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Examples and Types of Effective Functional Level Strategy for Business Support

Published: 20 April, 2024

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A key objective of any business strategy is to improve operational efficiencies and customer satisfaction, aligning these enhancements with the company’s broader strategic goals . Functional level strategy meaning extends beyond mere tactical adjustments as a level of business strategy ; it involves a profound understanding of how each strategy supports and enhances the business goals , ensuring that every effort made is synchronized with the overarching ambitions of the company. This article will guide you through what functional level strategy entails, its different types, and how real-world businesses successfully implement these strategies to excel in their fields.

Digital Leadership, a digital strategy and execution firm, will guide you through what functional level strategy entails, its different types, and how real-world businesses successfully implement these strategies to excel in their fields.

What is Functional Level Strategy?

Functional level strategies encompass the actions and objectives allocated to different departments to bolster your business level strategies and corporate level strategies . These strategies delineate the desired results to be attained through the daily operations of specific business functions. It refers to the specific managerial tactics implemented within distinct areas of an organization, such as marketing, operations, or finance, to support broader business and corporate level strategies . It focuses on maximizing resource productivity and achieving operational excellence in specific departments. A financial strategy encompasses both the management of current assets and the strategic investment for future growth, reflecting how tightly interlinked strategy is with fiscal health and expansion. 

In functional level strategies , functional managers play a crucial role in this process, executing the functional plans that propel the organization forward. To continue with the example, consider the strategy of increasing market share through targeted advertising and improved customer engagement, demonstrating how a strategic focus on customer acquisition is integral to the success of the business.

The 3 Types of Business Strategy Levels

In business strategy , functional strategies play a crucial role as short-term plans with specific objectives, such as enhancing operational efficiencies or expanding market share. Within the broader framework of business strategy, the three levels of strategy —corporate, business, and functional—are essential components designed to address immediate needs while contributing to long-term business goals . While strategy types may vary across industries, the overarching aim often revolves around increasing market presence and efficacy. The hierarchical structure of strategic planning encompasses:

• Corporate-Level Strategy : This level dictates the overall scope and direction of the corporation, determining its business lines and target markets.
• Business-Level Strategy : Here, the focus shifts to how the company competes within each market or industry, with an emphasis on competitive positioning and differentiation.
• Functional-Level Strategy : At this level, the focus lies on operational and tactical approaches to achieving the objectives outlined by higher-level strategies. It involves maximizing efficiency and effectiveness in specific areas of operation.

Overall, these levels of strategy work in tandem to drive the organization forward, balancing short-term imperatives with long-term aspirations.

Types of Functional Level Strategy

Functional strategies encompass a variety of focus areas, each critical to the organization’s success:

1. Marketing Strategy

This strategy is the cornerstone of connecting with customers and achieving a competitive edge in the market. It involves thorough market segmentation and targeting to identify specific customer groups and tailor products or services to their needs and preferences.

• Product differentiation strategies focus on creating unique value propositions to stand out from competitors.
• Promotional campaigns aim to raise brand awareness, drive sales, and build customer loyalty through various channels such as advertising, public relations, and digital marketing.
• Pricing strategies involve setting optimal prices to maximize profits while remaining competitive in the market.

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2. operational strategy.

Operational strategies are geared towards optimizing internal processes to enhance efficiency and productivity.

• Lean manufacturing principles aim to eliminate waste and streamline operations to deliver high-quality products or services at minimal cost.
• Just-in-Time (JIT) inventory management ensures that inventory levels are closely aligned with demand to minimize carrying costs and avoid stockouts.
• Total Quality Management (TQM) focuses on continuous improvement and maintaining high standards of quality throughout the production process.
• Supply chain integration involves collaborating closely with suppliers and distributors to improve coordination and responsiveness to customer demand.

3. Financial Strategy

Financial strategies are vital for ensuring the sound management of the company’s financial resources.

• Cost leadership strategies aim to minimize expenses while maintaining quality to gain a competitive advantage in pricing.
• Capital structure optimization involves finding the optimal mix of debt and equity financing to minimize the cost of capital and maximize shareholder value.
• Profit maximization strategies focus on increasing revenue and controlling costs to maximize profits.
• Risk hedging strategies involve mitigating financial risks through techniques such as hedging against currency fluctuations or interest rate changes.

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5. research and development (r&d) strategy.

R&D strategies are crucial for driving innovation and maintaining a competitive edge in the market. These strategies focus on developing new products or improving existing ones to meet underserved customer needs and stay ahead of competitors.

• Technological advancement strategies involve investing in research and development to leverage emerging technologies and stay abreast of industry trends.
• Intellectual property protection strategies safeguard innovations through patents, trademarks, and copyrights.
• Collaborative research initiatives with academic institutions or industry partners can facilitate knowledge sharing and accelerate innovation.

6. Information Technology (IT) Strategy

IT strategies play a critical role in supporting business operations and driving digital transformation.

• Cloud adoption strategies involve migrating IT infrastructure and applications to cloud platforms to increase scalability, flexibility, and cost-effectiveness.
• Cybersecurity strategies aim to protect against cyber threats and ensure the confidentiality, integrity, and availability of data and IT systems.
• Digital transformation strategies involve leveraging technology to streamline processes, improve customer experiences, and gain insights from data.
• IT governance frameworks ensure that IT investments align with business objectives and comply with regulatory requirements.
• Infrastructure optimization strategies focus on maximizing the performance and efficiency of IT infrastructure and systems.

7. Risk Management Strategy

Risk management strategies are essential for identifying, assessing, and mitigating risks that could impact the organization’s objectives.

• Enterprise risk management frameworks provide a systematic approach to managing risks across the organization, considering both internal and external factors.
• Defining risk appetite involves setting boundaries for the types and levels of risk that the organization is willing to accept in pursuit of its goals.
• Crisis management plans outline procedures for responding to and recovering from unforeseen events or emergencies.
• Insurance strategies involve transferring certain risks to insurance providers to mitigate financial losses.
• Compliance with regulatory frameworks ensures that the organization operates within legal and ethical boundaries.

8. Supply Chain Strategy

Supply chain strategies are critical for ensuring the efficient flow of goods and services from suppliers to customers.

• Managing relationships with suppliers involves establishing collaborative partnerships based on trust, transparency, and mutual benefit.
• Optimizing logistics involves selecting the most cost-effective transportation routes and modes to minimize lead times and transportation costs.
• Inventory management strategies aim to balance inventory levels to meet customer demand while minimizing carrying costs and obsolescence.
• Focusing on sustainability and ethical sourcing involves promoting environmentally friendly practices, ensuring fair labor conditions, and adhering to ethical standards throughout the supply chain.

Examples of Functional Level Strategy

1. marketing functional level strategy examples.

• Segmentation and Targeting: By understanding customer segments, companies can tailor their marketing efforts to address specific needs, increasing efficiency and effectiveness.
• Product Differentiation: Distinguishing products from competitors’ offerings can attract a loyal customer base and enhance market share.
• Promotional Campaigns: Effective campaigns increase visibility and drive customer engagement.
• Pricing Strategy: Strategically setting prices can optimize revenue while maintaining competitiveness.

