Written by This is the fourth post in a series that will explore a fundamental question: how can a leader be more intentional about connecting company strategy to individual work, individuals to teams, and teams to one another? If you missed the first three posts on Roughly 500 Words On… you can read them here: https://kaleidoscopeadvisory.com/roughly500words/
Chapter 3: Differentiating Between an Operating Model and Organizational Design – We are all Cogs in the Machine, and it is Incredible!
A common and cynical refrain for many in the working world is that we are all just cogs in the machine. This refrain elicits a vision of a vast machine where workers slowly and agonizingly grind away and play a small and relatively inconsequential role in making some anonymous machine work. Nobody knows what that machine produces, but workers continually churn on mindlessly, lacking autonomy and fulfillment.
It’s an exceedingly bleak view of the world. But what if there is a far more compelling interpretation?
What if each cog is so finely machined to make it unique and irreplaceable? And each cog is precisely placed alongside other cogs to make up a critical component of the vast machine? And that machine has been imagined, designed, engineered, and assembled to be able to do something extraordinary (like create perfect banana splits)? Each cog in that vast machine is incredible if that is the case. That machine and those cogs: that is what leaders can create.
In the last post, we talked about organizational and individual capabilities. At a macro level, these are the outputs – the key things an organization needs to do – and the inputs – the key things individuals do to enable the outputs. But now, we need to be more thoughtful about organizing those capabilities.
Leaders and managers often jump straight to organizational design: who are my people, their reporting lines, and the management structure? While essential, it doesn’t consider the intersection between strategy, capabilities, and structure, and its orientation towards customers or external partners. That consideration, building the proverbial machine, is an organization’s operating model.
Simply, an operating model is the broad organization of a company’s capabilities to enable a strategy. If we return to our orchestra analogy, the orchestra’s operating model informs the arrangement of each section of instruments before the conductor and audience. For an orchestra, its operating model balances each delicate sound and creates its macrostructure, within which each section and individual is organized. All of this is tuned and harmonized to ensure the sound is perfect for the audience.
Returning to a company’s operating model, leaders must thoughtfully arrange an organization’s capabilities to optimize how it interacts externally with customers and partners, and internally across functions and teams. Leaders must also determine how to thoughtfully introduce processes, technology, and governance to make the whole system work. Once an operating model is in place, leaders can focus on organizational design, roles, and people to make the operating model come to life and ultimately enable the strategy. Only then should leaders focus their attention on roles, reporting lines, sizing, and span of control.
So, where to start? Every leader should consider a few questions when thinking about her organization’s operating model:
- External Orientation: How am I orienting my organization to my market, customers, or external partners? What are the critical connection or integration points?
- Internal Interaction: Which distinct organizational capabilities do I need to come together to collaborate effectively, solve problems, and create solutions?
- Connective Tissue: What processes, technologies, or governance will I need to encourage and manage my external and internal interactions?
- Risk Management: Where are the most critical connections or the riskiest failure points in the system? How will I reinforce those through structure, process, or governance?
So far, we have connected the dots between strategy, organizational outputs, and company structure. The next post will focus on individual role design, the critical link between an organization’s outputs and the required individual effort and inputs.
Until then, please let me know your thoughts on this series or topics you would like me to cover in the future.
-Paul