What is Functional Planning?

In business, plans for the future are based on goals and objectives. These goals serve as the framework for the planning that will be used to achieve them in reality. Functional planning is a process to understand what the organization wants to achieve with its available resources. This understanding forms the basis for creating specific plans detailing how the organization will function to achieve its goals.

3 Levels of Planning:

There are three levels of planning for the business. Functional planning is also part of this level. We have explained all the three stages in detail below:

1. Corporate level Planning:

At the corporate level, executives must determine how to gain a competitive advantage in each enterprise. It must also decide which firms it should be involved with. This is accomplished by selecting an optimum set of businesses and determining how they should collaborate. Top management typically makes major investment and divestment decisions at this level. Mergers and acquisitions (M&A) is a method for businesses to expand. When several commercial divisions need to be brought together, M&A may assist in aligning them. This planning generally happens in large corporations, although it can also occur in smaller ones.

Read the full article: What is Corporate Planning? Types, Phases, & Importance

2. Business level planning:

Most people are already familiar with strategic planning with a corporate degree. This inquiry seeks to answer questions like “How may we compete?” and “How can we obtain a competitive edge above our rivals?” To address these issues, it is critical to have an excellent knowledge of a company and its surroundings. Internal and external analysis methodologies should be used at this level. Once a firm’s planning has been analyzed, top management can utilize frameworks to start developing strategy. Finally, the company-level planning intends to create a competitive advantage by offering real value to customers while also being a one-of-a-kind and hard-to-mediator participant in the competitive market.

In business planning, you’ll want to assess expansion opportunities, but it’s typically focused on the product or service rather than the entire company. At this stage, you must ensure that each department meets corporate objectives. You also need to establish which departments are successful and which require help at this level.

3. Functional level planning:

Functional planning is developing and documenting detailed plans to achieve objectives set at higher organizational levels. It includes specifying how resources will be used to support activities in each functional area, such as marketing, production, human resources, finance, and information technology. A well-designed functional plan provides a roadmap for achieving short-term goals that contribute to the success of long-term strategic objectives.

At the operational level of planning, employees’ decisions are often described as tactical choices. They are concerned with how various functions of an organization interact with one another and overall strategy levels.

Functional planning is a detailed plan that focuses on one or more functions. Each function’s goals are established in this method. This is because, without functional planning, your company may quickly lose momentum and “get bogged down” while the competition continues to expand.

Functional Planning
Functional Planning

Responsibility for functional planning:

The functional manager is responsible for the day-to-day running of the department and ensuring that it meets targets set by senior management. They are also in charge of planning for future growth and development and managing budgets and resources.

A functional manager typically has a great deal of experience in their field and is an expert. They use this knowledge to oversee the work of subordinates and ensure that it meets high standards.

Functional managers usually report to a business unit head or director, who gives them broad guidelines for operating. In large organizations, there may be several tiers of management between the functional manager and the CEO.

Key points to consider in functional planning:

Functional planning is the most comprehensive type of planning. Each department has its own set of objectives and tools or digital assistance solutions. These are all factors considered during the operational plan. All departments keep track of data regarding performance and team accomplishments in their operations.

Aligning functional and corporate planning

The ultimate aim of functional planning is to supplement the company’s overall plans. That is why, at a functional level, plans must always be in line with corporate-level and business-level planning.

It makes sense for functional planning to be created for the business’s aim of expanding market share in country X. The objectives haven’t been properly linked. When all strategy levels are focused on achieving the same goal, chances of success improve considerably.


The danger of over-tracking data and information to measure progress occurs when you don’t have functional planning. It’s critical to think carefully about the data that must be tracked to see if your company planning is being supported.


It’s insufficient to link the operational planning to the company objective. Functional planning must be integrated from both a horizontal and vertical standpoint. Coordinating purchases/production, stocks, and logistics could be an example of how coordination might work. You don’t want to create a bottleneck for items moving through various departments before reaching their intended destination.

Resource Allocation

The various departments and divisions must get the appropriate resources to carry out the functional planning. To put it another way, if a department lacks financial and human resources, it will be impossible to execute a functional plan. This also includes both tangible assets – such as cash – and people. If the department lacks the necessary resources, this may significantly impact the department’s ability to contribute meaningfully to corporate planning.

Different types of Functional Planning Systems

The following list should help you understand why functional planning is done in various sectors.

Functional marketing planning

The term “marketing” refers to a marketing plan, which is essentially a strategy for generating sales. A marketing campaign entails developing and executing a plan for promoting the company’s products or services. The marketing mix is one of the essential components of a successful marketing planning process. This comprises all actions that a company can do to increase demand for its goods or service.

The marketing mix comprises four components: price, advertising, process, and people. Companies frequently undertake a SWOT analysis before employing the marketing mix to examine the company’s position in detail.

Financial strategy

The Financial sector’s functional planning includes all phases of financial management, such as planning, acquiring, using, and managing a business’s financial assets. It covers fundraising planning, budgeting for different departments, application of funds, investments, work capital management, dividend payments, and net value calculations.