2. Operations Strategy Functional level Strategy Examples

• Lean Manufacturing: Reduces waste and increases process efficiency.
• Just-in-Time (JIT) Inventory Management: Minimizes inventory costs and reduces waste.
• Total Quality Management (TQM): Ensures that all aspects of production meet high-quality standards.
• Supply Chain Integration: Streamlines operations from production to delivery, enhancing speed and reducing costs.

3. Financial Strategy Functional level Strategy Examples

• Cost Leadership: Achieving the lowest operational cost to gain competitive advantage.
• Capital Structure Optimization: Balancing debt and equity to minimize cost of capital.
• Profit Maximization: Focuses on increasing the bottom line.
• Risk Hedging: Protects against financial risks through strategic financial instruments.

4. Human Resource Functional level Strategy Examples

• Talent Acquisition and Retention: Ensuring that the organization attracts and retains skilled employees is crucial for maintaining competitive advantage and innovation.
• Employee Training and Development: Investing in the development of employees not only improves their productivity but also enhances their satisfaction and loyalty.
• Performance Management: Effective performance management systems help align individual achievements with business goals, enhancing overall productivity.
• Workforce Diversity and Inclusion: Embracing diversity and fostering an inclusive environment leads to more creative and innovative solutions.

5. Research and Development (R&D) Functional level Strategy Examples

• Product Innovation: Continuously improving and innovating products to meet customer needs and stay ahead of competitors.
• Technological Advancement: Investing in new technologies that enhance product features and production processes.
• Intellectual Property Protection: Safeguarding innovations to maintain competitive advantage and company value.
• Collaborative Research: Partnering with academic institutions, industry leaders, and other organizations can accelerate R&D efforts and bring new insights.

6. Information Technology (IT) Functional level Strategy Examples

• Cloud Adoption Strategy: Leveraging cloud technology to enhance flexibility and scalability of IT resources.
• Cybersecurity Strategy: Implementing robust security measures to protect data and operations from cyber threats.
• Digital Transformation Strategy: Integrating digital technology into all areas of a business, fundamentally changing how businesses operate and deliver value to customers.
• IT Governance Framework: Establishing a structure for aligning IT strategy with business objectives and ensuring effective management of IT resources.
• IT Infrastructure Optimization: Streamlining IT infrastructure to improve performance and reduce costs.

7. Risk Management Functional level Strategy Examples

• Enterprise Risk Management (ERM): A comprehensive approach to identifying, analyzing, and responding to potential risks.
• Risk Appetite Definition: Determining the level of risk the company is willing to accept in pursuit of its objectives.
• Crisis Management Plan: Preparing for potential business disruptions and ensuring a quick and effective response.
• Insurance Strategy: Using insurance to mitigate financial losses from various risks.
• Compliance and Regulatory Strategy: Ensuring all business practices conform to legal and ethical standards.

8. Supply Chain Functional level Strategy Examples

• Supplier Relationship Management: Developing strong relationships with suppliers to ensure reliability and cost-effectiveness.
• Demand Forecasting and Planning: Using advanced analytics to predict customer demand and optimize inventory levels.
• Logistics Optimization: Enhancing the efficiency of transportation and distribution to reduce costs and improve delivery times.
• Inventory Management Strategy: Implementing systems to maintain optimal inventory levels, reducing holding costs and avoiding stockouts.
• Sustainability and Responsible Sourcing: Emphasizing ethical sourcing and environmental responsibility in the supply chain.

Key Variables of Developing Functional Level Strategy

Detail-oriented approach.

Implementing functional level strategies demands a meticulous attention to detail. Each aspect of a functional plan—from task delegation to monitoring outcomes—requires precision to ensure alignment with broader goals.

Capabilities, Goals, and Performance Metrics

Effective strategies are built on a clear understanding of a department’s capabilities and the strategic goals it aims to achieve. Setting measurable performance metrics is crucial for assessing success and making necessary adjustments.

Customer Needs and Preferences

Strategies must be responsive to customer needs and preferences, which can vary significantly across different market segments. Tailoring approaches to meet these needs can significantly enhance customer satisfaction and loyalty.

Alignment with Higher Strategies

Functional strategies must dovetail with business and corporate level strategies , ensuring that all efforts are cohesive and synergistically driving the organization towards its overarching objectives.

Horizontal Integration Across Departments

Cooperation across departments can streamline processes and foster innovation. Horizontal integration helps in sharing best practices and leveraging expertise from various functional areas.

Progress Measurement

Regular progress tracking is essential to determine the effectiveness of strategies and guide future adjustments. This involves analyzing performance data and benchmarking against predefined metrics.

Case Study of Implementing Functional Level Strategy: Amazon and Apple

Amazon exemplifies the successful implementation of functional level strategies. Their meticulous approach to customer service, logistics, and inventory management has established them as a market leader. By aligning their operational strategies with innovative technology and customer-centric policies, Amazon continuously enhances efficiency and customer satisfaction.

Also, the strategy of Apple, known for its innovative approach, demonstrates how a functional strategy is important not just as a short-term plan but as a continuous commitment to excellence and market leadership. An example of a functional-strategy that Apple employs is its marketing approach, designed to increase market share and integrate seamlessly with its strategy.

How to Implement Functional Level Strategy

1- understanding corporate strategy.

Grasping the overarching corporate strategy is the first step. This understanding shapes the functional level strategies ensuring they contribute to the broader goals of the organization.

2- Assessing Functional Capabilities and Resources

Evaluate the current capabilities and resources available within the functional areas. This assessment helps identify strengths to leverage and gaps to fill.

3- Identifying Alignment Opportunities

Look for ways to align functional level strategy with business-level strategies . This ensures that functional teams are not only fulfilling their roles but also contributing to larger business objectives.

4- Setting Functional Objectives and Priorities

Define clear objectives and priorities for each functional area, aligned with the overall business goals. These should be specific, measurable, achievable, relevant, and time-bound (SMART).

5- Developing Action Plans and Implementation Roadmap

Create detailed action plans and a roadmap for implementation. This includes timelines, resource allocations, and key milestones to track progress.

6- Fostering Communication and Collaboration

Enhance communication and collaboration across teams to ensure everyone is aligned with the functional and corporate strategies. This fosters a culture of transparency and collective responsibility.

7- Reviewing and Revising Strategies

Continuously review and revise strategies based on performance data and changing market conditions. This agility allows the organization to stay relevant and competitive.

The Benefits of Functional Level Strategy in Strategic Management

Functional level strategies are pivotal for translating high-level business goals into specific, actionable plans that address daily operations tailored to share and your business strategy and strategic objectives. These strategies enable organizations to optimize their operations across various departments, ensuring that every component contributes effectively to the achievement of the overall strategy .

Functional level strategy, including examples of functional level strategy such as supply chain management and quality control, are crucial for maintaining high product quality and operational efficiency. These strategies help manage the intricate details of daily operations , ensuring that the overarching goals and objectives are met.

Frequently Asked Questions

How do functional strategies contribute to achieving organizational objectives.

It break down broad organizational objectives into specific actions and goals and objectives for each department. By optimizing operations and focusing on department-specific goals, It ensure that every part of the organization is working effectively towards the common objectives, thus driving overall success. They are vital for the execution of complex processes and enhance the organization’s ability to respond to market changes swiftly.

Why is understanding functional level strategy important for achieving organizational objectives and ensuring alignment with overall strategy?

