20 years helping business leaders deliver alpha. View our success stories
20 years helping business leaders deliver alpha. View our success stories
By Claudio Limacher
This is the first article in a three-part series on designing and implementing a fit-for-purpose Target Operating Model. The series provides a practical roadmap for leaders seeking to turn strategy into results quickly, sustainably, and at scale. Part I focuses on recognizing when the operating model is no longer aligned with business needs. Part II will address how to design a TOM that truly enables strategy. Part III will cover turning design into lasting results through effective implementation.
Most organizations experience performance friction long before leaders understand the root causes. There are familiar symptoms: slowing execution, growing coordination overhead, silo tensions, duplicated work, and shrinking margins. At first, these issues appear isolated or situational. Perhaps a team is understaffed, a process is outdated, or a leader is overwhelmed. But more often, these indicators point to something deeper and more systemic – the operating model is no longer aligned with the needs of the business.
Operating models rarely fail overnight. Instead, they erode gradually as strategic ambitions evolve but organisational structures, roles, and ways of working stay the same. A company that once operated smoothly can find itself unable to execute at the required speed or consistency. What worked in the past becomes a constraint for the future. [10][11]
Understanding when your operating model is no longer fit for purpose is a crucial first step toward restoring strategic clarity and execution effectiveness. As highlighted in our introductory article, when the operating model is misaligned with the strategic ambitions of the business, even the best plans struggle to take off. The right starting point is not a new strategy, but a candid diagnosis of how work actually gets done today. [1]
Operating model misalignment often begins with subtle signals, small inefficiencies that accumulate over time. Individually, they may be dismissed as growing pains or leadership issues. Collectively, they reveal a systemic problem that individual efforts alone cannot fix.
Slow Execution. Decisions that once took hours now take days or weeks. Approval chains lengthen, and simple initiatives require multiple stakeholder rounds. Leaders and teams spend more time coordinating internally than delivering externally. When issues resurface in quarterly reviews without resolution, structural rigidity is likely to blame. [7][10][11]
Blurred accountability. When roles are unclear or overlapping, individuals step into work that isn’t theirs, or avoid work that seems ambiguous. Tasks fall through the cracks, or multiple teams unknowingly duplicate efforts. Blurred roles and unclear decision rights lead to a culture of un-accountability, where no one truly owns outcomes. This often stems from outdated governance structures that fail to clarify responsibilities. [5]
Cross-functional friction. Teams start optimising for their own KPIs rather than shared business outcomes. Departments acting as isolated “silos” is a classic symptom of misalignment: when R&D, Sales, and Operations each optimise for their own priorities without coordination, collaboration suffers and customers feel the pain. Misunderstandings increase, meeting load explodes, and alignment becomes a costly overhead. [5]
Strategy and Vision fail to translate into action. A strategy or vision may be inspiring and analytically sound, yet progress stalls once it reaches the operational level. If growth targets or strategic initiatives consistently fall short despite favourable market conditions, the culprit is often the operating model itself. Structures and processes that worked in an earlier stage simply fail to scale. This is typically not a strategy issue; it is an operating model issue. [5][10][11]
Leadership teams feel stretched. Leaders compensate for structural and governance gaps through personal effort. They become deeply involved in operational firefighting rather than steering the business. Overload becomes the norm, not because leaders lack capability, but because the system demands heroic effort to produce even ordinary results.
These symptoms may appear unrelated, but collectively, they paint a clear picture: the organization is working harder, not smarter, because the underlying system is no longer supporting execution. [10][11]
A common misconception is that misalignment results from poor leadership or flawed structures. In reality, it is usually the result of change outpacing design. Strategy changes faster than structure, and the gap between them widens over time.
Growth without redesign. As companies scale geographically, in headcount, or in portfolio complexity, the original operating model loses its coherence. What worked for 150 people no longer works for 1000. Structures designed for simplicity become layered and bureaucratic as teams, products, and markets multiply.
