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Functional Departments: Roles and Functions


Each organization is a complicated system made out of smaller, even more complex systems. Just like in a living organism, the company’s parts are interconnected and dependent on each other. Each of these departments has distinct roles and functions to facilitate the business processes, and none of them can operate without the others. The departments are staffed by different people with various backgrounds that manifest diverse cultures. Organizations can also go through processes that uproot existing cultures, import others, and fragment into subcultures. All of this affects how well the business operates and how its employees feel about the company.

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Functional Departments

The four functional departments that CAPSIM focuses on are R&D, Marketing, Production, and Finance. Not every business necessarily has all four, but some combination of them is always present, and the core of their functions and roles remains consistent. “Company Departments” (n.d.) gives a brief overview of how these departments are depicted in CAPSIM. However, in real life, these departments may have drastically different organizational structures.

R&D, which stands for Research and Development, is tasked with innovation, designing new products, and updating old ones. The core aspect of R&D is the innovation that allows the business to remain current and, crucially, outclass its competition. Marketing departments are tasked with getting the product to the customers by selling it, distributing it, and increasing its popularity. CAPSIM has a somewhat broad understanding of marketing, which also incorporates sales, pricing, and distribution. However, its primary purpose is to promote the company’s products and manage the company’s relationship with its customers.

Production departments control the mass manufacture of the products that R&D designed. The actual physical goods that fill the market are manufactured by Production, which also entails managing such things as production plants, raw materials, labor, assembly, subcontracting, and automation. Finally, Finance departments oversee the flow of money in the company. Finance takes on debts, purchases assets, and sets account policy. Everything any company does requires capital, which Finance acquires and distributes.

Measuring the key performance of each of these departments is a strictly case-by-case in-house project. Parmenter (2015) warns against using financial concepts in measuring performance, as well as assuming every measurable process is essential. “Key” implies indispensability, so each department’s performance should only be measured in relation to what the business actually needs to operate.

Each department has a core specialty, without which a business would not operate, but the exact nature of the specialty depends on the business. For example, a supermarket chain’s Marketing key performance indicators could include the number of new clients attracted per year. An exclusive high-end private jet company’s Marketing department effectiveness could be measured not on the quantity but the quality of the new customers.

Interrelationships, Culture, and Decision-Making

A business is rarely a monolithic structure that consists of just one system. As businesses grow in size, they also grow in complexity and disparity. Systems theory is a broad meta-theory that is aimed at explaining how complicated things work, from biological organisms to entire societies (Cummings, 2015). When applied to business and management, systems theory allows one to recognize the multitude of parts that a given company can be divided into. Moreover, it allows one to analyze the connections between these disparate parts and how they interact to facilitate business processes.

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The four functional departments are influenced by each other to a great degree. Discoveries made by R&D are given to Production to manufacture en masse, yet Production can impose requirements on R&D regarding material availability or cost-effectiveness. If Production allows a factory flaw to reach the customers, Marketing has to deal with the backlash. The relationships among departments can be not only reactionary but collaborative. For example, R&D and Marketing can work closely together to identify a particular niche in the market and design a product for it, while Production and Finance can calculate whether it is a worthwhile endeavor. No department in a large enough organization ever exists independently from the rest.

The organizational culture can vary from company to company and even from department to department. Schein (1990) describes the corporate culture as a shared learning of how to solve problems. If a particular way of doing business is repeatedly successful, it becomes ingrained in the culture. As a company grows, new problems are introduced, and new solutions are generated, which creates new cultures that do not always gel well with each other. Outright competition and power games among departments in the same company often occur because of cultural conflicts. According to Schein (2019), incompatible cultures often appear due to mergers and vertical integration.

There are four possible ways for a company to progress in case of these conflicts. Cultures can exist separately if they do not operate against each other, or they can even blend together. If they are incompatible, one can dominate another, or remain as a counter-culture, which often generates conflicts and harms the company’s performance. He described a case study, in which a highly bureaucratic insurance branch of a company dominated an informal medical branch. The main takeaway from his case studies is that there is no universal solution to any problem.


The functional departments consist of R&D, Marketing, Production, and Finance. Organizational culture appears as groups of employees collectively discover solutions to shared problems. Different departments, although deeply connected, often solve completely different problems. The cultural divides become wider as the company grows, which can lead to conflict and dysfunction. Different scholars propose different solutions, which boil down to prioritizing. As with most things, navigating the cultural disparities requires a case-by-case approach.


Company departments. (n.d.). Web.

Cummings, T. G. (2015). Systems Theory. In C.L. Cooper, P.C. Flood, & Y. Freeney (Eds.), Wiley Encyclopedia of Management. Hoboken, NJ: John Wiley & Sons.

Parmenter, D. (2015). Key Performance Indicators: Developing, Implementing, and Using Winning KPIs. Hoboken, NJ: Wiley.

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Schein, E. H. (1990). Organizational Culture and Leadership. Hoboken, NJ: John Wiley & Sons.

Schein, E.H. (2019). The Corporate Culture Survival Guide. Hoboken, NJ: John Wiley & Sons.

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