How to Design an Effective Operating Model

How to Design an Effective Operating Model


  • Designing a useful operating model is a pre-requisite for organizational growth and sustainable success.
  • Despite setting the right strategy, companies generally fall flat in creating an agile and effective corporate environment.
  • Competitive advantage and sustainability could be maintained by addressing five organizational issues.

In their quest to ensuring sustainable growth and success, companies shift their primary focus to securing an agile and effective corporate environment. They also tend towards delivering seamless customer experiences by leveraging available technologies. Reducing costs while maintaining first-class quality becomes yet another priority.

That said, despite setting the right strategy to achieve all of the above, companies generally fall flat due to a few reasons.

First, they don’t set -or successfully implement- the right initiatives. Non-compliance with defined business processes is another failure factor. Some companies focus on quick wins with no regard for the long term strategic initiatives. Finally, inefficient utilization of resources and skills often hinder success.

“So, what is the main reason behind those shortcomings? How do successful organizations ensure that they are useful and sustainable?”

Organizations must be willing to change what they are doing and update or redesign their operating model accordingly. Corporations tend to accept the success they currently have without realizing what they could have. That causes them to sit back and take the losses instead of designing the optimal operating model.


Consider an operating model like a well-oiled engine. If only one of its cogs does not function well, the whole system would underperform and eventually fail. Given the current challenges, it is paramount that the below five components are implemented correctly to ensure competitive advantage and maintain sustainability.

Component 1: An organizational structure fully aligned with the organization’s vision and strategy

Designing an organizational structure might seem like a straightforward activity at times. However, creating the most effective organizational structure to direct individuals to execute the strategic goals and objectives is a tall order.

Historically, organizations had a centralized structure with a well-defined chain of command. However, tech companies -especially successful ones like Apple and Facebook- have changed their approach to a decentralized one. That way, they are better positioned to reach their strategic goals, maintain their competitive advantage, and grow sustainability in the market.

In general, there are four types of organizational Structure:

  1. Divisional Structure, which is usually common for large organizations with various business units. This Structure defines leadership based on its products, projects, or. A perfect example of such organizations is multinational FMCG companies.
  2. Functional Structure, which segments an organization based on its functions. In other words, HR, Procurement, Operations, and Sales would all operate under a separate department.
  3. Flat Structure is usually preferred by the start-ups that operate in a fast-paced environment and must implement strategies quickly. This Structure allows individuals to feel empowered by providing them with direct access to leadership.
  4. Matrix Structure, which allows individuals to perform and operate different functions. For example, an employee could have a procurement role as a buyer and a financial one as a contract validator.

Component 2: A well-governed set of processes and policies

Processes and policies could be either created from scratch, based on a successful best-case practice, or the documentation of an existing activity. Regardless of the source, those processes should be clearly- defined, lean, and streamlined to minimize waste.

  1. Activities should be explicit at the lowest level possible
  2. Roles and responsibilities should be well-defined and agreed upon among all stakeholders. A common practice is the use of the RACI Matrix
  3. Key performance indicators (KPIs) should be defined for each process
  4. Most importantly, Service/Operational Level Agreements management (SLA/OLA) should:
    • Be clear
    • Have a cross-organizational agreement and approval
    • Have defined consequences in case of breach
    • Have its separate communication plan

Component 3: A focus on automation and digitization

Once you set the ideal organizational Structure and designed lean processes, it is time to leverage digital tools to automate your processes and improve your customer’s journey.

Thanks to digitization, you can deliver a sustainable service while reducing time waste, thus, improving your customer’s experience. Also, taking the bold move to implement Intelligent process automation (IPA) will enable you to substitute human effort and prevent evitable errors.

Component 4: An efficient allocation of skills and resources

Organizations always face issues in allocating the right number of resources to operate successfully. Sometimes they redesign an operating model, which would otherwise have worked perfectly had they had the correct number of resources.

But, how to ensure that what you allocated is enough? It is paramount to think of it from two perspectives.

First, you could conduct the right resource sizing analysis at each activity level. Second, you could size the digital impact of automation. That will decrease the number of required hours to complete an activity and reduce the total number of the resources needed to operate the model.

Component 5: A focus on a data-driven, performance-based culture at all levels of the organization

It is crucial that the data-driven, performance-based culture starts at the top and be endorsed at all organizational levels. That way, it could cascade to every employee in the organization. Keep in mind that your employees are the source of the data. Therefore, the success of performance reporting depends on the quality of your employees’ data entry.

If performance reporting is inaccurate, management cannot make the right decisions. It is a relatively simple concept; If a CEO wants to have a weekly static presentation to check his organization’s performance, the whole organization will shift towards a weekly performance update approach focusing on getting only this specific information on a particular day.

However, if a CEO wants to have a fully-integrated, real-time performance dashboard that he can access on his phone, that leaves the organization with no choice but to have a data-driven, performance-based culture at all levels.

In conclusion, designing a useful operating model is a pre-requisite for organizational growth and sustainable success. If any of its components fails, the whole model will not succeed in serving an organization’s strategic goals.

Defining a clear organizational structure and well-governed processes, allocating your resources efficiently, leveraging the technological and digital solutions, and promoting a data-driven, performance-based culture would ensure a successful implementation of your operating model, securing sustainable scalability and growth for your organization.

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