New strategic priorities. A shift in the company’s offering, customer-centricity, innovation, or cost efficiency requires a different way of working. Structures designed for a previous strategy struggle to deliver on new priorities. When the “how” is misaligned with the “what,” even the most compelling strategy stalls at the operational level. [1]
Accumulated “organizational debt”. As challenges arise, organizations often address them with local fixes: additional layers, new committees, extra reporting lines. Over time, this creates bureaucratic complexity that no single leader controls. Each fix makes sense in isolation; together, they create a web of dependencies and exceptions that slows everyone down – in other words the company has accumulated “organizational debt” as a liability.
Leadership changes. New leaders bring new expectations and working styles, which can increase ambiguity when the operating model is not adjusted accordingly. When priorities shift with every leadership transition, but the underlying structure remains unchanged, confusion and misalignment inevitably follow. This effect is compounded with rapid sequence of senior leadership changes.
Technology outpaces org and process design. Digital tools, automation, and AI are reshaping how work should be done. As AI automates routine tasks, from contract analysis to customer queries, roles and structures must evolve. If the operating model is not adapted, teams work around systems rather than with them. Companies that fail to anticipate and adapt risk carrying unnecessary costs and missing automation-driven efficiency gains. [10][11]
Mergers and carve-outs. Mergers – particularly merger of equals – often leaves companies with overlapping structures and siloed sub-units requiring an entirely new operating model. Without a unified org set-up, synergies remain unrealised and costs escalate. Equally, in a carve-out situation, the inherited model requires a transition from support by the former parent company, leaving the new entity to struggle with unclear processes and capability gaps. [9]
When the operating model falters, the impact is felt everywhere: performance, culture, customer outcomes, and financial results. Research indicates that even the best-performing companies have a 30 percent gap between their strategy’s full potential and what is actually delivered – attributable in no small part to shortcomings in their operating models. [12]
Slower decision-making. Decision rights become unclear, leading to escalations, loops, and delays that burn precious leadership attention. What should be a straightforward pricing call or resource allocation decision turns into weeks of meetings and sign-offs. Research shows that organizations with high misalignment spend significantly more time in meetings resolving decisions that should already be settled at front-line levels in the organization. [14]
Lower productivity. Teams spend a disproportionate amount of time aligning, coordinating, and clarifying instead of executing. The real cost is not the meeting time; it is the lost momentum and opportunity cost of delayed action. It is estimated that up to 20 percent of time in misaligned organizations goes toward work that does not connect to actual strategic priorities. [15]
Decreased customer satisfaction and top-line growth. Fragmented workflows and inconsistent handoffs directly affect the customer experience. When the internal organization is misaligned, external delivery suffers. A well-designed operating model can improve customer satisfaction by 10 – 30 percent, implying that a misaligned model depresses it by a comparable margin. [12]
Talent frustration and burnout. High performers become overloaded as they compensate for systemic gaps. Morale drops and turnover increases, not because of the work itself, but because the system makes the work unnecessarily difficult. [6]
Strategic stagnation. Key initiatives stall or take significantly longer than anticipated, reducing competitiveness. Investments and resource allocations fail to align with the company’s goals and strategy, creating chronic inefficiencies. [5]
Taken together, these costs compound silently. What begins as friction in one area quickly spreads across the organization, eroding competitiveness, draining talent, and widening the gap between what the strategy promises and what the business delivers. Recognising these as system issues, not isolated incidents, is the prerequisite for meaningful change.
Organizations typically reach a moment of truth, a point when structural issues can no longer be compensated through extra effort. Common triggers include entering a new growth phase, integrating acquisitions, digital or AI transformation, declining performance metrics, external pressure from investors or the board, major strategic shifts, and leadership transitions. [9][10][11]
Due to more frequent macro-changes, companies should revisit their TOM assumptions more often than in the past. Research shows that two thirds of companies have undertaken a redesign in the past two years, a clear sign that organisational design agility is becoming a competitive advantage. [13]
These moments reveal the true extent of misalignment and create urgency for change. But urgency alone is not enough. The real opportunity lies in channelling that urgency into a structured response: moving from symptom management to root-cause diagnosis, and from diagnosis to deliberate redesign.
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To determine whether the operating model is the real issue, leadership need to move beyond superficial observations and ask six hard, honest questions: Where does work consistently get stuck? This uncovers structural bottlenecks that no amount of individual effort can resolve. Which decisions are unclear or slow? This highlights governance gaps, places where decision rights are ambiguous or where too many people need to weigh in. |
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