The four business functions and how they depend on each other

How could a bakery's best morning turn into its worst? Imagine a small bakery's video of its cinnamon buns goes viral overnight. The next day, four hundred people queue down the street. By ten o'clock the buns are gone, and two exhausted staff are still facing the queue. Nobody ordered flour for tomorrow, and angry comments pile up under the video. So why did the bakery end the day worse off? Hold on to that queue, because every business has the same weak spot.

Every business has four main jobs that have to be done for it to run, and each of those jobs is called a business function. A business function is one area of work that every business carries out, whatever it sells. The first is operations. Operations is the function that makes the product or provides the service. In the bakery, operations is everything that turns flour into buns, from ordering supplies to checking each batch is good enough to sell. Finance is the function that looks after the money coming in and going out. For the bakery, finance makes sure there is cash in the bank to pay for tomorrow's flour. Marketing is the function that finds out what customers want and makes sure they hear about it. The bakery's video of its buns was marketing at work. Human resources is the function that looks after the people who work in the business. That covers recruiting staff, training them and keeping them motivated. In the bakery, human resources decides who is on shift each morning. Now try naming one yourself. A dental practice books its new receptionist onto a first-aid course. Which business function is the practice carrying out? It is human resources, because training staff is part of looking after the people who work there. These functions are jobs that need doing, and they are not always separate departments. Picture Priya, who runs a phone-case stall as a sole trader, which is a business owned by one person. At seven in the morning Priya orders new stock, which is operations. At noon she posts photos of her new cases online, which is marketing. At six in the evening she counts the day's takings, which is finance. When she hires a Saturday helper, she is doing human resources. One person can carry out all four functions in a single day. In a large company each function may be a department of hundreds of people, but the jobs are the same.

The four functions cannot work on their own, because what one function does changes what happens in the others. That link is called interdependence. Interdependence means the functions depend on each other, so an action in one part of the business affects the outcomes in another. Now a question about the bakery's morning. When the queue arrived, which function ran out of something first? Operations ran out first. Marketing had brought in four hundred customers, but operations had no extra buns, no spare oven time and no flour ordered for tomorrow. The same success landed on human resources, which had planned two people for a normal day. Four hundred customers met two worn-out staff, and that is where the angry comments came from. It landed on finance too. Finance had set aside no cash for extra flour or extra wages, so the bakery could not buy its way out of the shortage. So the bakery ended the day worse off because marketing worked alone. Its success overloaded the three functions nobody had told. Links run in every direction, not only out of marketing. If finance cuts the advertising budget, marketing can do less promotion. If human resources hires new bakers without training them, operations gets burnt batches and wasted flour. Now a new case to trace for yourself. A gym is short of cash, so its finance team delays the pay rise its trainers were promised. Which other function feels the delayed pay rise for the trainers, and what happens there? Human resources feels it. Trainers who expected more money may lose motivation, and some may leave, so the gym has to recruit and train replacements.

When a question names two functions, the answer traces the effect from the first function into the second, in three steps: point, apply and impact. The point says what changes. Apply ties it to a fact from the business in the question, and the business's name on its own is not a fact. Impact says what that change does to the business's sales, costs or profit, joined on with the words which means. Here is a case to work. Fernleaf Garden Centre's finance team has cut next year's marketing budget by twelve thousand pounds, to save money after a poor winter. That twelve thousand pounds used to pay for a spring radio advert and a leaflet drop before Fernleaf's Easter plant sale. The task is to analyse one way the cut affects Fernleaf's marketing. Start with the point. A smaller budget means the marketing function can do less promotion. Which fact from Fernleaf's case belongs in the apply step? It is the radio advert and the leaflet drop before the Easter plant sale. That is what the twelve thousand pounds paid for, so that is the promotion Fernleaf loses. Now the impact. Without the advert and the leaflets, fewer local gardeners hear about the sale, which means fewer of them come in during Fernleaf's busiest season. Spring revenue, the money that comes in from sales, falls. That is the money that carries Fernleaf through the summer. A saving made by finance could cost Fernleaf more in lost sales than it saves. One examiner's report on a short question like this, asking how one named function affects another, says, "This question was very poorly answered with two thirds of candidates gaining no marks." Two in every three students scored nothing on it. The fix is the habit you just watched: make a point, add a fact from the case, then give the impact, traced from the first function named into the second. Now a different kind of question, with four options. A phone-case maker runs a social media campaign that doubles its orders in a month. Which of these is the impact on its operations function? A, it spends more money on the campaign. B, it needs to make twice as many cases and order more materials. C, it receives more applications from people who want to work there. D, it pays more interest on its bank loan. It is B. Operations makes the product, so doubled orders mean making twice as many cases and buying more materials from suppliers. Now a question about the options that lose. Why is the answer not A, when the story is all about a campaign? A is money spent on promotion, which belongs to marketing and finance. C belongs to human resources, and D is finance. The story is about marketing, but the question names operations, so the answer has to be about operations. One examiner's report on a multiple-choice question built the same way noted that the question mentioned marketing and advertising. Then it said, "it is the impact on the operations function that is required." The habit that fixes it is to underline the function the question names before you read the story, and then answer about that function.

