Why Your Operating Model is Not Just Your Organisational Structure

Before you head down the path of focusing on the organogram, who reports to whom or is responsible for specific activity, it's essential to first define what the operating model is and how it actually works
Why Your Operating Model is Not Just Your Organisational Structure
Image credit: shutterstock
4 min read
Opinions expressed by Entrepreneur contributors are their own.

When undertaking a business transformation piece, very often the need to create a functional operating model is high on the agenda, in order to ensure clear structure, and defined roles. However, a mistake many leaders make is to think the key function of an operating model is to develop an organisational structure, and that everything else will then fall into place. This is very short sighted; there are numerous other elements to take into account to ensure success and future proof the business.

Before you head down the path of focusing on the organogram, who reports to whom or is responsible for specific activity, it’s essential to first define what the operating model is and how it actually works. Whilst it does include the organisational overview, it also needs to include structure, process, workflow, systems, your people/ culture strategy, and roles and responsibilities.

I advise leaders to start with an ‘outside-in’ approach. Think about how the organisation interacts with the market, its customers and clients, and then review what makes sense strategically. Consider your business objectively and whether there are different ways to look at it. There are many factors at play - whether it’s structured by the market, by customers, by product, profit and loss line, specific projects, functions, or a matrix of a number of these. What works for your business.

Once this has been established, then flip the thinking and consider the business from the inside out. Take time to think about how your bespoke operating model or ‘way of working’ could lead to competitive advantage. For example, facing the market through product lines rather than ‘industry lines’, if this goes against normal process, and will be a point of difference for your company. If there isn’t a clear competitive advantage to doing things differently, work out how you can do the same, but more effectively and efficiently.

Having established this, the next stage is to establish what workflow process, data and systems are needed to enable the operating model. 

The matrix operating model is becoming more commonly introduced, which, when done well, can help drive collaboration and endeavour to get input from the different functions across the organisation. But very often this matrix model falls down because the enabling processes, data and systems are not well-defined, and those involved aren’t sure what they’re working towards. This can lead to the ‘perfect storm’ of unclear accountability, fear and blame, and people step back instead of leaning in. By setting out defined KPIs and communicating these effectively, it can be a successful system to follow. It’s also crucial to factor in mechanisms to review and discuss the KPIs and ideal outcomes - it can’t just be a set and forget.

When setting up an operating model, it’s vital to get all the leaders in a room to map it all out. But make sure to use a facilitator to keep everyone on track, ensure everyone is contributing equally and to manage any difficult conversations objectively. At the end of the discussion, there should be a clear idea of what the operating model will look like, taking into account the following checklist:

  • How is the organisation facing its market - through product/ industry lines?
  • What organisational structure is being put in place, who is responsible for specific responsibilities. 
  • What enabling processes are needed to streamline workflow
  • What data and systems are crucial to enable the processes
  • Which roles cover which specific activity, and how are the processes, systems and data owned? How is accountability enforced?
  • What behaviours are needed throughout the team in order to facilitate the operating model
  • What mechanisms are in place to ensure discussions and improvements continue and that there are review points

It’s a useful guide for structuring the decision. As long as decision makers understand the importance of developing an operating model that includes the organisational structure, but is not exclusive to it, a successful growth trajectory can be implemented, that is fit for purpose, measurable and goal-aligned.

 

More from Entrepreneur

Get heaping discounts to books you love delivered straight to your inbox. We’ll feature a different book each week and share exclusive deals you won’t find anywhere else.
Jumpstart Your Business. Entrepreneur Insider is your all-access pass to the skills, experts, and network you need to get your business off the ground—or take it to the next level.
Are you paying too much for business insurance? Do you have critical gaps in your coverage? Trust Entrepreneur to help you find out.

Latest on Entrepreneur