Technology is increasingly important to a company’s essential business processes, especially in terms of music. Just look at the changes in the industry over the past ten years!
- Services, most commonly customer service, is a primary business process for many companies, including the entertainment industry.
Defining Your Business Model
What is your business? Stop, don’t answer that off the cuff. Though this question sounds superficial, it’s really the first step in identifying your core business processes.
Even if you have a business model, it’s time to take a good hard look at it. You need to determine how you earn money and where it comes from. Do you have a clear picture? Good, write it out. Don’t be shy.
To give you examples, shown below are the common business models in the worldwide gaming industry. Around 45 percent of the respondents stated that they used the “pay to download” business model in the game that they were developing:
Now, go a step further. Look for all of the ways you can make money. Is there something you should be doing that you’re not? Jot down your ideas before you move on to the next step.
Identify Your Core Business Processes
Armed with your business model and ideas, let’s dig into your business processes. We want to identify and separate core processes from supporting processes.
It’s time to make a new list or lists if you prefer. Grab those colored pens or highlighters because we suggest color-coding for this exercise!
- Ask yourself what actions and activities drive your business.
- Create a list of all departments and roles. Don’t forget to identify who has input in company decisions at each level.
- Define each process with essential and non-essential activities.
- Detail transitions and places where products or materials transfer internally and externally.
Map Your Processes
Compare your business model to your current processes. Use your list of core business processes then plug them into a cycle from beginning to end.
Link suppliers, inputs, processes, outputs, and customers to develop a map that includes cash flow in both directions. Your finished map should represent the cash cycle of your business.
You did it! Take a good, hard look at what you wrote because these pieces represent your company’s money trail, the foundation for your income and success. What did you discover?
Optimizing Your Core Business Processes
If you’re still here, you must be dissatisfied with something you found in your business model, core business processes, or both. What didn’t you like? It’s okay if you can’t quite put your finger on it, we’ll figure things out together.
Let’s be honest, there’s always room for improvement. Refining your business model and core processes map keeps things fresh and productive. After all, innovation is one of the hallmarks of good business, right?
Compare and Analyze the Maps and Money
Take your time with this step because it’s the crux of your evaluation. Pull your financial statements, including balances, income, and cash flow. You need dates so you can evaluate any hold-ups in your cycle.
Create a new list that describes how long each process takes. Pay special attention to steps requiring approvals and the time spent waiting for them. Also, include what each step costs or earns.
It’s a good idea to look at several months of data in case there are explainable (or unexplainable) anomalies. For example, a pandemic can throw a wrench into any business plan and alter numbers. At that point, you’re not evaluating a clear picture of your cash cycle.
Dig deep to identify any areas for improvement. It doesn’t matter if you can ultimately change a process; you just want to identify every potential opportunity to improve.
Make a Decision
Armed with your data, it’s time to make a decision about your processes. Which ones cost the most? Where do you lose the most time?
It’s not enough to point out the weak points in your cycle. Now is the time to take a rational look at each step of the process. You may be tempted to start with your weakest link, but that may not be wise.
This is the time to consider leverage, or which process you can improve for the greatest return on investment (ROI). It may not be the worst performing process on your list, especially if that process would take a lot to fix or you don’t know how to begin. Ask yourself four questions about each process:
- Why is this step an issue? Determine the causes or decide to evaluate the step for a longer period to identify the source of delays.
- Should it be a problem? Some problems are external and beyond your locus of control, like a supplier. Your only option in those circumstances may be a new supplier.
- What happens if I make a change in the process? Consider the repercussions of making a change. You may want to make a list.
- What if I leave it alone? Weight the benefits against potential losses because some processes are better left alone.
Look for the place that costs the least (time, money, effort) and gains the most in return. Sometimes a slight gain in one area has a ripple effect that improves every process across the board.
Redesigning Your Core Business Process
There is a difference between optimizing and redesigning your business processes. When you undertake a redesign, you commit to a complete overhaul of your existing processes to make massive changes.
Business process redesign requires a thorough audit of your existing business. Once you feel comfortable with the information you have at your disposal, do one last review to make sure redesign is necessary. If so, get started!
- Identify and outline clear goals, including desired results.
- Analyze existing core business processes to identify gaps or room for improvement.
- Create and detail the changes.
- Put the new processes in place and monitor their effectiveness.
Best Practices for Managing Core Business Processes
Congratulations, you created (or refined) your business model, identified your core processes, and identified opportunities for change. Maybe you already pushed some changes into place. If so, kudos to you!
Establishing business processes is only half of the equation. You need to manage them and monitor for areas of improvement. Remember, as the world changes, you may find new resources or encounter obstacles that require adjustments.
What is Your Reason for Change?
Sure, it’s fun to switch things up once in a while. However, when it comes to business, change for the sake of change is not just frustrating; it’s foolish.
Before altering a business process, it’s important to ask yourself three questions.
- Is this change driven by performance?
- Is the change driven by the community or stakeholders in the company?
- Does this change align with criteria set forth by the organization’s mission, vision, and values?
If you answer no to any of these questions, you should probably take a second look at the proposed change.
To be effective and successful, changes to business processes should improve things for your team or your stakeholders and align with your mission.
Be Transparent About Changes
Do you remember a time that you had to change your way of working because management told you to? Did they explain the reason for the change? If not, how did that make you feel?
Transparency with everyone involved in changes to business processes is paramount.
Customers and suppliers need to know if they have new contacts.
Team leads and supervisors need to know about new hires or transfers to other departments.
Handling changes openly makes transitions easier for everyone involved.
Your team can prepare and adjust to the new expectations, and external partners can accommodate the changes on their sides.
Remain Open to Feedback
Business revolves around people, so it helps to hear the input of those around you. Employees, colleagues, suppliers, and customers can provide unique perspectives into your business processes if you let them.