• Alignment : Functional strategies ensure that each department’s efforts support overarching business goals.
• Resource Optimization : They guide efficient allocation of resources like budget and personnel.
• Coordination : Functional strategies help departments work together smoothly towards common objectives.
• Risk Management : They identify and address risks specific to each function, ensuring resilience.
• Adaptation : These strategies allow quick adjustment to changing market conditions and business needs.

Functional level strategies are the building blocks of a company’s overall strategy, crucial for achieving specific operational goals. By effectively implementing strategies across different functional areas, businesses can enhance their overall performance and competitive position in the market. Examples of functional level strategies include targeted marketing campaigns, streamlined logistics for supply chain management , and innovative product development processes.

Key Takeaways

• Understanding and applying functional level strategies is essential for operational excellence and strategic alignment.
• Each functional area requires tailored strategies that align with overall business objectives.
• Digital Leadership’s consulting services, particularly in innovative and digital transformation consulting, are vital for modern businesses to effectively implement and optimize these strategies.
• Real-world examples demonstrate the significant impact of well-executed functional strategies on business success.
• Types of Business Strategy: There are three types of strategies: cost leadership, differentiation, and focus.
• Types of Functional Strategy: It include production strategy, sales strategy, and human resource strategy.
• Role of Functional Strategy: Every functional level strategy focuses on specific functional areas and supports the overall strategic goals of the organization.
• Importance of Functional Strategy: It plays a crucial role in aligning each functional area with the overall business strategy to ensure integration and achievement of strategic goals.
• Example of Functional Strategy: For instance, Apple’s sales strategy revolves around increasing market share, aligning with its overall business strategy of differentiation and innovation.
• Integration of Functional Level Strategies: Functional level strategies integrate with corporate level strategy and involve the involvement of multiple functional areas to execute the overall strategic plan effectively.
• Finance Strategy: Finance strategy encompasses the management of financial resources and aspects of financial management within the organization.
• Execution of Functional Strategy: It involves developing and implementing short-term plans to achieve specific functional goals, supporting the overall strategy.
• Example with Human Resource Strategy: Human resource strategy involves developing strategies at the functional level to support the management of personnel and talent within the organization.
• Overall Strategic Alignment: Functional level strategy helps in achieving strategic goals by aligning each particular functional area with the strategy to ensure coordination and integration.

  A key objective of any strategy is to improve operational efficiencies and customer satisfaction, aligning these enhancements with the company’s broader strategic goals . 

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The Role of Functional Strategy in Achieving Business Goals

Category: Strategy Management .

Introduction

Strategic planning is a vital process for any business, but it can also be a waste of time if not done properly. According to Gartner , business executives say that 56% of the time spent on strategic planning is wasted. How can functional leaders ensure that their strategic planning is productive and aligned with the business goals? The answer is functional strategy.

Functional strategy is not only important for each function but also for the whole organization. When the functional strategies are aligned and integrated, they create a powerful synergy that propels the business forward. Each function contributes to the value creation and competitive advantage of the business, while also collaborating and coordinating with other functions to ensure harmony and consistency. Functional strategy is the essence of organizational excellence.

In this article, we will explore the significance of functional strategy in achieving business success. We will provide insights into how to develop and implement effective and efficient functional strategies for each department, and how to harmonize them with the broader business strategy and goals. By understanding and fine-tuning these strategies, you will be able to enhance your operational performance, secure your competitive edge, and fulfill your business aspirations.

Understanding Functional Strategy

Functional strategy is the set of specific, focused actions and plans that each department or function within a company develops and implements to support the overall business strategy and objectives. It is different from corporate strategy, which defines the overall direction and scope of the company, and business-level strategy, which determines how the company competes in its chosen markets. Functional strategy is more concerned with how each function performs its tasks and activities to contribute to the company’s success.

6 Types of Functional Strategy

Functional strategy is important because it helps align the actions and goals of each function with the overall business goals. It ensures that each function is working towards the same vision and mission and that they are coordinated and integrated with each other.

Finance and Accounting Functional Strategy

Finance and accounting are the functions that manage the company’s financial resources and transactions. It is responsible for planning, organizing, controlling, and reporting the financial activities and performance of the company. Finance and accounting support the business goals by providing accurate and timely financial information, analysis, and advice to the management and other stakeholders. It also helps the company achieve its financial objectives, such as profitability, growth, and stability.

Examples of finance and accounting strategies

Finance and Accounting Functional Strategies are essential for managing a company’s financial health and ensuring compliance with financial regulations. Here are some real-life examples that demonstrate these strategies:

Microsoft’s Capital Allocation Strategy: Microsoft’s approach to finance involves prudent capital allocation, ensuring that its investments yield optimal returns. The company strategically balances its portfolio between research and development, acquisitions, dividends, and share buybacks. This strategy not only supports growth but also maximizes shareholder value, demonstrating effective financial stewardship.

Berkshire Hathaway’s Value Investing Approach: Led by Warren Buffett, Berkshire Hathaway’s finance and accounting strategy revolves around value investing. The company carefully analyzes potential investments, focusing on long-term growth and intrinsic value rather than short-term market trends. This approach involves meticulous financial analysis and disciplined accounting practices, contributing to the firm’s substantial growth and profitability over the years.

Apple’s Tax Strategy: Apple’s financial strategy includes efficient tax planning. The company has been known for utilizing various legal avenues to minimize its tax liabilities, such as locating subsidiaries in countries with lower tax rates. This strategy, while controversial, reflects a complex understanding of international finance and tax laws, helping Apple to maximize its profits.

General Electric’s (GE) Diversification and Risk Management: GE’s finance strategy historically involved diversification across multiple industries, which was complemented by a robust risk management approach. This strategy allowed the company to balance risks and rewards across different sectors, maintaining financial stability even in turbulent markets. However, in recent years, GE has shifted its strategy to focus more on its core businesses, demonstrating adaptability in its financial planning.

Starbucks’ Financial Reporting and Sustainability Initiatives: Starbucks emphasizes transparency in its financial reporting, integrating corporate social responsibility (CSR) into its financial strategy. The company provides detailed reports on its sustainability initiatives and social impact, aligning its financial goals with broader social objectives. This approach not only fosters trust among investors and customers but also demonstrates how financial strategies can be aligned with ethical and environmental considerations.

“Manage the top line: your strategy, your people, and your products, and the bottom line will follow.” Steve Jobs

Marketing and Sales Functional Strategy

Many marketing leaders struggle to see the results of their strategic plans. According to Gartner , only 13% of marketing leaders have seen results from their strategic plans. How can marketing and sales leaders improve their strategic planning and execution? The answer is marketing and sales functional strategy. A marketing and sales functional strategy is a plan that aligns the activities of the marketing and sales departments with the overall business objectives. It helps to define the target market, the value proposition, the marketing mix, and the sales process for a product or service. It also helps to measure and improve the performance of the marketing and sales functions by using metrics and feedback mechanisms.

Examples of marketing and sales functional strategy

Marketing and Sales Functional Strategies are pivotal in driving business growth, brand recognition, and customer engagement. Here are some real-life examples that showcase these strategies effectively:

Coca-Cola’s Global Branding Strategy: Coca-Cola’s marketing strategy is a prime example of successful global branding. The company has created a universally recognizable brand through consistent messaging, iconic advertising campaigns, and strategic sponsorships. Coca-Cola’s ability to adapt its marketing to local cultures while maintaining a consistent global brand image demonstrates a highly effective international marketing strategy.

