Operating Models & HR Implications
An operating model defines how work gets done. HR must align its practices and services to support the chosen model—and often help redesign it for changing needs.
What Is an Operating Model?
An operating model defines how an organization delivers value—through its people, processes, structure, and systems. It’s the bridge between strategy and execution.
The structure of teams, flow of decisions, and distribution of authority are all part of the operating model. Different models suit different strategic contexts.
Common Types of Operating Models
1. Functional Model
- Organized by function (e.g. marketing, finance, operations)
- Clear specialization and accountability
- Efficient for standardized work and cost control
2. Divisional Model
- Organized by product line, geography, or customer segment
- Each division has its own functions (mini-organizations)
- Enables responsiveness and autonomy
3. Matrix Model
- Dual reporting (covered in separate page)
- Blends functional and divisional oversight
- Flexible but complex
4. Process-Based Model
- Organized around end-to-end workflows (e.g. order-to-cash)
- Removes handoffs and focuses on outcomes
- Supports lean and agile environments
Choosing the Right Model
There’s no one-size-fits-all model. The choice depends on:
- Business complexity
- Customer diversity
- Geographical reach
- Need for innovation vs. efficiency
HR’s Role in Operating Models
The HR function is deeply affected by—and also influences—the operating model. Key areas:
1. HR Structure
- In functional models: centralized HR services
- In divisional models: embedded HR business partners
- In process models: cross-functional HR teams supporting flows
2. Talent Management
- Career paths must align to the model (e.g. deep expertise in functional vs. broad skills in divisional)
- Succession planning becomes more complex in matrixed or decentralized models
3. Leadership Development
- Each model requires different leadership capabilities:
- Functional: depth and expertise
- Divisional: generalist and commercial thinking
- Matrix: collaboration and influence
4. Culture and Change
- Switching models is not just structural—it requires cultural shifts
- HR must manage the people side of operating model changes
Pitfalls to Avoid
Final Thought
The operating model is the organization’s backbone. HR’s challenge—and opportunity—is to make sure it’s not just structurally sound, but human-centered, scalable, and strategy-aligned.