How should you develop your Operating Model to improve your business performance

Sep 2, 2015

Business Model Inc Global meetingAs we’ve pointed out in numerous posts previously, there is a growing pressure building on the way the HR and management’s functions. With the introduction of new global trends, managers are met with a multitude of talent challenges – global skills deficits, leadership gaps, challenges to hiring in high growth economies, low employee engagements etc. (CIPD,2014). In this week’s blog post we focus on how operating models should evolve by delivering business-integrated HR strategy and expert solutions that increase business performance.


What is an Operating Model?

  • According to Cooper, Dhiri & Root (2012), in its simplest form, an operating model dictates where and how the critical work gets done across a company. It provides the vital link between a company’s strategy and the detailed organisation design that it puts in place to deliver on the strategy.
  • It serves as a blueprint for how resources are organized and operated to get critical work done. It encompasses decisions around the shape and size of the business, where to draw the boundaries for each line of business, how people work together within and across these boundaries, how the corporate centre will add value to the business units, and what norms and behaviours should be encouraged (Cooper, Dhiri & Root, 2012).


Factors for growing importance

According to Brief (2014) there are few major factors that have heightened the need for operating models to evolve in recent years:

Decision Making and Redistribution

The pursuit of growth has led to organisational complexity as companies extend to adjacent businesses and new customer segments, products and geographies. These incremental changes have accumulated over time, leading to complex organisational structures that create ambiguity and slow decision making. Having an operating model makes it possible to sustain effective policies required to invest in differentiating capabilities, and it does this by sharing resources across businesses and functions and by redesigning structures.


Technological innovation has provided big changes in the workforce.  It has also provided more opportunities to deliver better HR Services to a mobile and more global workforce.  The rise of collaboration technologies alters how teams interact across geographies and time zones. There’s more information flowing into and around an organisation every day, and those flows don’t always respect hierarchy (CIPD, 2014).


This week’s managers’ tips:

1. Align Closely

An operating model should closely fit the company’s strategy. Every organisational structure creates boundaries between departments, geographic units or lines of business and people must learn to collaborate across them. What’s important is to define the “seams”/overlaps/connectors in a way that reflects how the company creates value, that promotes better decision making and that balances operating-unit accountability with economies of scale. Aligning to the model and defining the best boundaries not only improves decision making but also can be critical for sustained, substantial cost reduction (Blengko & Garton, 2015)

2. Put customer priorities at the centre of the design

Most organisations today aspire to become more customer-focused. The ones that succeed understand not just the needs and priorities of their target customers but also the best organisational setup to address those needs. An operating model that’s truly centred on customers goes all the way to defining accountabilities on the front lines so that employees can be highly responsive to customers (PWC, 2015).

3. Organise to develop and deliver the capabilities that matter most

Organisations with highly effective operating models excel at only those few capabilities essential to realising the strategy while being “good enough” where that’s sufficient. For example, when a company realises it doesn’t have to gold plate every service that a support function provides, therefore it can then shift resources to the services that are essential to winning in the market (Blengko & Garton, 2015). Once senior leaders have agreed on which capabilities matter most, they must harness the right people, processes and technology to deliver the capabilities and make sure each dimension of the operating model supports this effort. In the operating model you are then able to outsource those services that help the organisation but also aren’t essential to be performed in-house or are non-proprietary.


What is do you think about the relationship between strategy and structure? Have you looked at the operating model of your organisation recently?


By: Curran Daly + Associates


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