Nike’s Just Do It Campaign: Nike’s “Just Do It” campaign is an iconic example of a sales and marketing strategy that connects with consumers on an emotional level. The campaign, which focuses on inspiring athletes of all levels, has helped Nike to position itself as more than just a product but as a symbol of motivation and perseverance. This emotional branding strategy has been instrumental in driving sales and reinforcing Nike’s position as a leader in the athletic apparel market.

Apple’s Premium Pricing Strategy: Apple’s marketing and sales strategy involves positioning its products as premium and aspirational, which justifies its higher price points. The company’s focus on innovative design, high-quality materials, and a seamless user experience, combined with effective marketing, has created a strong brand loyalty. This strategy not only drives sales but also establishes Apple products as a status symbol

Spotify’s Freemium Model and Personalized Playlists: Spotify’s marketing strategy includes offering a freemium model where users can access basic services for free but pay for premium features. This strategy is complemented by personalized playlists and recommendations, which enhances user experience and engagement. By leveraging data to understand user preferences and create custom content, Spotify not only retains users but also effectively converts free users to paid subscribers.

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Operations and Supply Chain Functional Strategy

Operations and Supply Chain Functional Strategy is a topic that deals with how a business manages its operations and supply chain activities to achieve its strategic goals and objectives. It involves planning, designing, implementing, and controlling the processes and resources that create and deliver value to customers and stakeholders.

Examples of operations and supply chain functional strategy

Operations and Supply Chain Functional Strategy are crucial elements in business, focusing on optimizing processes to ensure efficient production, distribution, and service delivery. Here are some real-life examples that illustrate these strategies:

IKEA’s Cost-Efficient Supply Chain: IKEA’s operations strategy focuses on cost-efficiency and sustainability. The company designs its products in a way that they can be flat-packed, reducing shipping costs significantly. IKEA also sources materials close to its manufacturing facilities to minimize transportation costs and carbon footprint, exemplifying an efficient and environmentally conscious supply chain strategy.

McDonald’s Supply Chain and Operations Management: McDonald’s excels in supply chain and operations management, ensuring consistent quality and service across its global outlets. The company implements a tightly integrated supply chain with rigorous standards to manage its network of suppliers. McDonald’s also uses a sophisticated logistics system to ensure fresh ingredients are delivered timely to its restaurants, which is critical for maintaining food quality and customer satisfaction.

Zara’s Fast-Fashion Supply Chain: Zara’s approach to supply chain management is central to its business model. The company can design, produce, and get clothing to stores in just a few weeks, much faster than traditional fashion retailers. This is achieved through a highly responsive supply chain that allows Zara to quickly react to changing fashion trends and consumer demands, keeping inventory fresh and reducing markdowns.

FedEx’s Use of Technology in Operations: FedEx showcases an advanced use of technology in its operations and supply chain. The company utilizes a highly sophisticated logistics infrastructure that includes real-time package tracking, automated sorting systems, and optimized route planning. This high-tech approach enhances efficiency in package handling and delivery, setting a high standard in the courier and logistics industry.

Final Thoughts

In summary, functional strategy plays a crucial role in bridging the gap between a company’s overarching objectives and the day-to-day operations of its various departments. It’s about aligning each function’s unique strengths and capabilities with the organization’s broader vision, mission, and values. This alignment is key in driving value creation and securing a competitive edge in today’s fast-paced and multifaceted market landscape. The careful planning, execution, and ongoing evaluation of functional strategies are imperative for any business aspiring to thrive. By adeptly managing these strategies, a business meets its current goals and sets the stage for sustained growth and exceptional performance in an ever-evolving corporate world.

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Functional Strategy: What It Is & How to Develop One in 5 Steps

The further down from the top you go, the less familiar your teams are with strategy and how it is executed on a regular basis. 

Recent research for Cascade’s Strategy report revealed an alarming fact: There is still a vast strategic misalignment between C-suite and team members across business functions. 

Although numerous studies and reports have been published on failed strategies, this crucial problem of the strategy remains unsolved.

In this article, we aim to give you a better understanding of how functional strategy fits in this picture, why organizations should care about a functional strategy to drive the execution of top-level strategies, and how functional managers can develop better strategies aligned with corporate strategy. 

Understanding three levels of strategy

We covered strategy levels in depth in this article , so here’s just a short summary of each one to get a better understanding before we dive in functional level strategy: 

Corporate strategy

Corporate strategies are a top-level strategies that defines overall company strategic direction. 

Business strategy 

Business strategy defines a direction and actions of individual business units within the organization. 

Functional strategy

Functional level strategies are those put in place at the operational level of an organization and will facilitate the corporate (or business) level strategy implementation.

In terms of strategic planning, a functional strategy should be the last strategy level created during the strategic management process as it defines the 'HOW are we going to support business objective on the departmental level?’. 

Types of Functional Level Strategies

Here are typical examples of functional-level strategies: 

Human Resources Strategy

HR strategy should outline how the organization will manage its human resources to achieve its strategic goals.

Financial strategy

This strategy highlights how finances will align with company goals for growth and innovation.

Research & Development Strategy

R&D strategy should specify how R&D contributes to corporate strategy by developing competencies through new products, services, and business models.

Marketing Strategy

It can cover many areas, from customer identification to market research to customer acquisition through social media. Still, its primary goal should be to generate demand for the company’s products and services. 

Production Strategy

Production strategies should focus on supply chain management , operation planning , and overall manufacturing system. The main objectives are improving quality, minimizing production costs, and increasing quantity.

The strategic needs and goals of, for example, the Human Resources Management department will differ substantially from those of marketing managers. Most organizations will have multiple functional strategies, and each department needs its own. 

📚Related content: 

• The 3 Levels of Strategy: The Difference & How to Apply Them
• What Is Corporate Strategy And Its 4 Key Components
• Pre-built strategy templates for functional departments
• What Is Business Level Strategy (How To Create + Examples)

The 7 Best Business Strategy Examples I've Ever Seen

The relationship between different levels of strategy .

As mentioned earlier, the strategy levels you choose to employ in your organization will depend on the size and structure of your company.

For example, if you're a large organization with multiple businesses operating under an umbrella company, you're going to need all three strategy levels: 

• corporate strategy for the organization as a whole
• business strategy for each of your different businesses
• functional strategy for the various departments in each of the businesses.

On the other hand, organizations with one business unit will not need a separate corporate and business strategy. They will instead create a combined corporate and business strategy for the organization, plus a functional strategy for each of their departments.

For this article, we will focus on this scenario and, in this instance, explain why functional strategies should be closely tied to corporate strategy. 

As the corporate strategy defines the direction of the business and what it wants to achieve, the functional strategy explains how to support the execution of corporate goals and objectives.

The bottom line is that corporate strategy isn’t just for the C-suite team. It supports long-term company growth by helping every functional department align with the company's priorities, from sales to production and customer success teams.

Importance of functional level strategy

New technologies, automation, sustainability initiatives, and ever-changing customer expectations are redefining the business world as it was known.

