Blog | Consulting, Intelligent Automation

Target Operating Model

Feb 1, 2021 | 3 min read

In this blog from our Lean Methodology Series, we explore the reality of Target Operating Models (TOM). Read on to find out more.

So many organizations work on Target Operating Models (a comprehensive model that enables the implementation of business strategy), but are they really?

What we see most often is not a Target Operating Model being implemented, but rather a reorganization or a restructure.

In essence, it’s Organizational Design (aligning people, processes and competencies with business strategy and objectives). And that’s not a bad thing as it can yield valuable benefits such as increased efficiency, faster decision making, improved quality to your organization and more. It’s just not a new Operating Model.

What’s the difference?

Let me give you an example.

Let’s say that you’re a bank and you process mortgages and mortgage applications. Your current Operating Model and Organization Design might look like this:

Diagram showing current operating model

You have your Sales in a Retail Function, and your processing teams in Operations. You split up the teams in Operations by the type of activity they do and an application passes its way through each of the teams to be completed.

Now you decide that you want to break up your mortgage operations and put some of the application processing employees in with the retail Field Sales unit. Then put the underwriting employees with the risk function, putting some of the work with the contact centers and some in a back-office admin environment. Something like this:

Diagram showing same operating model but different org design

That’s a reorganization, it is not a new Operating Model.

Because the WAY we do the work is not changing – just how it all aligns from an Org Design point of view.

Now let’s take the same example and do something different. What if you decide that a better way to process this would be to have an application come in and have it worked as far as it can be by one person?

That one person does the checking, the verification, the conveyancing instructions, the verification, the assessment and when another piece of information comes in from the customer, they do that as well.

Diagram showing new target operating model

Now we are keeping applications all together and separating our teams by the type of the application that is occurring – but the team works it from end to end.

That will be a change to how you operate your model of mortgage application processing which invariably comes with a reorganization. You’ll probably need to redesign how your structure works to support that new way of working and examine your technology and how it supports or doesn’t support the process.

So that’s the difference between an Operating Model piece of work and an Organizational Design piece of work.

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