The CEO Agenda: Operating Model

The best CEOs are the architects of their organization and the operating model is their blueprint. But aligning all elements of the operating model goes beyond internal structure. Bain partners Eric Garton, Marcia Blenko, James Allen and Rob Markey discuss how a focus on small teams and conflict resolution can build an operating model that best executes strategy.

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Read the transcript below.

ERIC GARTON: The best CEOs I've worked with are really the chief architects of their own operating model. They spend a lot of calories thinking about what work gets done, how that work gets done, and making sure they've got great people to do the work. They have a real bias for organizations that operate with speed, and they make sure that they've got people on their teams who act like owners with a real sense of urgency and insurgency.

MARCIA BLENKO: The best CEOs that I've worked with get that they have to go beyond the boxes and lines of the org chart and try to align all elements of the operating model to execute the strategy—so, not just structure, but accountabilities, individual decision rights, and KPIs to management forms and the management processes—how to make that work really effectively to make the right decisions on resource allocation and getting people to focus on the metrics that really matter, all the way to ways of working—the right behaviors and the way people need to collaborate across the organization, role-modeled by the top leaders in the organization.

The operating model acts as the bridge between strategy and execution. The crucial first step in designing the operating model is actually translating the strategy into a set of, say, seven to 10 design principles that basically say, what does this organization need to do to deliver the strategy? In my experience working with CEOs, I've seen that there are two powerful reasons to use design principles. One is it really focuses everyone on what matters most in designing the organization. The fact is you can't design an organization to optimize for everything.

The second is they really helped to align a leadership team, and it takes what can be a very subjective and emotionally charged discussion and turn it into a very fact-based dialogue. So design principles basically translate strategy into the requirements that the operating model has to deliver. One of my favorite situations recently was a CEO, who really felt that the entrepreneurial mindset of his company had got them to where they got to. And he wanted to make sure, regardless of the new model and what other things they're optimizing for, that that entrepreneurial mindset was still at the center of operating model design.

An important part of operating model design is defining the role of the center, and as I've worked with CEOs, I've admired those who go beyond just defining what the center should do, but also get into thinking about how the center should engage the businesses. Some CEOs prefer to have more of a mandated, controlling approach with very clear guidelines that the businesses really need to follow to be able to deliver value for the business.

Others take more of a hands-off attitude, feeling that businesses should have that local autonomy and the ability to be accountable and decide what to opt into.

JAMES ALLEN: Really great CEOs just instantly are able to think about the relationship between strategy and organization and everything they do. And they're good at the blueprinting of the operating model. They do that well, but they do something else. They really zero in on the teams that are going to make the most difference. And they know where value is going to be created.

They know the talent that's going to be accountable for that. And they do everything they can in organizational design to mobilize that team, support that team, give them their own sense of mission. We almost call it a micro battle that they can go out and fight the good fight supported by the center, but they're in charge. They can do whatever it takes.

And that instinct to be able to take big strategy, big organization, and bring it down to motivated entrepreneurial insurgent teams is the magic dust of these guys.

ROB MARKEY: Some of the most important work that gets done in an organization comes out of small teams that have been set on an insurgent mission given the task or challenge to do something extraordinary for an important set of customers. And one of the challenges that you face as a leader is identifying which are those teams that you need to put your weight behind, that you need to protect from the natural forces of the organization that tend to disempower them or put barriers in their way.

Sometimes they're buried deep in the organization. Sometimes they're subject to the forces of middle management, who create structure and process that tends to undermine their ability to be effective. So as a leader, one of the things you want to do is identify that small number of really critical teams. Set them on an insurgent mission. Give them a challenge to do something extraordinary, and then knock the roadblocks out of their way. Give them the resources they need. Challenge them to be great.

GARTON: The CEOs I know who have really built effective operating models have a real intuition about designing in creative conflict in that operating model and the means for resolving that conflict. They know experientially that the most inspired outcomes come from resolving that conflict on behalf of their customers and employees and other stakeholders. There was a CEO I once worked with, who would often say, the decisions that were made without debate or agreements that came without conflict were often pleasant, never pleasing, and never transformational.

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