As businesses compete for their market share, those who master organization-wide alignment will be well positioned to outperform their peers.

The success of functional-level strategies has a direct correlation to the success of your organization's corporate-level strategy. Even the most thoughtful corporate-level strategies will fail to produce results if a functional-level strategy is overlooked, misaligned, or poorly executed (or all three).

Functional level strategy is the direct concern of managers at the departmental level, but this doesn’t mean that corporate level strategists can ignore it. In fact, immerging into the details of strategic initiatives of disparate departmental units is probably one of the most significant tasks of corporate-level strategists.

Functional Strategy of Apple Company as an example

When Steve Jobs took over Apple for the second time and reorganized it into a functional organization, he clearly understood the task.

Apple’s evolution of a functional organization played a crucial role in the company’s success. Via HBR.

Apple’s approach to leading with expertise, giving voice to functions , and sparking multi-dimensional collaboration has led to incredible innovation and success over the past two decades. 

Now, it's true that this Apple example is unique, and it might not be the best fit for all companies. Nevertheless, it illustrates well what a company can achieve if it pays more attention to alignment between corporate and functional strategy. 

Here’s another example. The company aims to launch a new product in a new market. However, the number one trap that derails many product launches is the failure to proactively get all teams involved, aligned, and on the same page. The fact is that a successful market penetration requires alignment across the whole organization and its functional areas.

This means that sales strategy needs to be perfectly aligned with the marketing department, while product development needs to work hand-in-hand with the team leading the production process. On top of that, all these departments need to perfectly sync with each other while staying aligned with company business goals to ensure success.

Not only does this help to launch new products faster and secure a competitive advantage, but also helps companies avoid epic failures due to poor product-market fit. (FYI, this is not just a start-up problem, it also hits the big boys. )

5 steps to create a functional strategy aligned with corporate strategy

Strategic plans at the corporate level are slightly abstract. They contain a broad-ranging vision and high-level objectives/goals, which can be hard to translate into concrete plans and targets.

For organizations to execute their corporate strategy and achieve these high-level goals, it is necessary to further break up these goals into clear and concise actions. This is where functional strategy comes into play. 

Functional level strategy is characterized by a strong emphasis on detail, metrics, and practicality. As a result, functional level strategy development involves a much greater level of communication and feedback both vertically and horizontally than strategy development at the corporate levels.

Recognizing this fact is the key to aligning functional strategies with the broader goals of corporate strategy.

Achieving success with a functional strategy can be a daunting task. However, based on the work experience with our clients, we put together some straightforward steps which any strategist can take to ensure excellent results.

Step 1: Share and communicate corporate strategy with functional unit leaders

Functional unit leaders should be involved in the creation process of corporate strategy. Department heads need to understand the corporate strategy and the goals and objectives their department can support to create an aligned functional strategy. But that’s not the only reason. You will be able to get their buy-in faster if they have to help implement the strategy they co-created. 

If they weren’t involved in the process, then at least a strategy walkthrough meeting should occur between organizational and functional leaders to put everyone on the same page. We've already created a guide on how to share and get feedback on your strategy , so if you're unsure how to go about this process, check out this guide. 

As a quick checklist, all involved stakeholders should come out of the meeting with a solid understanding of: 

• The specific goals/objectives/KPIs that each department will 'own'.
• The goals/objectives/KPIs that each department will 'contribute to'. E.g. If the head of sales owns the corporate strategy objective 'Increase year on year revenue by x%' - the sales department may also need support from marketing, customer success etc. 
• The timelines associated with each goal/objective/KPI.
• A clear understanding of what success looks like for each goal/objective/KPI.

Step 2: Strategy formulation on the functional level

The second step should allow department heads the time to interpret the objectives they own from the corporate strategy and begin to formulate a functional strategy for how they can best achieve these objectives.

In creating a functional strategy, department heads should pay special attention to the support they will need from different departments. Here’s what you should do at this stage:

• Frame Objectives or Goals
• KPIs for each Objective/Goal
• Create Projects or work plans for each Objective/Goal
• Ownership allocation for every action and decision-making in the strategy
• Define timelines and milestones

Step 3: Foster communication

As noted earlier, two-way communication is critical to the success of corporate strategy as a whole. Within a hierarchy, horizontal and top-down communication is generally easier to achieve than transparent 360-degree communication across the organization. 

It is essential to consider the needs of the various parties involved and clearly define which parties should be involved. Creating an environment that fosters this communication is vital in creating an effective functional-level strategic plan. 

Step 4: Revise functional and corporate level strategies

At this point in the process, corporate and functional leaders should come back together to share and review functional strategy and how it aligns with corporate strategy.

Here are some questions that can help you evaluate functional strategy: 

• Are functional objectives too narrow or too broad? 
• Are your KPIs too optimistic? 
• How does this functional objective contribute to the corporate strategy? 

Asking these questions can be the difference between a cohesive relationship between corporate and functional strategy, and one that is poorly aligned and ineffective.

Corporate leaders should provide feedback and recommendations to ensure close alignment between the strategy levels. 

Step 5: Implement proposed changes to functional strategy

You may have found in the review process that specific functional strategy objectives didn't align clearly with corporate-level objectives.

So, even if departments successfully execute and achieve these objectives, there won't be an impact on the success of the corporate objectives. If this is the case, the objective probably needs to go.

Having objectives that don't align with corporate objectives/goals will steal time and attention away from those that correlate with your corporate strategy's success.

Everything you do has an opportunity cost, which is why strategic alignment between strategy levels is so important. 

Functional leaders should make proposed strategy amendments based on the previous step's feedback. 

Time to move from theory to practice

Strategic alignment between strategy levels is a business investment that can positively influence organizational alignment; improving efficiency, innovation, and profitability. 

We hope this 5-step process will help you infuse some clarity into the whole process when planning your functional strategies. 

When you’re ready to turn your plan into action, try out our free Cascade’s strategy execution platform built to help teams achieve alignment and hit strategic goals faster. Or book a 1:1 demo with Cascade’s strategy expert. 

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Functional Level Strategy – Definition, Types & Examples

How do you achieve your yearly organizational goals? Do you just set an annual figure and start chasing it blindly? Or, do you set semi-annually, monthly, weekly, or even daily milestones? Which one is the right way to achieve your long-term goals? Obviously, setting short-term goals is a better approach to achieve bigger targets.

Moreover, you also need a strategy to manage these routine or day-to-day functional level tasks. In business terms, you need a functional-level strategy. Want to know more about it, its types, importance, and real-world examples? Well, if you do, keep reading!

Table of Contents

What Is A Functional Level Strategy?

A functional level strategy is a plan of action to achieve short-term, routine, or day-to-day business goals to support the corporate and business level strategies . Basically, a functional level strategy helps a business to manage operational activities on a daily or routine basis.

It is important to note that a functional level strategy involves multiple operational or functional areas such as marketing, HR, production, R&D, sales, etc., Moreover, every functional unit generally develops its own functional strategies.

A functional level strategy must have the following ingredients

• It should reflect the corporate and business level objectives/goals.
• It must ensure an optimum allocation of resources in all functional areas/units.
• Last but not least, a functional level strategy needs to maximize the coordination between all functional areas to optimize their outcomes.

