Stephanie Owen, Consulting Executive Director at Catalyste, explains the difference between a restructure and an operating model change, and highlights the benefits of adopting an operating model change.

Recently, Jo (alias), a long-time client, contacted me to see if we could help her organisation manage a restructure. When we talked further, it became clear that the change would be more far-reaching than the reshuffling of boxes and reporting lines on an organisation chart. I suggested that we needed to explore a change to the operating model of her business.

What’s the difference between a restructure and an operating model change?

Let’s start by saying that there are many similarities and some overlaps:

  • Both can be ways to change the cost structure of the business.

  • Both can be used to change and build the right capability, improve succession planning and career path progression for staff.

  • Both can be used as ways to reinvigorate the organisation and improve organisation agility.

  • Both will typically involve changing people’s roles, levels, reporting lines, and indeed, whether they stay employed by the organisation.

So, when is a re-structure needed?

It is a restructure if:

  • The primary impact of the change is that people’s existing job responsibilities are reallocated among existing staff, typically those in the same team, function, or organisation.

  • The reallocation of work may also be to staff who are less, or more, senior than the staff currently doing the work.

  • Reporting lines and/or spans of control may change, but most people are doing more or less the same work.

  • Unnecessary work is eliminated from the organisation.

  • There may be staff added to the organisation, and the staff may bring additional or different capabilities to the team, however the overall nature of the team or function remains substantially the same.

  • It is typically achieved relatively quickly, and indeed, often commissioned in order to achieve short-term cost objectives.

When is an operating model assessment beneficial?

An operating model can be thought of as the way that people, processes, and infrastructure (including technology) combine to deliver a set of organisational results or outputs.  Applying “operating model thinking” means consciously evaluating the capabilities an organisation will need to deliver its strategic objectives, and aligning its people, processes and technology to these objectives.

Or to put it another way, it is a way of modelling how an organisation translates strategy into day-to-day delivery of products and services to its internal or external customers.

Applying 'operating model thinking' means consciously evaluating the capabilities an organisation will need to deliver its strategic objectives, and aligning its people, processes and technology to these objectives.

An operating model change:

  • May change where the work gets done.  For example, it may involve offshoring, centralising or decentralising certain functions, or outsourcing;

  • May significantly change the content of some, or all, job roles.  For example, following outsourcing, vendor management complexity may increase, while internal delivery complexity decreases; or a customer service officer may acquire sales responsibilities;

  • May change the risk profile of the business.  For example, offshoring may expose the organisation to new risks or even categories of risks – such as exposure to new types of laws (say, data protection in Europe), geopolitical risks, natural disaster risks;

  • May change the economic model within the organisation, for example, a former support function changing from being a cost centre to a profit centre. This then also causes a significant change in the dynamics and relationships among internal functions.

  • May require changes to physical infrastructure (e.g. in the case of outsourcing or offshoring means premises are no longer required in-house/in-country);

  • Will likely require enabling changes to the technology/information systems and processes in the organisation – for example, the introduction of a customer relationship management (CRM) system;

  • Often involves fundamental changes to where and how service is delivered to internal or external customers – for example, moving to self-service, or contacting a call centre rather than face-to-face interactions.

Summing up the differences

Overall, an operating model change is a broader, more far-reaching and strategic exercise than a restructure. Operating model changes nearly always involve restructures, however a restructure is not always an operating model change.  An operating model change, because of its more strategic nature, will require a more comprehensive transformation management approach relative to a restructure.

An operating model driven change has the benefit of 'traceability' between the end organisation, process and technology change outputs (e.g. org charts, new systems etc.) and the unified 'vision' of the business from a capability and strategy execution perspective. It is visual, as well as detail-rich. There is integrity and congruence, when done right.

An operating model driven change has the benefit of “traceability” between the end organisation, process and technology change outputs (e.g. org charts, new systems etc.) and the unified ‘vision’ of the business from a capability and strategy execution perspective.  It is visual, as well as detail-rich.  There is integrity and congruence, when done right. This makes communicating the course of action and gaining buy-in much easier, with more consistency between the ‘espoused vision’ of the business and the program of activities the management team is driving. What is common to both operating model change and restructures is that a robust change management approach, including good sponsorship/leadership, is critical to success and sustainable benefit realisation.

Considerations for your next operating model journey

If you are considering an operating model driven change for your organisation, there are many considerations, however here are a few principles to keep in mind:

  • A strong business vision is essential. What type of organisation do we want to be? What’s our mission, our purpose for being? Take the time to get the mission/vision/purpose right – it will pay dividends.
  • Leadership capability is critical.  The lead team need to be capable and aligned, working together to drive the initiative.
  • Have a plan.  It sounds obvious, but given the depth with which an operating model analysis can achieve, it is likely that the outputs will include years of complex and interrelated transformation initiatives, ranging from new systems to restructures and career models.  Having a structured program, or portfolio plan, with “horizon views” is important. Rome wasn’t built in a day!
  • Get mid level management and grass roots staff on board.  An operating model analysis can be a terrific basis for staff and management involvement.  A good change management plan, including co-design / ownership & involvement strategies can pay huge dividends.
  • Don’t confuse an operating model exercise with enterprise architecture.  When done right, an operating model will generate the top level visions for end to end core processes and also top level organisation design. An operating model program can be used to launch an enterprise architecture initiative, but they are not necessarily linked, and aiming for both can jeopardise the original intent

An operating model driven change program can be a highly worthwhile and transforming experience for an organisation that invests wisely in the right capabilities and with the right mindset. It can also be a trap for the unwary.  If you are thinking of an operating model driven transformation for your business and want to discuss it, feel free to contact me.

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