The method
Operating model vs org design vs org structure: what is the difference?
An operating model is how a business turns strategy into daily work: where work is done, who decides, and how money and measures flow. Org design is the choice of units, roles and reporting lines inside it. Org structure is the result of that choice, the chart a business can print today.
How do the three terms compare?
| Term | What it decides | Where to see it |
|---|---|---|
| Operating model | Where work is done and who decides | Decision rights, forums, scorecards, sourcing |
| Org design | How units and roles are drawn | Organising logic, role definitions, layers |
| Org structure | Who reports to whom today | The org chart |
The three terms nest. Structure is one output of org design. Org design is one part of the operating model.
What does an operating model cover beyond the chart?
An operating model holds the parts of the business a chart does not show:
- Decisions: who recommends and who decides the decisions that matter, and which meetings may decide.
- The centre: what head office does for the teams that make the money.
- Sourcing: which support activities are done in-house, shared or bought.
- Money and measures: what each unit's scorecard measures, and how people and money move between teams.
- Capability: the skills the strategy needs, and where they sit.
A business can redraw its chart and leave every one of these unchanged. The Operating Model Health Check names that pattern Boxes Without Wiring: a tidy chart with nothing changed behind it.
What does org design decide?
Org design starts with the organising logic. A business is organised by customer, product, region or function, or a mix. A sound choice can be said in one sentence and matches how the business makes money.
Org design then sets the roles and reporting lines. It also says who is accountable for what. It decides how many people each manager manages, and how many layers sit between the top and the customer.
Why does the order of the work matter?
Redrawing the chart is the wrong first move. Decision rights, measures and capability come first, and the boxes move last.
Where only the chart changes, roles overlap and hand-offs run on goodwill. Scorecards keep paying people for the old job. A good structure on its own does not fix any of this.
The next step
The Operating Model Health Check shows which parts of your model were designed and which were inherited. It covers 26 practices across five dimensions, from decision rights to the last restructure, in about ten minutes. To count your spans and layers first, use the spans-and-layers calculator.
No email before your result. No sales call after it. No list. Delete on request.
Related questions
- What are the stages of excellence in an operating model?
- Which KPIs should a business track, and which ones backfire?
- What is a Stages of Excellence assessment?
This page is drawn from the Operating Model Health Check and the operating model page on onestepright.