7Aligning the Operating ModelRedefine Where Critical Work Gets Done

A company's operating model defines where critical work is done in the organization, and how resources should be organized to deliver that work. It reflects a series of choices about the roles and structure of each major organizational unit, determining the respective roles of corporate headquarters and business units, the boundaries of each line of business, how people work together within and across those boundaries, and how global functions and shared services support the business units. These choices shape key characteristics of the company that affect baseline cost levels: how the company faces off to customers and competitors, the number of business units, what work is shared across the organization or dedicated to individual businesses or functions, and the degree of standardization versus customization and centralization versus decentralization of various business processes, and the number of locations. Therefore, changing the operating model can have a big impact on both a company's relationship with its customers and its cost structure. A key step in a Fit for Growth cost transformation is to ensure the operating model aligns with the company's strategy and supports its differentiating capabilities—and if that is not the case, acting quickly to adjust the operating model. Too often, companies embark on cost-reduction programs without taking a hard look at their inherent operating model and organization, ...

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