If you notice grumblings from certain departments or regular complaints from specific customers, you may have a problem to address.
Communication is key and could help you identify or solve an issue with your core business processes in a way that satisfies everybody.
Establish Goals and Timelines
Whenever you initiate a change, make a plan that includes definitive goals and timelines. Even if you don’t hit every spot, you have an opportunity to gauge what works and what needs help.
Clearly defined goals and end dates help you avoid some common missteps. Too much information overwhelms you and muddies the bigger picture.
Further, goals help you define what you plan to measure and determine if the change is beneficial.
Avoid Complacency
When you manage a business or organization, you’re in it for the long haul. That said, one successful change is not the end of the road.
You may need to enact several more changes down the line, so don’t fall into complacency after one successful transition.
The buck stops with you, so if you simply maintain the status quo, your team will follow suit. You may miss out on some incredible opportunities or fail miserably if you encounter an obstacle (like a pandemic!).
Common Problems with Core Business Processes and How to Fix Them
What if you know there’s a problem with your business processes, but can’t figure out where? It happens.
Sometimes you can’t step back and see the big picture, but other times it’s impossible to see what slips between the cracks.
Maybe the process itself is like Alice’s rabbit hole, and you can’t reach the bottom or crawl out.
Take a breath, grab a notepad, and let’s tackle this together. Note that you may need to call in reinforcements to answer some questions or take a little field trip to see something with your two eyes.
Problem #1 Your Company is Disorganized
Do you run a company where everybody does everything? Probably not. Even if there is cross-training or overlap between departments, it’s doubtful that everybody handles everything.
If your team struggles with boundaries, it can present in different ways. Maybe two people did the same assignment, and another job went unfinished.
Perhaps nobody communicated to HR that one team needed a temp for a day, and they fell behind.
Organizational issues between departments can wreak havoc on a company. You need to address it immediately.
Make sure your team, and all of your partners, understand everybody’s roles within the company. Keep lines of communication open to keep things moving smoothly.
Problem #2 You Don’t Leverage Technology Correctly
Who remembers learning the Dewey Decimal System and flipping through card catalogs at the library to find a book?
While libraries still rely on the Dewey Decimal System, most card catalogs went the way of the DoDo.
Integrated communication systems allow library patrons to access millions of digital titles and request items from different branches or cities.
The library system still needs librarians, but their world changed dramatically over the past thirty years.
Would librarians be as successful if every library used a different organizational system? What if their computers couldn’t communicate with each other at all, or had to work through a translation program?
The same is true for businesses relying on software, like CRMs. If you don’t have a standardized system for tracking your business needs, like communication and inventory.
The graph below shows the usage of different automation technologies in organizations worldwide. Around 36 percent of the respondents stated that they had been implementing RPA (Robotic Process Automation) in their organization, with 31 percent using such technology in selected functions and 5 percent implementing it extensively:
Do a thorough audit of your existing system.
Look for any gaps in communication or information exchanges. Make sure team members have access to all information they need to work effectively.
Problem #3 Your Company Loves the Status Quo
Change is frightening for many people, but as we discussed previously, it’s necessary for business. Complacency is comfortable and convenient, like a ratty, old college sweatshirt on laundry day.
Would you wear the ratty old sweatshirt on a date? Probably not, at least not if you want to make any type of impression on your date. The same is true about businesses that refuse to upgrade from comfort to innovation.
There are two typical causes of complacency in the business world – ego and fear. Let’s start with ego, the manager who refuses to relinquish control or embrace new ideas.
Ruling with an Iron Fist
Be honest, look in the mirror, and ask your reflection if you’re the ratty, old sweater unwilling to admit that there could be a better way. No? That’s not you? Great, admitting you’re open to change means you can move on to the other common cause.
On the other hand, if you can honestly admit that you are a barrier to change, it’s time to rip that sweater off and step out of your comfort zone. Trust us, it will be okay!
Don’t Rock the Boat
Take some time to evaluate your work environment. Do team members feel like they can speak up and make suggestions?
Employees see issues with processes they use every day, but if they don’t feel it’s safe to speak up, they won’t. It’s a sign of distrust within your organization.
Don’t worry, all is not lost. It just means you need to take a different approach and find the source of fear.
Try initiating open-door policies, surveys, and town halls to encourage your team to share ideas. It may take time to establish trust, but it will open the door to real progress.
Problem #4 We Need that in Triplicate
Who remembers the dreaded team projects in grade school that inevitably resulted in one person doing nothing, one doing the wrong thing, and two others completing the same thing?
Miscommunication occurs in the business world as much as it did in Mrs. Johnson’s 4th-grade classroom.
Failed team projects in the business world can mean significant losses. If you’re lucky, it costs a little time and money, but you could lose customers if it happens too often, or the mistakes are egregious.
Is this an issue for your company? Roll up your sleeves and get down to business. Investigate the trend to see where things go awry so you can fix it.
Cutting out redundant processes will streamline your process and save you in the long run.
Problem #5 You Don’t Have Access the Information You Need
“Tell me about a time you had to make a decision without all of the facts. How did you handle it? Would you do anything differently?”
This is an excellent interview question because it can tell you a lot about a person’s character. However, when it comes to managers making decisions about business processes, insufficient or inaccurate information can lead to bad choices.
If you suspect issues with reporting, it needs to be remedied immediately. Analyze your situation to see where the gaps are and determine how to fix them.
- Real-time reporting is beneficial in many situations, but not always possible.
- Too much information is as detrimental as too little information.
- Are the timelines and goals reasonable for your team?
- Watch out for obstacles or events that temporarily impacted the numbers but resolved. Don’t make decisions based on those numbers.
