The management of a business relies on both a solid hard skill set and the effective use of soft skills. The strategic decisions an organization makes concerning its operations and its framework of goals combine both hard and soft skills. Two management theories -- operational level strategy and functional level strategy -- have emerged to explain the ways organizations make decisions. Each has its advantages and disadvantages.
Famed management consultant Peter Drucker first proposed a focus on operational level strategy in the mid-20th century. He noted that most organizations have many levels of management. This is true even in businesses where tasks might be delegated across a small number of employees or outsourced to third parties. The strategic decisions a business must make about its current and future plans are, in Drucker's view, decisions about the operations of the company: They deal with scheduling activities, paying invoices, supply chain management and the use of assets and resources. Focusing on operations has its advantages. It allows the business to harvest the worth of the asset or resource for many different purposes. An employee can be seen as an asset, for instance, that generates income, performs a vital business function and helps produce goods and services. The same could be said of technology, such as a computer, which serves the business' operations in many ways.
Despite the benefits of seeing all strategy decisions as essentially operational level decisions, there are some drawbacks to this approach. Such a strategy has the tendency to reduce all assets and resources to numerical quantities. While viewing employees as vital resources to the company can be a good approach, there is the risk that employees eventually are seen as just a means to an end of profit. Businesses also might be too quick to discard resources when they don't have an immediate value or worth. This can be dangerous in an era where technology is rapidly changing.
Functional level strategy is a response to operational level strategy. It advocates for the business to see its management decisions as specific to a functional area of the organization, such as marketing, human resources, finance, information management and public relations. The advantages of this are that employees and resources can be assigned to the tasks that best suit their skills and interests. If you have an employee with expertise in HR, for instance, it makes logical sense to assign her to the human resources function instead of the finance division. Functional level strategy aims to see people and resources as an end in themselves, not a means to an end.
Functional level strategy is quite useful from the standpoint of valuing the innate worth of the people and resources with an organization, but there are some disadvantages that are particularly evident in smaller businesses. Oftentimes, small businesses combine several functions into one or a few departments. A business might not have enough staff or resources to separate HR, technology, finance and other departments from one another. All of these functions might be performed by a few or even just one person. In these cases, functional level strategy is more difficult to employ because the tasks and strategies a business undertakes begin to look more like operations than they do functions. A good business manager can employ operational level strategy where it is a appropriate and use functional level strategies where they fit in best.