Why is Functional Level Strategy Important?

Functional level strategy is important for any organization because of the following reasons;

• It works as steppingstones to achieve corporate and business-level objectives.
• A functional level strategy helps in developing a layout to perform day-to-day/routine business operations.
• It acts as a binding force in any business; integrates different functional/operational departments such as HR, marketing, sales, R&D, production, customer relationship, etc.
• Functional level strategies are more pragmatic/practical in nature and help in dealing with every practical scenario at micro levels (in an organization).

Features of Functional Strategies

Here are some important features of a functional level strategy

• In comparison to business or corporate strategies , functional level strategies are short-termed.
• It sets a layout as to what a business should do to make the grand strategy work.
• The basic objective of every functional level strategy is to ultimately pursue the corporate strategy.
• It pertains to the department, function, and division of an organization.
• Functional level strategies also deal with sub-functional areas (if any).
• Every functional unit or department develops its functional strategy on the basis of guidelines from the higher level.
• Functional level strategies fall last in the hierarchy. They support business-level strategy, which finally supports the corporate-level strategy.
• Functional level strategies mainly focus on the external environment .
• A functional level strategy may vary for the same organization in different locations. i.e different business units/franchises in different areas/cities/states.
• Functional strategies of every functional unit must have strong integration between each other to fulfill overall corporate objectives.

Factors of Functional Level Strategy

As we have already mentioned, a functional-level strategy must be in alignment with the business and corporate-level strategy. If the corporate objective is to increase profits, then business and functional level strategies much resonate with it.

Integration

It is mandatory to implement the functional level strategies horizontally. This helps in integrating different functional units to yield better efficiency.

Existing Resources

Every department, division, or functional unit must have enough resources such as capital, workforce, etc., for the execution of functional level strategy.

Measuring the effectiveness of a functional strategy can be very challenging due to excessive information. Therefore, it is vital that how and what type of data should be tracked to evaluate whether there is any progress or not.

Types Of Functional Level Strategies With Examples

There are major types of functional level strategies, including;

Marketing Strategies

Marketing has evolved as one of the most important functional units in any organization. Although marketing is a vast field itself, it basically focuses on identifying the needs of a target audience and then offering products or services to cater to those needs. A marketing strategy consists of different parts, but a marketing mix (product, price, place, promotion) is arguably the most important one.

Currently, there are a number of marketing techniques, including relationship marketing , social marketing, place marketing, person marketing, direct marketing, etc.

Now, if an organization’s corporate levels strategy focuses on Quality, Delivery, and Efficiency, here is how different organizational departments respond.

Financial Strategies

Financial strategy deals with every section/area that comes under financial management. The strategy mainly focuses on planning, acquiring, using, and controlling a corporation’s financial resources. If we dig a little deeper, a financial strategy deals with issuing/raising capital, assets acquisition, investments, budgeting, working capital management, application of funds, dividend payment, etc.

Production Strategies

A production strategy manages everything related to the production process. This process includes manufacturing system, supply chain management, logistics, and operational planning & control. The core objective of a production strategy is

• Maximizing the quality.
• Minimizing the total cost of production.
• Increasing quantity.

Human Resource Strategies

Human resource strategy in an organization deals with every single aspect related to the organization’s workforce. The core function of any HR department is to work for employees’ development and help them with suitable working conditions and growth opportunities so they can contribute to organizational goals. Apart from that, HR covers recruitment, training, motivation, development, and retention of employees.

Research & Development Strategies

An R&D strategy mainly focuses on two things;

• Innovation; developing new products
• Making improvements in current products

A business needs to keep introducing new products and improve the current ones to implement different business strategies such as market penetration , concentric diversification , and product development. Generally, there are three R&D approaches to implement these strategies;

• Be the innovator; introduce an unprecedented product
• Produce low-cost products
• Be a smart, innovative follower; add more features and launch a similar but better product than competitors.

Examples of Functional Strategies

Yahoo- marissa mayer’s failure to understand company’s functional levels.

Yahoo (an industry giant in the past) hired a prominent and successful Google executive, Marissa Mayer, hoping that she would change the fortunes for “struggling” Yahoo. Initially, the investors strongly believed that she would be able to get the company out of “dark pits.” However, what happened was completely against everyone’s expectations.

Out of many mistakes, Marissa’s biggest blunder was totally misunderstanding the corporation at functional/operational levels. She did make proposals for different changes but underestimated the resistance to these changes from Yahoo’s lower-level employees.

The Outcome

After all her efforts going in vain, she finally proposed the best solution; selling Yahoo. Verizon acquired Yahoo (which was once a $135-billion company) for only $5 billion.

Yahoo ultimately saw its downfall because the company failed to integrate the functional level strategies with corporate strategies proposed by Mayer. 

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shaharYar Ahmad Ranjhaa

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How to Build a Functional Business Plan

In this blog we discuss The Buildify Method’s approach to putting together a functional business plan along with the different business systems that are used in an effective business plan for start-ups, fast growing companies, tech companies, and even large businesses: How to Build a Functional Business Plan.

Welcome! You’re about to read original content from The Buildify Method .  As a nationally recognized business consultant, coach, and speaker, Aaron Keith is passionate about supporting the entrepreneur community by sharing his knowledge gained from coaching over 10,000 entrepreneurs in nearly 20 years. Companies ranging from billion dollar enterprises and celebrities, all the way to main street and small start-ups. We are committed to helping entrepreneurs take a business from one level to another. We have everything from a podcast to coaching programs , and software .

Today we are going to dive in and work on very specific performance-based systems and the importance of a business plan. Aaron has been coaching and consulting companies for about 20 years and has coached over 10,000 companies from around the world. We also share some information about some systems and processes that have helped all size companies, big and small.

The first topic is goals. Goal setting is absolutely critical, but it’s not just goal setting. It’s the systems behind the goals. The first system that comprises a proper business plan or an effective business plan is called a sales goal breakdown. Your sales goal breakdown is a document that takes your sales goal and breaks it down into minute detail.

Why is this needed? It’s needed so that your brain latches on. There’s a system, and there’s your brain. You want systems to impact your brain. Your brain is what causes performance. Just having a system on your computer isn’t going to do anything for you. Having a system that you’re interacting with causes the brain to move differently, which causes different actions, which causes different results.

Business System

Let’s focus on the system first. Here’s how you want to set up your sales goal breakdown document. First, the very top should have your sales volume. From your sales volume, that’s going to break down what your average sales price is. Once you have your annual sales price, it’s going to break down the number of units you need to sell per year.

So that first chunk is annual sales volume, average sales price, and number of units sold. Now, the next section is actually a little more important. It breaks it down for the month. So it’s going to show you, this is how much sales volume you need to do for the month. Then, from there, it’s going to reduce it again and keep breaking it down.

It’s going to then show you how many units you need to sell from the number of units you have to sell per month. It’s going to say how many active customers you need to be working with each month. From there, it’s going to reduce again and show you how many appointments you have to go on to get that number of active customers. Once we know how many appointments you have to go on, we reduce again, down to leads.

That way, from start to finish, you know how many leads you need to convert to appointments. And that many appointments convert to active buyers and sellers. This many buyers and sellers will close this many transactions per month. Don’t stress if this was too fast; we have a resource you can use that breaks it down for you.