A business sets objectives, which are targets it wants to reach by a set time, and every function then needs its own plan to get there. Bramble and Bean runs one cafe. Its owners set this objective: open a second cafe in the next town within twelve months. What would each of the four functions need in its plan for that second cafe in the next town? Try it on paper before I show you the answer. Marketing's plan is about the new customers. It researches the next town and its rival cafes, then sets prices and plans an opening promotion. Operations' plan is about the building and the supplies. It finds and fits out premises, buys a second coffee machine, and agrees milk and bean deliveries for two sites. Human resources' plan is about the people. It recruits and trains six new staff and a manager for the new cafe. Finance's plan is about the money. It works out the cost, about sixty thousand pounds, arranges the money, perhaps with a bank loan, and forecasts cash for the first few months. Now a different question about those plans. Human resources wants to advertise for six staff straight away. Which plan has to be agreed before that, and why? The finance plan comes first. Bramble and Bean cannot hire six people until finance shows it can pay their wages before the new cafe earns enough to cover them. That is one objective, four plans, and a clear link between two of them. A good link always names both functions and says what one needs from the other. One examiner's report on a question about functions working together records that some students "did not answer the question, not considering any functions and received no marks." The fix is to name the functions in every sentence, and the link between them, the way the finance and human resources link does for Bramble and Bean. Links also start outside the business. A new law, a rise in costs or a new rival lands on one function first, then spreads to the others. Picture the price of coffee beans jumping by a third. It lands first on Bramble and Bean's operations, which now pays more for every bag. Where does that rise in the price of coffee beans travel next, and what decision does it force? It travels to finance, because costs rise and the profit on each coffee shrinks. That pushes a decision onto marketing: raise the price of a latte and risk losing customers, or keep it and earn less. That is why these links sit under every decision. Before a decision in one function, check what it needs from the other three, and what it does to them.

Now you do the recalling, one question at a time.

What are the four business functions? They are operations, finance, marketing and human resources.

Now a second question. Does every business have a separate department for each function? No. A sole trader can carry out all four functions alone, because the functions are jobs that need doing, not always departments.

Now a hotel, as a new case. It cuts the training for its new receptionists. Which function feels that, and how? Operations feels it, because receptionists provide the hotel's service. Untrained staff make booking mistakes, which means guests get the wrong rooms and some never come back.

One more for you. A question asks how marketing affects operations. In which function does your answer finish? It finishes in operations, the second function named, with a fact from the case at every step.

Now picture the bakery's morning again, with the four functions planned together. Before the video goes out, marketing warns operations, so the flour is ordered and the ovens start at five. Human resources puts four people on shift. Finance has already set aside cash for the extra stock. The queue is just as long. This time the bakery keeps selling all day, and the customers leave happy enough to come back.

If you could teach this one to a friend now, give it a thumbs-up, and you will know not to come back to it. If it has not landed yet, save it. Each function gets a chapter of its own later in the course, so they come back round anyway.

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