Target Operating Model development
Taking an all-embracing consultative approach
I’ve been involved with many organisations over the years where I have either been a customer of change, the facilitator of change, or a happy by-stander witnessing its implementation. I’m fascinated by the mechanics of it, but even more fascinated with the psychology. I’ve been lucky enough to have delivered operating models on an end to end basis many times alongside some very capable people.
There are many players within any change. Each have their own agendas, opinions, desires and fears which are all ever present, but seldom universally taken into account. With Target Operating Models the number of stakeholders becomes far greater. The scale of change is also greater, and as such the psychological factor is multiplied. I’ve seen this bring out and magnify natural character traits in many people during what is probably going to be the biggest programme of work an organisation will undertake.
These character traits are the natural preferences of an individual that will be exaggerated by the stress of change. I’m not going to go into the detail of the change curve here, but that journey tends to revert humans to their natural psychological preferences. If you are undertaking a target operating model design, it is important to be aware, and inclusive, of all stakeholders inside and outside of the organisation so that their perspectives can be harnessed and insecurities allayed.
For this reason, an all-embracing and consultative approach to Target Operating Model development is the only way to achieve widespread acceptance and sustainability of a proposed transformation. I’m going to break down this approach into two areas: 1) embracing your stakeholders; and 2) the approach itself.
- Embracing your stakeholders
Here are a few of the most common personality types that I see. It’s essential that any all-embracing operating model approach includes their views, however it is important to be able to manage them effectively. There will be more characters to consider, these are just the ones that I see every single time. I can often put names to some of these, thinking back over the last ten years or so:
- The Emperor/Empress – These people may be directly responsible for the business area itself – Preconceived ideas about how a business should be run tend to result in a design that they themselves desire, rather than be defined by customers and users. It is important to challenge their thinking, asking them what their customers really want and if their vision will deliver this. A compromise design that delivers exactly what customers need, whilst still giving the leader most of what they’d be happy with can be a good tactic.
- The Perfectionist – The person often in charge of the TOM design or implementation. Often they will be directly accountable for the success of the programme and therefore failure is not an option. It can, if not managed, lead to paralysis by analysis rather than forging ahead with a reasonable amount of data and insight. This leads to time and money being burnt at an alarming rate in a programme that will undoubtedly already have tight timescales and budget. The key is to remain pragmatic and ensure that the building blocks of the business are prioritised by importance and cost, so that analysis can be rightsized for the tasks at hand.
- The Pragmatist – The opposite of the Perfectionist. Often this is my own natural preference. I do need to consciously focus on my teams, ensuring that every conclusion and recommendation is data driven and made through solid insight. Too much pragmatism can lead to something being missed. I would recommend a Devil’s Advocate be appointed within any team to challenge ideas and designs, or having regular team sessions where design conclusions can be peer reviewed. There’s always something you’ll have missed.
- The Bureaucrat – Target operating models often take a long time to develop and deploy. This doesn’t have to be the case if an agile approach to governance is adopted. Project management and governance is very important, essential in my opinion, but too much can slow down decision making. I often find that there are too many layers of governance, with decisions being made by those without the information or insight. Fewer meetings and layers can promote decisiveness and lead to a faster design of higher quality. Helping bureaucrats to take a step back to see the bigger picture, highlighting where decision making bottlenecks are before suggesting a smoother path with just as much control can be a good approach to follow.
- The Militant – Often a participant or colleague within the business who undertakes the services and processes. This behaviour is born from fear of change, which is natural for all humans. It is their natural reaction and is not intended to be malicious. They genuinely fear what the change will mean for them personally. Overcommunication and involvement is the key here, and they can soon become your closest ally if you articulate what’s in it for them and remove the fear of the unknown.
- The Champion – The opposite of the Militant. They get change and they’ve experienced it before. Instinctively they know that embracing it will secure their future. It is the same natural driver as that seen in the Militant, fearing what the change will mean for them, but it is exhibited differently. They want to safeguard their place in a future world by being as close to the changes as possible. They too can be your closest ally, but be mistrusted by others. Regular communication and a reminder that not everybody is able to get on board with changes as quickly as they are helps to steady the boat.
- Your customers – the most important stakeholder of all. While we can say our most important asset is our people, without your customers you have no revenue. Without revenue you would have no business and without a business you have no people. This is why customers should always be held as the most important stakeholder of all. Every choice we make, every process we create, must be in line with what our customers want and need. Fully analysing this cohort is a major element of the all-inclusive approach that I will now introduce at a high level.
- My all-inclusive approach to Target Operating Model development
When it comes to the design and implementation of operating models, I use a deliberately structured approach that follows an all-encompassing and consultative method, ensuring every stakeholder, especially those that I’ve covered above, are fully involved.
The first step of this approach focusses on tackling vision and strategy. This is crucial to ensure that my clients and I know what the aims of the organisation are. This aligns the management team (often comprising many of the stakeholder characters I discussed with you earlier) to a common goal. My clients are then able to assess if each project currently in their project portfolio is aligned to this strategy. More often than not, half of the change portfolios I help clients to review are not delivering anything related to where their organisation needs to be. Sometimes millions in budgeted spend can be avoided and repurposed.
The next step focusses simultaneously on outline requirements and current state diagnostics. The former places great emphasis on the wants and needs of every customer persona and internal user. Through a technique called kano analysis, a clear picture is developed of who a client’s customer categories are, what makes them tick, what each of them need as a minimum from a service, and what would really excite them. This analysis can involve focus groups, workshops, mystery shopping and going back to the floor. Design principles will emerge from this, which will clearly define every decision that we take with respect to the operating model creation.
Internal needs of those undertaking services on behalf of customers are also important. The all-inclusive approach I recommend will identify most of the stakeholder characters that I’ve described, enabling them to be prioritised and managed as appropriate through a stakeholder management plan. Current state analysis is important to identify a lot of these needs, and discover the challenges that people face on a daily basis within the organisation. Many consultants skip current state analysis, with the rationale that only the future is important. However, I see this as a really important opportunity to engage with all layers of staff in an organisation, allowing them to vent their frustrations. This plants the seed for change. I also involve these colleagues in future state design, creating the processes needed to achieve what their customers want. This makes the target operating model design their own. They buy into it and there is far lower opposition to change, particularly where challenging culture may have presented a problem to acceptance.
Clearly, some design choices will be made at a senior level without the involvement of all staff. This is normal and should be expected. There is a business to run at the end of the day and sometimes tough decisions need to be made. However, the message stays the same. TOM design for the most part MUST be all-inclusive in order for the right design to be achieved from the ground up. By following an all-inclusive consultative approach to Target Operating Model design, every persona’s need becomes clearly understood and every stakeholder and their character traits can be managed. This is crucial for change acceptance, saving time as well as your sanity when it finally comes to the not insignificant task of implementation.
You can find out more about our approach to Target Operating Model design and implementation on our website.