Business Numbers are Critical

It is critical that you know these numbers. Why do you need to know these numbers?

If you don’t know these numbers, then your brain is not latched on to what you have to produce and cause in the world. Being present to what you need to produce is absolutely critical to increasing your performance as a real estate agent, as an entrepreneur. This document directly impacts your brain and causes you to perform at a higher level because you intimately know your numbers.

How do I know if the sales goal I set is too large?

If last year you did 20 million, don’t set this year’s goal at 100 million. If your goal is too large, there might be such a large disparity between here and there, that your brain can’t latch onto it as real. It’s too conceptual. You do not want that. You want to set a goal that should intimidate you, it should scare you. So if you did 20 million last year, maybe set your goal at 40 million or 50 million- doubling that business. That works.

Your goal should scare you a little bit but your brain should be thinking that it’s possible. That’s a good goal.

On the other side, you don’t want to play too small. You did 20 million last year, doing 25 million this year is not a goal; it’s too small. If you want ideal human performance, you need to cause stress or pressure to cause you to grow. It’s just like working out. If you work out with a 5 lb. weight all year, it’s not causing any stress on the body. The body doesn’t have to adapt, hence you don’t grow muscle. Your brain and your performance are the same way. There has to be some degree of stress or pressure on you for you to take yourself to the next level as an entrepreneur, and it’s why you need to learn How to Build a Functional Business Plan.

The Personal Calendar

This next system is critical for every entrepreneur, whether you’re in real estate, it doesn’t matter. This is a really critical system that we all have to master. It is also a system most of us need to improve, regardless of how many years you’ve been in business. This system is scheduling and task management.

Personal Schedule

Everything that matters to you needs to be scheduled. The reoccur button needs to be set with no ending. Your personal schedule is designed to support your business in some way. A lot of your personal needs set you up so that when you’re in your business you’re performing at your best.  Examples are haircuts, massages, facials, time off, vacations, date night, or just personal time where you’re just off the clock. I strongly recommend going into your calendar for the year and putting in all your vacations, your workouts, meditation time, date night, and all those things that matter to you so that you’ve seat a framework around your life that supports you.

That creates balance. When you have balance in your calendar, that balance gives you capacity. Capacity is critical. The more capacity you have, the more you have room to grow and expand and take on more. So that’s the personal calendar.

The Business Calendar

Again, anything that matters to you must be in the business calendar. There are a couple of things that are absolutely important that are nonnegotiable. They must be in your calendar.

First is business development time. Your business development time is that time where you’re working on your business with no interruptions. Your cell phone and emails are off and you are just cranking away on your business. Your business development time is when you get to work on your company and not in your company. That’s how your business grows and move to the next level.

You can’t just sit by a tree and wait for an apple to fall. You need to water the tree, prune the tree and eventually the tree will produce an apple. Most of you want clients, but you’re not taking care of the things that produce clients. Your calendar is one of the primary systems that remind you when and how frequently to do those actions. Your business development time is one of those main actions.

Marketing and Lead Time

All marketing and lead generation time must be built into your calendar. It should be reoccurred for the rest of the times. You need a market for the rest of your career; that doesn’t change. The calendar must include when you make phone calls, when you do networking, when you send out newsletters, videos and all the different marketing actions that you have. Make sure it is recurring and is a routine.

If you’re interested in performance, you want to have things in your calendar. When they become routine, you’re very effective. You want your week to be a routine that has all the things in it that matter to you. One of the things that has to be in there is your finances, your budget. Critical aspects also include when you’re doing your marketing and when you’re working on your business.

Questions on Calendaring

What are some of the questions we have around calendaring?

The number one question that we’ve got, is when is the best time to do my marketing and lead gen activities? The best time that I’ve found, for real estate, is before 11am-your mornings. After around 11am, your clients are going to start contacting you. Your mornings are more for you and working on your business than on your client. Our recommendation is that you schedule all of your marketing time before 11am.

Task Management

Your calendar and task management are heads and tails of the same coin. They very much mesh together and come together in a unified system. Here’s the way I want you to set up your tasks. Number one is that you should have an Excel spreadsheet or Word document or some kind of technology that allows you to organize your tasks in the following fashion. First I want to see the task. Next column should be priority level (1, 2, or 3 based on if it needs to be done today, next couple of days, or next year). Then, we have the date the task needs to be completed by, followed by who is responsible for taking that action. In my companies we use Excel and Microsoft OneDrive, so I can see everybody’s tasks. It allows me to add things for all of my staff’s to-do. It’s shared so everybody can see everyone else’s to-do list. I recommend doing the same system for projects. Have a to-do list and a project list.

Project List

While a to-do list is a one-time action, a project list requires multiple occasions to get things done. The project list can be a list of things you are one day going to get around to; it is not a to-do list. It’s more of a holding or capture tool. Your calendar is actually your to-do list of what you’re going to get around to doing.

In the morning, I recommend having a calendar to occasion to look at your calendar and deal with your to-do items and take them from your to-do list and plug it into your calendar. This way, there is space and time dedicated to doing the task.

People asked how they can better use their to-do list. I think it was covered by saying the to-do list is a capture tool and the calendar is the real to-do list.

Performance-Based Systems

No we’re talking about performance-based systems. And we’re talking about the plan that embodies or encompasses a lot of these systems. So, the next main system that I want to move into are often systems that aren’t talked about; they aren’t addressed by a lot of entrepreneurs. It is absolutely critical that your business plan has a business budget and a personal budget.

How does your budget impact your company? Whether you’re a brand new real estate agent who has never done a transaction, or you have a team of 60, you absolutely have to manage your budget.

Let’s start with your personal budget. Your personal budget impacts your business budget because your business budget has to pay your personal budget.  If your personal budget is wrong, then your business budget is wrong.  Then your sales goals are wrong because your sales goals have to make enough money to pay your business budget. Your business budget has to pay your personal budget and it gets worse.

If your personal budget is off it affects the business budget, if the business budget is off it affects the sales goal. If your sales goal is off, your entire business plan is off because your business plan is predicated on generating enough money to run the company. So this is the little rock at the bottom that has a huge cascading effect across your company. And I get that most of us were not taught a lot about money.

My finance coach sat down with me and really taught me about finances years ago. So I am passionate that entrepreneurs learn about this topic. If you want to email me directly, I’ll send you some books that are very, very good at teaching you about finance and budgeting.

Personal Budget

So, let’s go over some of the thing we have in our personal budget. You should have the following in there: travel, cash reserves for a rainy day, and another line item for investment and retirement. Let’s just focus on these three because they are variable.

Your travel budget can be $50 or $50,000. You need to set real numbers around what you want your travel budget to be, what you want your cash reserves to be and what you want your investments and retirement to be.

You may need to meet with a financial advisor or do some research. Take some time to start putting some numbers in the budget around these line items because they vary so greatly. They’ll have a massive impact on your business budget, and then later on your sales goal.

Business Budget

Next we will look at the business budget. You need to have taxes built into your business budget. Business reserves need to be set aside as well as profit, our fixed expenses and variable expenses.

What should I use to manage my money?

