Building an operating model begins with a question most organizations don’t ask before they start redesigning: what must this organization be able to do to execute the strategy it has committed to? Not what it does today. What it needs to do going forward. Organizations that open an operating model redesign by drawing reporting relationships have skipped that question — and typically produce a structure that looks coherent internally but is misaligned with what the strategy actually requires.
The three phases of effective operating model design are: Establish Strategic Direction, Design the Operating Model, and Execute for Impact. Each phase produces the inputs the next requires. The sequence is not optional. Compressing or combining phases is the fastest path to a redesign that will need to be revisited.
Before You Design, Establish Strategic Direction
The principle that governs operating model design is form follows function. Structure must follow clarity — clarity about which capabilities the organization needs to develop, which markets and customers it serves, and what the current operating model fails to provide. Phase 1 establishes that clarity before any design work begins.
Establishing strategic direction means answering three questions. First: which capabilities are differentiating — those the organization must execute better than any alternative to sustain competitive advantage? Second: where are the strategy’s execution failures concentrated — where do decisions stall, accountabilities go unclaimed, and strategic intent fail to translate into what the organization actually does? Third: what design criteria must the new operating model meet to close those gaps?
The deliverable at the end of Phase 1 is not a revised org chart. It is a shared view of strategy and execution requirements, a diagnosis of where the current model breaks down, and design criteria that will govern the decisions made in Phase 2. Without these, design becomes guesswork — and the resulting structure reflects what the design team believes is logical rather than what the strategy actually demands.
A top-15 public accounting firm with $900M in revenue, 350+ partners, and 3,000 employees had completed its first strategy refresh in four to five years. The strategy was finished. What was missing was the machinery to execute it. Decisions took months and were relitigated multiple times. Strategic initiatives gained little traction. The firm’s geo-centric structure — built for a different strategic context — created parochial behaviors that limited client relationships and constrained profitability. Lotis Blue’s first task was to align the leadership team around the key drivers of strategy execution, assess which of those drivers were least mature relative to future needs, and clarify which were strategic in nature versus operational. That diagnostic became the brief for Phase 2.
Design All Seven Elements Together, Not in Isolation
Operating model design is not org chart design. An org chart addresses one element of the operating model. A complete operating model requires seven interdependent elements, each designed in relation to the others:
- Differentiating Capabilities — the specific things the organization must do better than any alternative, and that every design decision must protect and reinforce
- Processes & Technology — the workflows, systems, and tools through which work gets done at every level of the organization
- Roles & Accountabilities — who owns what, at the level of specificity required to act without constant escalation
- Decisions & Governance — decision rights, decision-making forums, and the governance norms that determine how authority is exercised
- Organizational Structure — spans, layers, and reporting relationships — the formal architecture through which the organization manages its work
- Behavioral Norms & Culture — the behaviors the model requires, what it rewards and tolerates, and how those norms are reinforced at every level
- Workforce Strategy — how the workforce is sized, composed, developed, and deployed to deliver on the capabilities the operating model requires
The interdependence of these elements is what makes partial redesign fail. Restructuring without redesigning governance leaves the new structure operating under the old decision-making logic. Clarifying roles without addressing behavioral norms leaves people knowing what they are responsible for but unsure of what the model actually expects from them. Designing one or two elements while leaving the others unchanged means the model you design will be absorbed by the system you didn’t.
For the accounting firm, the design phase translated the Phase 1 diagnostic into concrete structural and accountability decisions. Lotis Blue identified duplications, gaps, and areas that were largely unled — work that was strategically critical but assigned to no one specifically. The firm’s senior-level roles were reshaped with clearly defined contribution expectations and performance measures. The redesign specified where each role should lead execution, where it should approve or consult, and where it only needed to be informed — accountability at the level of resolution the strategy required.
Execution Is Not Rollout — It Is Behavioral Change
Most organizations treat operating model implementation as a communication challenge: distribute the new org chart, hold a launch event, share the new role profiles. The gap between that and actual execution is where operating model redesigns fail.
Execution is behavioral change. A new operating model specifies how decisions should be made, which behaviors are expected, and what work belongs to whom. Until the people inside the organization actually behave differently — make decisions differently, escalate differently, hold each other accountable differently — the model is a document, not an operating reality.
Three conditions make execution hold. Governance is actually used: leaders make decisions through the new governance framework rather than around it through informal authority. Leadership behavior at every level models the new norms rather than the old ones — especially at the organizational layers where the model’s requirements were never explicitly designed until now. And feedback loops surface evidence of whether the model is taking hold: are decisions being made at the right level, or still escalating? Are accountability expectations clear enough to act on, or still generating the same ambiguities as before?
The accounting firm’s results emerged from all three of these conditions being met. The firm grew at a double-digit annual rate for several years following the engagement. Strategic initiatives moved faster, with clear ROI calculations and defined processes for addressing low-return efforts. Leadership time spent on critical operational areas fell by 25% or more, creating capacity for business development and M&A activity. The senior team and direct reports achieved clarity of mission, and annual business planning became substantially more effective. Those results followed from an operating model that changed how the firm’s leadership actually functioned — not just how it was organized on paper.
The Most Common Ways Operating Model Design Fails
Most operating model redesigns that underdeliver share the same failure patterns.
Starting with structure. Designing reporting relationships before understanding what the organization needs to do produces a structure that is internally coherent but strategically wrong. That structure will need to be redesigned once the strategy demands something the structure can’t deliver — which it inevitably will.
Designing only for the executive layer. Alignment at the top is necessary. It is not sufficient. An operating model that establishes clarity for the senior leadership team but does not translate into middle-management and operational behavior has not been fully designed. It has been designed for the people who attended the design sessions. The organization’s actual execution continues to be governed by the structures and norms that existed before.
Redesigning elements in isolation. Organizations frequently restructure without touching governance, adjust governance without redesigning roles, or clarify roles without addressing behavioral norms. The elements they modify start producing different outputs; the elements they leave alone continue producing the same outputs as before. Internal friction is the result and the unchanged elements typically win, pulling the modified ones back toward the system’s prior equilibrium.
Treating implementation as a communications exercise. Announcing a new operating model is not the same as implementing one. Implementation is the sustained, deliberate management of behavioral change: ensuring that leaders make decisions the new way, that accountability expectations are applied in practice, and that the model is calibrated as evidence of adoption emerges.
Operating model design done well is phased, disciplined, and consequential. Each phase narrows the design problem. Phase 1 establishes what the organization must be able to do. Phase 2 designs the system that makes it possible. Phase 3 ensures the system actually takes hold. Organizations that skip a phase do not save time. They spend more of it — redesigning something that was never fully built in the first place.
