A target operating model is the description of how your organization works once the strategy has been executed: which roles exist then, which processes, which systems and which governance. It is not a vision and not a plan, it is the snapshot of the end situation you are organizing towards.
The difference with a vision is that a vision states where you want to go, while the target operating model states what the organization concretely looks like once there. A production company with 120 employees may have the vision to become market leader in a niche segment. The target operating model then describes, for example, that a separate sales team is created for that niche, that production shifts to smaller batches, and that a separate quality function is added. That is the difference between the direction and the blueprint.
Usually the question comes up because there is a bottleneck: management has set a strategy, but no one can explain what that means tomorrow for the organizational structure. Or the other way around, there is a reorganization proposal on the table and no one is sure whether that new structure actually fits the strategy. In both cases the intermediate step is missing: the translation of vision into a workable organizational model.
That intermediate step is often skipped because a vision on paper feels concrete enough to work with, while in practice it is not. Anyone who recognizes this can read at our vision is too vague, how do I make it concrete where that vagueness comes from and what is missing to be able to build on it.
A target operating model does not emerge from a vision in a single step. There are layers in between: the vision itself, a vision state that describes what the organization looks like in the medium term, a target that sets the concrete goals for individual parts, and a target state that translates that into how the organization functions at a set moment. The target operating model is, in fact, another name for that last layer, but worked out in structure, roles and processes.
For a service provider with 80 employees, the vision state might be that customers get an answer to every question within a day. The target then sets which service level belongs to that per customer segment. The target state, the operating model, subsequently describes which teams deliver that, with which authorities and which handover between front office and back office. Without those intermediate layers, a vision remains an ambition without form.
An operating model by definition touches multiple departments at once: sales, operations, finance, IT. If each department separately formulates its own goal that fits the vision, the result is often a model that is correct on the individual parts but does not work as a whole. Sales wants to grow faster, operations wants to run more stably, and those two goals can get in each other's way as soon as both claim hours, people and budget.
This is why a target operating model is not set in a single management meeting, but in a round where the whole organization gives input on what is feasible and logical within its own domain. What you run into when departmental goals work against each other is set out in what do you do when departmental goals work against each other, including how that tension becomes visible before the model is fixed.
An operating model that is only logical on paper does not always survive the first setback. A double check on eight dimensions, such as customer value, cost, risk and agility, shows whether the model holds up on multiple fronts, not just on the front it was designed for. In addition, confidence gates help to check at fixed moments whether the assumptions underlying the model still hold before further building continues.
For a wholesaler with 200 employees, a model designed for growth, for example with more stock points, may score poorly on the margin dimension if the cost of that stock has not been calculated through. How that trade-off between growth and margin works in practice is explained at how do you weigh growth against margin in a strategy.
If you want to know whether your own vision is already concrete enough to serve as a basis for an operating model, the free test 'is your vision steerable', with six questions about the four layers, gives a first impression, without any advisory conversation attached to it. Anyone who would rather first read how a vision is made measurable before going through the four layers can find that at how do you make a vision measurable.
Once the target operating model is on paper, the question remains what it concretely means for staffing: which roles and tasks the target state requires, alongside what is already present today in people and hours in the organization. That capability back-translation is the bridge between the model and the work floor, and the difference in hours that follows from it is worked out in the work scan on ftetoai.com.
Vertel wat u wilt bereiken, dan kijken we samen wat daarvoor moet staan.
Answers come from this site’s knowledge base. Not tailored advice, and not a scan of your company.