For your business and your personal, I would recommend using QuickBooks. I would not use QuickBooks online, get QuickBooks desktop. They do not function the same and the online version has some glitches. You can open a company for your business and another for your personal. You can open as many businesses as you want in QuickBooks. That way, your business and your personal both reside there; that’s important. And QuickBooks is very inexpensive.

Second is budgeting. The QuickBooks budget and most accounting software budgeting system do not work perfectly. You want to use Excel. It makes it very simple to track your budget, your actual and your difference.

Lead Source Breakdown

We are starting to acquire more and more of our business systems. The next one I want to look at is called a lead source breakdown. What is a lead source breakdown? It’s absolutely critical that you understand where you want your leads to come from and how many leads from each one of those sources.

Your first system was the sales goal breakdown and it broke down all of the aspects of your sales goal. And the last aspect of it was how many leads you need per month and per year. That’s how these two connect. We know how many leads we need per month.

Your lead source breakdown then starts to take these leads that we need per month and break it down by the source. Say you need 25 leads a month. Your lead source breakdown is going to show you that you need five leads from business alliances, three leads from online, and eight leads from your database. That way you can start to predict where you want your business to come from.

This is where you get to impact how your business functions.

What are some of the key sources your leads should be coming from in a successful real estate business?

If this was my company, these would be my top pillars:

-Business alliances (CPA, wealth manager, architect, divorce attorney, interior designer, etc.)

-Sphere (my database-absolutely critical to the growth and development of your company)

-Networking (another big, big, big pillar)

-Open houses (great way of bringing in new business)

Marketing Plan

Now we need a marketing plan that’s going to produce all those leads. I’ve worked with and coached over 10,000 companies from around the United States. Most businesses do not have a marketing plan that they can hand me. Your marketing plan should be something printable. You should be able to touch it and it has to do a couple of things.

It needs to look at all of the marketing actions and the frequency and duration of those actions. Your marketing plan is the absolute most important thing that’s going to generate new leads. If you know how many leads and you know the sources of those leads, your marketing plan is designed to bring you those leads from those sources. This is something that you’re going to have to spend some time building out.

We have a Buildify Business Plan and inside that we have our marketing plan.

What are the biggest challenges you see with real estate agents in their marketing?

There are a couple of them. I would say the size of your database is a huge challenge. So many of you reading need to do a little gut check and ask yourself if your database is actually large enough to fulfill on the sales goal that you set. So you need to get out there, meet some new people, start networking, join some groups and just be out in the world more.

That is one of the number one challenges; that people aren’t setting a KPI (key performance indicator) around how many new people they need to bring in per week, per month, per quarter, per year of your business to fulfill all of your sales goals.

The next is consistency. A lot of us are just not super consistent when it comes to marketing. When your business is going great and moving fast and furious you stop marketing. Then when your escrows start to close everything gets calm and you realize you haven’t been marketing in weeks.

So there’s this up and down cycle to your marketing actions. Consistency comes back to your calendar. If marketing is in your calendar, it’ll solve that.

Most of you don’t have a plan. If you had a solid plan followed consistently, your results would be spectacular.

Lead Tracking Form

The lead tracking form is another system we have at Buildify. It’s a beautiful document and it tracks two specific things. It attracts the volume of the leads that are brought in and the source of those leads. Your lead tracking form should break down the date of the lead so that we can see how many leads you brought in per month and the source of those leads and where they came in. It’s also going to track your conversion ratio. Most entrepreneurs don’t know their lead conversion ratio.

What if I’m not bringing in enough leads each month?

If you’re not bringing in enough leads each month, it’s most likely because you’re not following your marketing plan. That is the system that generates leads. If you’re using a lead tracking form, you’ll be able to see where the leads are coming from. This tells you a couple of things. It also gives you ROI (return on investment) and it gives you ROT (return on time).

If you’re spending a lot of time on your database and only getting a few leads, something’s off. This is a very important feedback mechanism. It’s giving you information around your performance and performance of the systems that encapsulate it.

The Pipeline Report

The last system we have is a pipeline report. Your pipeline report is also one of the primary systems that make up your business plan. We keep it very simple and structured. Your pipeline report is tracking by month and by quarter. So the way we structured the Buildify pipeline report, it shows your production, all your buyer and sellers that you’re working with by month and by quarter. You can see how much sales volume you have scheduled to come in per month and per quarter against your goals.

Your pipeline report is designed to hold you accountable to your production. Most of us are numb to our numbers. We are not paying attention to the goal. Real estate is one of those businesses you need to ahead of your company, dealing with the month you’re in isn’t going to impact anything.

The pipeline report will show you in real time how much you have coming in per month per quarter against your goal and it causes performance. It gets you engaged and motivated. That’s why the pipeline report is one of our primary systems. It’s foundational and critical.

How often should we be looking at our pipeline report?

Good question! Your pipeline report is something that you should be looking at on a daily basis, even just for a few minutes. Just a glance so you’re always staying present. For those of you that have assistants, your assistant would be the one maintaining your lead tracking form. They’re going to maintain your pipeline report for you. This is not just for the lead agent or the owner. If you have a team, every agent on your team needs the system we’ve mentioned today. Make sure each agent has their own documents and they need to be discussed at weekly team meetings.

They are designed for an entrepreneur and real estate agent to perform at a higher level.

Another question asked was “How will this help with the up and down cycle of my business?”

Your pipeline is keeping your brain out ahead of the business. Many get enthralled with the day to day and stop marketing. They stop focusing on the goal, which diminishes your intention. Every morning when you look at your pipeline report, you’re staying present to where you’re going, where you’re supposed to be. Intentionality increases focus and your commitment and actions follow suit. So you end up taking more action, and more importantly intentional action.

So your performance as an entrepreneur changes because the pipeline’s impacting your brain, it’s impacting your thinking and your focus.

In closing…

Look at your notes and make sure that you have the following in your business plan.

• Sales goal breakdown (documents breaking down your sales goal in granular detail)
• Business Budget and Personal Budget (finances managed with integrity)
• Lead Source Breakdown (breakdown the source of those leads and where you want those leads to come from)
• Marketing Plan (core system to generate those leads in those key areas)
• Lead Tracking Form (track those leads based on where we wanted them to come from)
• Pipeline Report (going to track active customers-buyers and sellers, how much money coming in per month against monthly and quarterly goals)
• These are some of the core systems that make up your business plan.

We’re committed that you take your business from one level to another using the Buildify processes and systems designed to help you do that. So here’s what we recommend- visit Buildifysystems.com . At the top of the page you’ll see ‘Business Plan’. We have the gold standard of business plans in the real estate industry. Our business plan is not just a comprehensive, interactive business plan. It’s very simple to put together, we walk you step by step. It also comes with a suite of performance based systems, most of which we spoke about today.

We thank you so much for joining us today.  We know your time is valuable. Please keep a lookout as we have new podcast episodes coming out weekly! If you want to get a few more nuggets, you can follow us on our podcasts which is TheBuildifyMethod.com .

Thanks again for joining us and we look forward to being a resource for you over the years to continue helping you grow and expand your company.

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Thank you for reading The Buildify Method Blog . We hope you got a few nuggets that you can take back to your business. If you haven’t already, please subscribe to our podcast and leave a review. It’ll help other entrepreneurs discover us and benefit from the community we’re building. We look forward to having you with us for the next Blog-isode.

Author:  Aaron Keith

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