Human resources planning

The functional HR planning covers all aspects of employee development, employment opportunities, and working conditions for them to contribute to the company. Recruitment and selection, development, motivation, retaining employees, and other relationships are all part of functional HR planning.

Production planning

The company’s overall production mechanism, operational planning, inspections, logistics, and whole supply chain management are all part of a company’s functional production planning. The product planning aims to improve the quality of manufacturing activities while also increasing efficiency and lowering total manufacturing costs.

Read also: Top 6 manufacturing ERP software that helps to improve visibility and efficiency of manufacturing business.

Research & development planning

Innovation and the creation of new goods and product improvement are all concerns addressed by the Functional planning for research & development. Product diversification, among other things, is an example of functional planning in this area.

Steps for Functional Planning System

The functional planning system is a logical, step-by-step process that helps ensure that all activities are carried out orderly and efficiently. The steps involved in the functional planning system are as follows:

Step 1: Define Expectations

Define the corporate and business context at the outset for all stakeholders to prevent managers and executives from misunderstanding one another and prevent the process from derailing. There are three main steps in this process: the responsibilities of each participant, the timeline for each step, and what is expected to happen. The people who will be responsible for approving the budget and strategy are the stakeholders.

Step 2: Define Business Mission and Vision

The business mission defines the company’s purpose, while the vision statement outlines what the company wants to achieve. These two elements help to focus and align all activities the functional planning team carries out.

Ensure your function’s workers know how the mission and vision impact their tasks. Clarify what business priorities, difficulties, and pivots will affect your function’s imperatives, possibilities, risks, and priorities.

Step: 3 Define goals and objectives

The goals and objectives of the functional planning process should be SMART: specific, measurable, achievable, relevant, and time-bound. All goals and objectives must contribute to the company’s overall mission and vision.

Step 4: Make a strategy for action

Now it’s time to convert your objectives and goals into a plan of action. This will entail the creation of a formal document that summarizes the actions necessary to achieve your goal. This paper will serve as your roadmap for executing, monitoring, controlling, and closing your goals.

You must be prepared to alter your strategy as unforeseen events occur, so be ready to adjust.

Step 5: Examine your skills

Identify the key functional capabilities required to execute your action plan. Inquire with business partners whether they see your function’s strengths and shortcomings. Your findings should correspond, regardless. Make a prioritized list of functional capabilities to strengthen or gaps to fill as a result of your research.

Step 6: Set measures and metrics

To assess your progress, you must establish quantitative measures and metrics. Doing so will help you determine whether you are on track to reach your goals.

Your metrics should answer the following questions: How much? How many? When? Where? Which? Who?

Step7: Evaluate and take action

It’s time to review your findings and take action now that you have all the required information. This may include changing your strategy, implementing new processes, or allocating additional resources. The goal is to ensure that all activities carried out by the functional planning team contribute to the company’s overall mission and vision.

Why Functional Planning is important

Functional planning is concerned with increasing the efficiency of a company’s operations across departments. Employees frequently discuss their Marketing, Human resources, or Innovation plans in these departments. When all of a company’s functional departments collaborate toward a common goal, they achieve the business and corporate as a whole. As a result, functional planning aims to integrate these plans as closely as possible with company planning.

If your company aims to introduce new goods to consumers, the marketing staff should develop effective marketing initiatives that reach innovators and early adopters via the appropriate outlets. The operational level of planning involves executing activities. Tactical choices are those made at this level. Given that they are solely operational, these choices are not connected to planning. Nonetheless, the major goal of a functional plan is to enable the organization’s long-term planning – not functional excellence.

Functional Planning Example

The easiest way to understand functional planning is through an example. Let’s say that a company wants to introduce a new product. The marketing team will develop a plan that includes objectives, strategies, and tactics. The goals may be to raise brand recognition or generate sales. Market research and launching a marketing campaign are two examples of strategies. And the methods might include developing a website or creating a print ad.

The human resources team will also develop a plan with objectives, strategies, and tactics. Recruiting new employees or educating existing personnel is common motives for these initiatives. Job fairs and the creation of an employee handbook are two possible strategies. And depending on the situation, job descriptions or arranging orientations may be used.

The operational team will also develop a plan with objectives, strategies, and tactics. The goals might be to increase output or decrease expenses. Streamlining the manufacturing process and adopting Just-In-Time inventory management are two examples of strategies. Additionally, installing new equipment or altering raw material sourcing may be tactics.


What are the connections between ERP Software and the Functional plan?

ERP Software helps to manage the key function of business including production planning, human resources planning, financial planning, marketing, and many more. ERP Software comes with different modules that are dedicated to specific business functions. All modules are connected to an ERP system that gives you a centralized view of your business.

What is the different function of planning?

An executive overview, Products, Services, Market research, Marketing strategy, Financial Planning, and Budget are the main function of planning.


Functional planning is essential for businesses of all sizes. By developing clear goals, objectives, and measures, you can ensure that all activities carried out by the functional planning team contribute to the company’s overall mission and vision. Functional planning can help increase efficiency and optimize operations across departments when done correctly. Before executing functional planning you also need basic knowledge about business functions.

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