Operating

models
Delivering on strategy
and optimizing processes
 Great leaders have an inspiring vision. Staff are experts
at what they do. Yet many companies struggle to bridge
their strategy (the ”why”) and their processes (the “how”)
with the “what” — and that’s where an operating model
comes in. Why is this?
Often we find that company leaders have strong aspirational visions that rally
employees to the why, and employees have systematic processes that get the
job done because they are experts in the field and know the how. But in many
situations we see that the true vision is never realized, because employees can’t
connect to the strategy in a practical way. We see processes never truly gain
efficiency because they seem disconnected to a broader context. Because of this,
companies may fail to realize their full potential.
In our experience, a well-defined and articulated operating model is the what—
the bridge between strategy and day-to-day operations that guides the team,
provides the context, and enables the behaviours that will realize the strategy
and vision.

An operating model is the bridge between strategy and operations

Strategy Operating model Operations

Why are we What are we doing? How do we do things?

doing this? An operating model It allows employees to
Leaders have increased translates strategic intent increase engagement in
visibility into the impacts into operational capabilities. strategy, providing a clearer
and trade-offs of It serves as the foundation view on how it affects their
strategic decisions on for execution and provides roles, processes, teams and
day-to-day operations a clear guide for enterprise supporting technology.
and initiatives. leadership team, line
managers and operational
teams.

Example artifacts: Example artifacts:

Strategy articulation Process maps, procedures,
document, purpose, guidelines, work
policies, organizational instructions, standards,
roadmap tools and systems

Operating Models | Delivering on strategy and optimizing processes 3

 An operating model helps define
critical organizational elements

While an operating model is not the strategy itself, it does help refine and reinforce
it. Similarly, while it is not the operational instructions, it does help guide them.
There are many misconceptions about what an operating model is and what it
looks like. Many executives think it is just a bunch of boxes and lines connected
to each other, while others see it as a detailed prescriptive guide. Ultimately, the
answer is — it depends. It depends on the size of the organization, the maturity and
complexity of the organization, and the outcomes you want to achieve. Operating
models are scalable and can be defined and documented to suit both the company’s
maturity and needs.

Operating models exist along a continuum based on a

combination of a company’s context and complexity

Smaller organizations with Large, complex organizations

low employee counts or with multiple products and
simple products and services services that don’t necessarily
have synergies

Operating Model Continuum

Simple operating model Detailed operating model

A poster or a graphic that A detailed binder that
provides the conception provides a very prescriptive
(mission vision values) and description of each element
process capabilities within the operating model

Although the above holds true in most cases, there are times when where a simple
operating model may work for a complex organization, and a detailed operating model
may work for a smaller organization. This would be driven mainly by the objectives and
goals that company executives want to achieve from the operating model, as well as
the organization’s context — industry, product, services, life expectancy, etc.

Key consideration: Operating models aren’t just reserved for large

companies — regardless of size, all companies should have an operating
model of some kind. In some cases, it might be brief or not very prescriptive,
but should still exist and be maintained to help bridge the gap between the
why and the how. Companies without an operating model of any shape at all
run the risk that strategy won’t be realized, processes will not be optimized
and staff won’t be aligned to a common view of how a company operates.

4 Operating Models | Delivering on strategy and optimizing processes

Through our years of experience designing and implementing operating models, we’ve
come to understand that operating models have to have the right elements. While
there are some standard elements many organizations have adopted (the “musts”),
we believe the strongest operating models include other leading elements.

Core elements Other EY leading

the musts for all operating models practice elements

Information Service
technology delivery
Design principles Culture & values

Performance
management

Governance Processes Organizational Risk

design & structure management

Defining an operating model is a disciplined process that recognizes a strategy

cannot do everything, for everyone all the time. In order to execute the strategy
successfully, an operating model is required. Before designing an operating model,
leaders must agree on the type of company they want to lead: operationally excellent,
customer focused, or product leading (Source: Disciplines of Market Leaders). This
helps create the foundation for robust design principles that align with a well-defined
business strategy. These principles require the leadership team to draw out and make
intentional choices about the trade-offs needed for the strategy to succeed. In addition
to building internal agreement about what the strategy means, these principles can be
used as a guiding light for the creation of an operating model to ensure all elements
hang together in a cohesive product.
From there, leaders can begin to build the other elements in iterations – from structure
and roles to processes and metrics – which will ultimately form the operating model.
Below we have defined the core elements of an operating model:
Design principles: Translates the strategy into a set of rules defining how the
organization should operate. They also provide rigour, consistency, context and
structure to guide the design process.
Governance: Defines the decision-making and delegation of authority, and creates the
framework that balances stakeholder interests and risk mitigation.
Culture & values: Defines the key attributes and behaviours the organization strives
to infuse within its people — establishing how work will get done and the values the
company upholds, acknowledging the company’s unique flair and how this is critical to
for the team to work more effectively together.
Process: Defines the key capabilities the organization commonly exemplifies from an
end-to-end perspective.

