Re-Designing the Operating Model
LAST UPDATED: November 12, 2025 at 12:36PM
GUEST POST from Chateau G Pato
Leaders often embark on organizational restructuring with good intentions, aiming for agility or efficiency. Yet, most reorganizations fail not because the new chart is wrong, but because they confuse the structure (the boxes and lines on the chart) with the operating model (the mechanism by which value is created and flows through the organization). They end up playing musical chairs with reporting lines, only to find the same dysfunctions resurface within six months because, as the saying goes, structure always eats strategy for breakfast.
To implement true, sustainable change, we must apply a human-centered design approach to the organization itself. We must stop asking “What is the best structure?” and start asking “Why does our current structure fail to deliver customer value?” This requires the rigorous diagnostic tool of the Five Whys of Organizational Structure.
This process moves beyond superficial complaints and identifies the root cause of systemic friction, revealing whether the true problem is structure, process, metrics, or talent.
The Five Whys Diagnostic for Organizational Structure
The Five Whys approach, adapted from quality management, forces a deep dive into organizational friction points. Start with a symptom (e.g., “Product launches are slow”) and keep asking “Why?” until you reach the systemic cause.
Symptom: Product launches are slow.
- Why 1: Why are product launches slow?Answer: Decisions on feature prioritization require sign-off from three different VP-level silos (Marketing, Engineering, Sales).
- Why 2: Why do three VPs need to sign off?Answer: Because each VP controls a separate, competing budget and their compensation metrics are siloed (e.g., Sales gets paid on volume, Engineering on uptime, Marketing on lead generation). No one is measured on time-to-market.
- Why 3: Why are their budgets and metrics siloed?Answer: Because the underlying financial reporting structure treats these functions as distinct cost centers, reinforcing the idea that they are running competing businesses rather than collaborative value streams.
- Why 4: Why does the financial reporting structure reinforce competing cost centers?Answer: Because the entire Operating Model is designed for cost optimization and risk aversion, reflecting the stable, high-margin market we existed in 20 years ago, not the fast-paced, low-margin, high-innovation market of today.
- Why 5: Why is the Operating Model still based on outdated assumptions?Answer: Because the executive team has never aligned on the **value streams** necessary to win today, and instead defers to the historical hierarchy to avoid conflict. The root cause is a failure of executive alignment and strategic imagination, not the org chart itself.
The Three Levers of Operating Model Design
Once the Five Whys reveal the systemic cause, the Human-Centered Change leader must pull the right lever. Re-designing the Operating Model means adjusting three interconnected elements—none of which is the org chart alone:
1. Value Stream Mapping (The Flow)
This replaces the traditional functional view with a flow view. Instead of organizing around departments (Marketing, IT, Operations), organization must happen around the customer’s journey and the **Value Stream** that delivers it (e.g., “Customer Acquisition,” “New Product Development,” “Service Resolution”). The structure is built around the work and the customer, not the people.
2. Metrics and Incentives (The Gravity)
As seen in the diagnostic, siloed metrics are the gravity that pulls teams apart. The new structure must be supported by shared, end-to-end metrics that measure the success of the Value Stream, not the individual function. If an IT team is measured on uptime, but the product team is measured on speed-to-market, the teams will always conflict. Aligning incentives is the force that pulls the organization together.
3. Decision Rights (The Speed)
The new model must explicitly define who has the authority to decide. Most friction comes from ambiguity, with decisions perpetually escalating upward. Adopting a decentralized model means pushing decision-making authority—and the associated accountability—down to the teams that have the most direct customer knowledge. This shifts the executive role from approver to architect of the system and monitor of guardrails, significantly boosting organizational speed.
Case Study 1: The Banking Giant and the Value Stream Shift
Challenge: Slow Digital Onboarding
A major international bank suffered from a glacial pace in launching new digital banking features. The Five Whys revealed that the root cause was the structural handoff: moving a new feature from Digital Banking (measured on UX) to IT (measured on stability) to Compliance (measured on risk avoidance). The customer suffered through slow, fragmented releases.
Operating Model Intervention:
The bank moved from a functional structure to a Value Stream Model. They created permanent, cross-functional “Customer Onboarding Pods,” each containing members from Digital Banking, IT, and Compliance. The pods were measured on one metric: time-to-launch for new features and reduction in customer abandonment rate. The executive leadership formally delegated the majority of compliance sign-offs to the senior Compliance member within the pod. This shift from sequential handoffs to parallel collaboration reduced the average time-to-market for simple features from eight weeks to two weeks, proving the power of aligning structure around the customer’s journey.
Case Study 2: The Manufacturing Firm and the Decentralized Decision Rights
Challenge: Centralized Command Crippling Local Innovation
A diversified global manufacturer experienced lagging innovation outside its headquarters. Every request for investment in local market-specific product modifications (e.g., smaller packaging for an emerging market) had to be approved by a centralized, U.S.-based committee. The Five Whys revealed that the central committee’s reluctance stemmed from a 20-year-old policy of standardizing inventory to reduce risk, even if it sacrificed growth opportunities.
Operating Model Intervention:
The firm did not eliminate the central committee, but they radically redefined its Decision Rights. The new model delegated 80% of all investment decisions under $500,000 to regional General Managers (GMs), provided the GMs adhered to three non-negotiable Guardrails (e.g., a minimum return on investment threshold, a maximum safety risk score, and a maximum working capital usage). The central committee’s role shifted from saying “yes” or “no” to designing and monitoring the guardrails. This empowered local GMs, leading to a 30% increase in locally-relevant product launches within the first year by pushing accountability and speed to the edge of the organization.
Conclusion: Structure is a Change Enabler
The Five Whys teaches us that the org chart is usually just a symptom of a deeper, systemic failure within the operating model. True organizational change starts with strategic integrity—a clear, executive-aligned decision on how value will be created, measured, and protected.
The process of re-designing the operating model is not a simple HR exercise; it is the ultimate act of Human-Centered Change. It forces us to remove the structural friction that frustrates employees and delays customer value, ultimately turning resistance into momentum.
“If your structure is slowing down your strategy, your structure is the wrong strategy. Reorganizing without redesigning your metrics and decision rights is an act of self-deception.”
Your first step to diagnosing your organization: Gather five key employees from different functional silos and collectively apply the Five Whys to the most painful, friction-filled process in your business.
Extra Extra: Because innovation is all about change, Braden Kelley’s human-centered change methodology and tools are the best way to plan and execute the changes necessary to support your innovation and transformation efforts — all while literally getting everyone all on the same page for change. Find out more about the methodology and tools, including the book Charting Change by following the link. Be sure and download the TEN FREE TOOLS while you’re here.
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