What is the difference between Operating Model and Organisation Design?

Understanding the Difference Between Operating Model and Organisation Design

In the world of business transformation, terms like "operating model" and "organisation design" are often used interchangeably. However, while both concepts relate to how companies structure and manage their operations, they serve distinct purposes and address different levels of business strategy. If you're involved in shaping the future of a company—whether through consulting, leadership, or change management—understanding these differences is crucial. Let’s explore what sets the operating model and organisation design apart.

What is an Operating Model?

An operating model refers to the high-level structure of how a business delivers value to its customers and stakeholders. It defines the key components and functions that enable the execution of a company’s strategy. At its core, the operating model encompasses the essential building blocks of the business—its processes, technology, resources, and people—that work together to drive success.

In simpler terms, the operating model is like the engine of a business. It shows how all the parts fit together to deliver products or services effectively. For example, in a retail business, the operating model would define how supply chain processes, marketing strategies, and customer service functions collaborate to achieve the company’s goals.

Key Components of an Operating Model:

• Processes: The systems and workflows that support business operations.
• Technology: The tools and platforms that enable processes and collaboration.
• People and Roles: The workforce structure and allocation of responsibilities.
• Governance: The decision-making framework that guides strategy execution.
• Customer Journeys: How value is delivered from the company to the customer.

An operating model is primarily concerned with how a company delivers its strategic objectives, often focusing on efficiency, scalability, and aligning internal capabilities with external market demands.

What is Organisation Design?

Organisation design, on the other hand, is the blueprint that dictates who does what within an organisation. It deals with the people and structure of the company, determining how teams and departments are organised, how authority is distributed, and how communication flows across the business. Organisation design goes beyond creating an org chart—it’s about optimising the structure of the company to meet its strategic objectives.

Where an operating model looks at systems and processes, organisation design focuses more on roles, reporting lines, decision-making structures, and the cultural dynamics that enable or hinder collaboration. It ensures that the right talent, skills, and leadership are in place to execute the business strategy.

Key Aspects of Organisation Design:

• Structure: Hierarchy, departmental divisions, and reporting lines.
• Roles and Responsibilities: Who is accountable for what within the organisation.
• Span of Control: The number of direct reports managers have and the layers of management.
• Decision-Making: Centralised vs decentralised decision-making and how authority flows.
• Culture and Behaviours: The values, norms, and behaviours that influence how employees interact.

Organisation design focuses on who is best placed to deliver on the company’s objectives and how teams should be configured to work efficiently.

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