Operating Models | Delivering on strategy and optimizing processes 5

 Companies without operating models
can face unnecessary issues

Defining an operating model will provide the blueprint of how 4. Increased or sustained operating risks due to the
to execute on a strategy. Without a defined operating model, absence of clear principles, roles, responsibilities and
organizations could experience the following challenges. processes. Without clear guidelines, employees can
unknowingly conduct their work in a manner inconsistent
1. Operational inefficiencies as people expend effort in with standards, and in ways that do not align to safety
areas not aligned with the strategic plan. An environment or regulatory standards, thus potentially exposing the
of busy people can further mask the reality that energy is company to more risk.
lost to work that is not important.
Operating models need to evolve along with the business
2. Ambiguity around accountabilities, roles and model and strategy to guide how people produce the right
responsibilities can slow down decision-making. When results. The operating model serves as a blueprint for how
these aren’t clear, there is duplication of work or, worse, resources are organized to get critical work done.
slippage of critical tasks leading to schedule delays and
financial consequences. This is especially important
when companies are in high-growth mode: if many new
employees are being onboarded without a clear and
consistent message on how the company operates, then
“After the consolidation of
they can embark on their roles without any “north star” three organizations into one, we
to guide their actions and decisions.
needed ‘glue’ to redefine what the
3. Low interaction and integration between divisional organization should look like.”
units and functional areas, as it is unclear to people how Executive Vice President,
they should cross these implicit boundaries. These non- Strategy, Provincial regulator
standardized approaches to processes and procedures
can lead to the loss of valuable organizational learning
and reduced usefulness of systems and data.

6 Operating Models | Delivering on strategy and optimizing processes

 Companies that articulate and implement operating
models can experience positive changes

Once a well-defined operating model is in place, organizations 5. Better ability to grow and scale quickly. When the
may experience several competitive advantages. basics are written down, they’re easier to communicate
1. Improved business performance as a result of increased to existing and new staff, and easier to review at critical
operational efficiency. When it’s clear who does what, junctures as companies mature and become more
duplication of work is diminished. This elimination complex.
of wasted effort allows time for innovation and 6. Improved risk management. When there is a common
improvements to the customer or stakeholder experience understanding of roles, responsibilities, goals and
or improved working capital. Part and parcel with this is processes, risks can be identified and mitigated earlier
improved cost management as a result of better ability to and more easily. In addition, with the right governance in
understand processes, plan, and control the budget — all place, risks can be escalated.
due to an entire company aligned around a single way to
operate. A well-articulated operating model also creates
a baseline to improve upon whereby leaders understand
clearly what is done today and therefore have a starting “We’re seeing the results of
point to improve upon tomorrow. implementing an operating model.
2. Better connection with stakeholders by adapting to It’s guided us on what is important
their changing needs — as market environments change,
organizations that adapt are able to meet or exceed to focus on and it’s stopped a lot of
their stakeholders’ and customers’ changing needs. A ‘churn’ around decisions.”
clear operating model provides a framework by which to
Executive Vice President,
continually map and manage stakeholders.
Strategy, Provincial regulator
3. Increased process integration across divisional units
and functional areas reducing duplication of effort.
Through standardization, organizational learning can
be leveraged across the organization. Systems and data
become transparent and more useful, and employees can
better link their piece to the rest of the puzzle. Key consideration: It’s important to remember
not to overdo it. Some companies get caught in
4. Improved coordination and decision-making. Operating the trap of defining the what and the how to large
models provide improved ability to plan and sequence levels of detail and become highly prescriptive.
initiatives, as dependencies across the organization are They lose flexibility, create a compliance culture
better understood. Leaders are able to transparently and employees can lose a sense of creativity and
see where weaknesses in capabilities (people, process or entrepreneurial spirit. Success is about finding the
technology) exist, and work together to find a remedy right balance for the organization.
that better aligns with the strategy.

“We’re doing a much better job of focusing our decisions at the right level,
thinking enterprise-wide, rather than making decisions in silos, based on
what’s best for a particular department.”
Vice President, Program Investment
Not-for-profit foundation

Operating Models | Delivering on strategy and optimizing processes 7

 It takes work to develop and implement an
operating model, but it’s worth it

Leaders want to enable and enact their strategies. Staff 3. Get the right people at the table – ask
want to be part of something bigger. So why doesn’t every yourself: whose viewpoints are required to
company have a clearly documented what, to bridge the why
and the how? Because it’s hard work to get it done. But these
build the future state?
critical steps are ones worth taking. Regardless of whether an operating model will document the
current state or bring about change, getting the right people
1. Assess your current state – ask yourself: at the table will expedite decisions with representation from
what’s working? What isn’t? across business units and functions.

