The operating model is a board-level governance concern. Boards should satisfy themselves that the operating model is capable of executing the approved strategy, hold management accountable for execution outcomes, and treat operating model risk as a governance risk.
The operating model is a board-level governance concern, not just a management concern. When the operating model is misaligned with the strategy or the organisation cannot execute consistently, the consequences are commercial — and the board is ultimately accountable for commercial outcomes.
Strategy-operating model alignment. The board is responsible for satisfying itself that the operating model is capable of executing the approved strategy. This requires the board to understand the operating model well enough to challenge management's assumptions about whether the current structure can execute the strategy.
Accountability for execution. The board holds management accountable for execution outcomes through clear accountability structures and reporting frameworks that give the board the visibility it needs to assess whether the organisation is executing its strategy effectively.
Operating model risk. The board should treat operating model risk as a governance risk — the risk that the organisation's structure, accountability frameworks and capability will prevent it from executing its strategy or managing its regulatory obligations.
Boards should commission an independent operating model review when: the organisation is consistently underperforming against strategic targets; when there is significant leadership team turnover or conflict; when a major strategic change requires a new operating model; or when the board has concerns about the organisation's ability to execute its strategy.
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