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Aligning operational governance with the business model.

Steps to sustainable and scalable change

After clearly defining your business model, you should consider aligning operational governance with the company’s business model to help position the company to deliver on its promise. Operational governance – not to be confused with corporate governance – addresses how a company’s decisions are made and executed. Without effective operational governance, structural inefficiency can occur, which companies can unlikely afford, in particular during an economic downturn, slow recovery or global macroeconomic challenges. Symptoms can include confusion and conflict between corporate and individual business units, turf battles, duplication of efforts, and organisational blind spots.

Effective operational governance can provide the foundation for lasting improvements. Yet, it is the one step that companies are most likely to overlook in restructuring or making organisational changes.

When corporate executives consider making organisational changes, they usually move straight to restructuring or realigning resources. However, before a single resource is redeployed, companies should consider how decisions are or will be made in the organisation.

First, you need to confirm, change, or adjust your company’s business model. By business model, we mean the way a company organises or structures itself to go to market, interfaces with stakeholders, and reacts to external events. The business model should serves the blueprint for a corporate transformation or restructuring effort.

Second, as with a construction project, the foundation needs to be laid. In business, this is the operational governance – i.e. determining how decisions are made and executed – that conforms to the business model. This is the step companies are mostly likely to overlook. Yet, it is a vital step.

Lastly, before deploying a single resource, you must establish a foundation of effective decision making if you want to increase your company’s chances for sustained improvement. Effectively implemented, this “operational governance” can provide the means and methods for making decisions and for institutionalising them. These include: clearly defined decision making roles, a clear division of responsibilities between corporate and the business units (or other organisational entities), and a supporting infrastructure for key interactions throughout the decision process.

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Your company’s choice of business model largely determines your overall approach to decision making. Decision making roles and responsibilities vary by business model.

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