Understanding your current state is a critical first step to In addition, creating the right working teams and steering
developing and documenting an operating model. Identify committee can bring additional diversity of thought and aid
and interview key stakeholders from across your operations with buy-in, which can result in a suitable approach for your
with a standard set of questions to capture opportunities, organization.
pain points and overall themes about the current state.
In addition, do a solid review of current documentation to
determine if it hangs together and tells the story you want it
“It’s critical to uncover passive
to about your why, what and how. resistance and make sure everyone
understands the case for change.”
2. Determine if there is a need to change –
Executive Vice President,
ask yourself: what’s the burning platform Strategy, Provincial regulator
for change?
Current state assessments may determine that all that is
needed is a stronger and more compelling documentation 4. Define your design principles – ask yourself:
of the current state. They may also unearth pain points how will the organization need to work
that, if not solved, will get in the way of achieving strategic together to achieve our strategic goals?
goals, hinder growth, or put your organization at risk. If
Design principles articulate the parameters for the future
the latter is true, a strong case for change that includes the
state, set the context and are born of an organization’s
consequences of not changing needs to be developed and
strategic priorities and current state assessment. Usually
communicated across the enterprise. Getting employees
plotted along a spectrum, design principles result in key
excited and mobilized around a common need to change is
statements to guide the development of the operating model
critical to success.
document.

“Educating people on the process of

designing an operating model builds
a strong foundation for change.”
Director, Innovation and Change Management,
Government administration agency

8 Operating Models | Delivering on strategy and optimizing processes

5. Shape your future state – ask yourself:
what critical elements need to be included in
our operating model?
“If the operating model is out of
Once the case for change has been developed and the right
reach for the audience, it’s not
people are at the table, you’re ready to shape your future delivering what it needs to deliver”
state. Regardless of the degree of change anticipated, it’s Executive Vice President, Strategy,
important to determine the key elements you need to include Provincial regulator
as part of your documented operating model, and give
weighting and attention to your most contentious elements,
or those that are most critical to your operations.
Development of the future state should happen through a
series of workshops, each focused on a different element “Without very strong communication
of your operating model. Each workshop should anchor
attendees on the purpose of an operating model, the case
and implementation, efforts to
for change and a definition of the element at hand before develop an operating model are
diving into facilitated discussions and exercises to help define
utterly wasted irrespective of how
the future state for that element. A focus on asking better
questions about the current and future state will get better good it is”
answers, resulting in a stronger documentation of your Vice President, Program Investment,
operating model. Not-for-profit organization

6. Get it all down – ask yourself: who’s the

audience for this, and what will resonate
with them?
Facilitating workshops can be hard work, but capturing all
the salient points, decisions, critical questions and answers, Key consideration: Ongoing maintenance and
as well as opportunities for change and improvement, can stewardship of an operating model is an element that
be even harder. Post-workshops, it’s time to document often gets overlooked. Having someone accountable
the outputs of the workshops into a single, coherent, for keeping the information relevant, up to date and
and cohesive document that is plainly worded and easily aligned with the strategy is critical — otherwise things
understood. quickly become out-of-date and employees lose
interest.
7. Implement it – ask yourself: Practically
speaking, how will we make all this come
to life?
Internal stakeholders will not see or feel anything you’ve
decided or developed until implementation starts and takes
hold. So it’s critical to not let up on any momentum once the
operating model is agreed. Strong implementation includes
identifying initiatives that will help achieve new goals, placing
those initiatives in the broader context (what else is going
on? How will base operations be impacted?), assigning
accountability for them, planning and executing on those
plans. Of course, all of this is enabled through dedicated
change management and communications efforts to ensure
employees are not only aware of changes, and understand
them, but have bought in and are committed to helping
make changes.
Operating Models | Delivering on strategy and optimizing processes 9
EY can help
Our team has deep experience in developing and Managing the process
implementing operating models across multiple complex
Developing and implementing an operating model can be
industries. We can help you translate your strategy, articulate
tough work. Our deep experience and proven methodology
your state and make it all come to life through meaningful
for managing projects and developing and implementing
implementation.
operating models can lighten the load on you.

Building, refining or finalizing strategy Aligning leaders and staff

We work with clients to finalize the why — the strategy At EY, we know that business engagement and business
that drives the organization and guides the content of its readiness leads to business adoption of changes required
operating model. to make the strategy and state come to life. Our approach
hinges on the engagement of leaders and staff through
Determining the operating model operating model development and the meaningful
components required preparation for any changes made as part of implementation.
Each organization is unique and has unique needs. We work
to understand your current state, and determine what you Planning and leading implementation
need as part of a customized operating model. The rubber truly hits the road with implementation.
Without proper implementation, the value of an operating
Developing content model risks being lost. We work with teams who can drive
Through a collaborative process, we can help you unearth change to create plans for implementation. Where ability to
and articulate your state, and document it in a compelling, implement is low, we can also provide value by co-leading
practical, and easy-to-understand way. implementation efforts, while simultaneously transferring
knowledge and capabilities to your people to sustain
implementation efforts.

“EY was able to ask

questions or push on
things that employees “There is huge benefit
just can’t.” to having an outside
Director, perspective in developing
Innovation and Change Management,
Government administration agency an operating model.”
Director,
Innovation and Change Management,
Government administration agency

“The approach that was

taken by EY got us there a
lot quicker and easier than
we’d thought.”
Executive Vice President, Strategy,
Provincial regulator

10 Operating Models | Delivering on strategy and optimizing processes

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Operating Models | Delivering on strategy and optimizing processes 11

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