I enjoyed reading an article by Marcia Blenko, a Bain & Co advisor, about operating model work for charities – https://www.bridgespan.org/insights/library/organizational-effectiveness/nonprofit-operating-models. The article follows the Bain definition of an operating model, which is focused on organisation structure, accountabilities, governance, systems and ways of working. It does not give as much attention to work processes, location, and supplier relations as the Operating Model Canvas. Nevertheless, Marcia is an authority in this area and worth listening to.
Her first five guiding thoughts are:
1. Start with strategic clarity
2. Use design parameters (or design principles) to define what matters most
3. Up your game on decision effectiveness
4. Prioritize must deliver capabilities over “good enough” capabilities
5. Look beyond structure
This article is about my reactions to these five.
1. Strategic clarity is a big problem in operating model work, especially in charities. So I wholeheartedly support Marcia’s focus on this. The problem for an operating model team, who may not be skilled at strategy work, is to know when there is enough clarity and when there is not. Few heads of organization are going to admit that there is not enough clarity. They are more likely to say the opposite. So I have a template that I get the operating model team to try to complete. If they can complete it, there is enough clarity. If not, there is a problem. The template asks the following questions
– what products or services does the organization aim to deliver/offer?
– to whom is the organization aiming to deliver these products or services (often there are multiple customer groups or beneficiary groups)? For charities, one of the “customer groups” may be donors. So, it is important to understand what the “service” is that is being provided to donors.
– in which locations/geographies is the organization aiming to deliver/offer these products/services?
– through which channels of delivery will the products or services be offered?
– what does the organization aim to have as its sources of excellence or advantage? These are normally operating capabilities. But they can be brand or location or a range of things.
– what operating initiatives/transformations are underway or likely to be initiated in the next two years.
2. Design parameters or what I call design principles are also critical to good design work. They help limit the number of options that need to be considered and focus design attention on the most important aspects. I agree with everything Marcia says on this topic. Again, I have a template to help with this work. It has three columns. The first is for the design principles (each a sentence that typically starts with “The design must enable ….). The second column addresses the question “why is this principle important”. It is useful to keep asking why, until the answer links directly with a high level strategic objective. The third column provides space for listing implications for the design. Here the design principle is converted into design ideas. The value of this column is that it helps make sure the principle really does have design implications.
3. Decision effectiveness is a big focus of Bain & Co’s consulting work. I agree that it is important, and I recommend using their tool – RAPID. But, I typically do not give it as much focus as Marcia does because organizations need to be flexible and responsive. Decision rights at time A may need to change for dealing with things that happen at time B. As long as roles are clear and people are competent with regard to their role, they can adjust decision making rights to suit the change in situation. So I mainly use RAPID only where there are “difficult links” that need to be designed at a lower level of detail.
4. Must deliver or critical capabilities are also central to the way I think about operating models. You should avoid making design compromises with regard to critical capabilities. But you can make design compromises for “good enough” capabilities. I use a value chain map to help pin point these critical capabilities and to help me assess whether I am compromising them.
5. Structure is just one design lever. It is a powerful one. But we should not think of it as the only one. In fact, I like to say that all of our design levers, only design the formal organization. The real organization is the informal organization. We make changes to the formal design in the hope that it will influence informal behaviours. Unfortunately, it often does not. Culture eats design for lunch!
The article mentions three more guiding thoughts, which I have not included here because I think they are less significant (and this article is getting too long). I will let you discover them for yourself.
Thank you for highlighting that publication by Bain. However, if I took out references to non-profit organisations, it could well have been written for a commercial organisation. All organisations and industries have their own characteristics, but I have not been able to find literature that really does talk to the characteristics of a non-profit organisation.
I recently had the opportunity to spend sometime with a major consultancy who were helping a charity I work with. And their insights really did feel like they were shoehorning a commercial model into the charity world, with approaches that were really not implementable; unsurprisingly, their caveat was that their proposals were something we could work towards over the next five years and rather than some thing that was actionable in the short term.
Nonetheless, the Bain publication does provide a very solid structure and approach, as indeed do your thoughts. Most pertinent is your point around determining clarity; however, clarity in charities is arguably a moving target. As you point out, donors are an important component, but that is very rarely a stable group of stakeholders. As they change over time (and it can be a very short period), and as the needs of society change (as indeed we have seen very suddenly during the COVID-19 pandemic), then so does the demands on the use of those charitable donations. That can have a profound impact on the organisational process, decision making and structure and very quickly you can find different parts of the organisation have ended up with completely different horizons.
Saras, Thank you for your insightful comments. As regards your last point about changing stakeholders, particularly donors, you are right that these changes typically require internal changes, even changes in strategy. While I recognize that this is pretty common within the charity sector, it also happens in the commercial sector. You can set yourself up to serve one customer segment, only to find this segment evaporate, forcing you to pivot to a new segment. Or you can find that your “offer” is attractive to customers you never imagined you would be serving. The key is to be ready to redesign the operating model (in days not months) to reflect the new stakeholder relationships that will help you succeed.