How to choose an Operating model for cross-over departments?

Tips for successful operating model redesign

Given the newness of the operating model concept in the nonprofit arena, many leaders will have questions about how to design or revise a model to achieve better results. In our advisory role, we have helped a number of nonprofits grapple with these questions. In addition to PSI, for example, we have worked with  [removed] , a New Mexico-based telementoring organization that trains physicians in more than 35 countries, and the  [removed]  (the Ounce), a national nonprofit that supports early childhood development through research, advocacy, professional development, and direct services. From these and other engagements, we have identified eight best practices for tailoring an operating model to fit a nonprofit’s strategy, whether a full overhaul or a partial realignment.

1. Start with strategic clarity.

It is impossible to improve performance without strategic clarity. Redesigning an operating model begins here. Achieving clarity often requires a concentrated effort to answer a number of questions: What lines of business will the organization engage in—for example, direct service, advocacy, field-building, or a combination? What programs and activities will the organization pursue, and what does success look like in each? Where geographically will it operate? Approximately what scale is anticipated in the next three to five years? What funding model will support such activities? What capabilities will be required, and will the organization develop those capabilities internally or access them through partnerships? What are the critical decisions that our organization will repeatedly need to make quickly and well? Nonprofit leaders need to get to this level of clarity to evaluate various operating model choices; for example, determining whether to organize structure and accountabilities around lines of business, or perhaps programs, geography, or function.

For Project ECHO, that strategic clarity started with a strategy review in 2017 that led to declaring the ambitious goal of reaching one billion patients globally by 2025. The new strategy required Project ECHO’s leaders to retool the organization’s operating model to meet the attendant execution challenges around decentralized decision making and massive scaling. On the ground, that meant empowering a wide range of global actors— primarily universities, NGOs, and doctors—to adopt the Project ECHO medical teaching model. The new operating model created a network of branch offices and regional super hubs, adjusting decision roles and processes to facilitate clear decision making across all the stakeholders.

Tips for Successful Operating Model Redesign Download

The Ounce, in existence since 1982, initiated its 2013 strategic plan with a renewed focus on expanding the organization’s efforts to develop well-functioning early childhood interventions at scale at the local and national levels. This included an organizational emphasis on scalable knowledge-transfer and increased collaboration and partnerships among fellow experts and practitioners in the early childhood education field across the country.

This shift included a significant investment in R&D to translate a growing body of scientific evidence about early brain development and the organization’s program implementation and policy expertise into new, scalable early childhood solutions. Its operating model adjustments focused on ensuring that these new capabilities to develop and scale early childhood education and interventions were well-resourced and had the accountabilities and decision rights needed to thrive.

Even organizations that recently have engaged in strategic planning commonly find the need for further strategy refinements to get sufficient specificity on what work the operating model needs to support. For example, PSI had previously invested in a strategic planning effort in which the organization examined external trends and internal abilities, and identified a future role as a health market transformer. And yet, before the operating model design work commenced, PSI had to further engage groups across the global organization on what the new strategy would mean in practice on the ground. This frontline operational perspective helped to translate high-level strategy into the day-to-day reality of what an operating model must accomplish.

2. Use design parameters to define what matters most.

Once you are clear about strategy, you are ready to translate that strategy into a list of requirements for operating model design. We call these “design parameters”—a set of 10–15 written statements that describe what the operating model needs to do to enable the strategy. They may also highlight specific organizational challenges to address or strengths to preserve. These parameters essentially serve as criteria for evaluating operating model design alternatives. When a leadership team aligns around the design parameters before moving onto the specifics of operating model design, we find that difficult choices becomes easier as the parameters bring some objectivity into the process.

PSI, Project ECHO, and the Ounce each used design parameters as an objective assessment tool to consider various operating model choices and to identify which best satisfied their strategic needs (see chart below, “Design Parameters”). PSI developed its design parameters by consulting leaders across the organization. “Landing on design parameters was very unifying for the organization, both from the senior leadership perspective and the network members’ perspective,” says Ellen Tipper, PSI’s senior advisor for strategy. Then, PSI formulated six possible high-level structural options for consideration and evaluated each against its 10 design parameters. The project team converged around three leading options that met most parameters, then developed a best-fit hybrid model from among elements of the three.

For Project ECHO, a key design parameter aimed to accelerate scale “by creating clear pathways and processes for regional delivery of support.” With that goal in mind, the team sought operating model options that decentralized decision-making authority wherever possible and built capacity regionally versus centrally. The Ounce chose a design parameter to provide “clear accountability for product/solution development, refinement, and scale.” Following through led to the development of a new internal unit that “owned” product development. Another parameter—“leverages internal capacity for research-fueled innovation”—ensured that members of the new product development team would tap the deep expertise of colleagues outside the new unit.