Target Operating Model - Transport Sector
Introduction
The client was an engineering and maintenance organisation within the transportation sector. The company had previously hired one of the ‘big four’ consultancies to design a target operating model (TOM). However, it quickly became clear that the design lacked the necessary detail and clarity to function effectively and efficiently.
The Orgworks, recognised as leading organisation design specialists, was asked to review and rectify the TOM and then redesign it to function correctly. We called this TOM 2.0.
Our approach
Our proprietary analytical tool (‘The Cube’) was used to analyse the organisational structure and to understand who was involved in which business processes. The approach was a bottom-up, data-driven methodology that evaluated the organisational structure and assessed how people were assigned to activities.
The approach looked into the detail and revealed opportunities to improve performance by assessing
the purpose and size of each unit
accountabilities and responsibilities
management and reporting
roles to retain, move or lose
processes and systems to improve.
The design process used a rational approach that
aligned the investment in people's time with the priorities of the business
optimised organisational structures to remove costs and deploy resources more effectively.
Our findings and recommendations
The analysis concluded that there were too many indirect employees, and that the Finance & Commercial department was the most significant contributor to this problem. There were too many managers, and managerial spans of control were overly narrow, resulting in too many structural layers. Furthermore, many non-managers were managing processes, resulting in not enough people simply ‘doing the work’. People were also being drawn into processes that were not their primary purpose.
Four options for refining the structure of the TOM were designed and considered:
Option One – a zero-base case focusing on the resources required for the current workload. This model looked to right-size the indirect workforce to satisfy short to mid-term operational imperatives.
Option Two – an adapted zero-base case that aimed to minimise the indirect workforce by eliminating anything that was not core to supporting daily operations. Only positions that were essential to this were retained.
Option Three – accountable cost centres using Option One as a foundation and recasting the indirect workforce to strengthen the two frontline departments, enabling them to manage costs fully.
Option Four – accountable profit centres using Option Two as a foundation and recasting the indirect workforce to make the two frontline departments capable of managing costs and sales and, therefore, profit.
The outcome of our work
We proposed that the most favourable model was the accountable cost centre (Option Three). This model created two business units with the resources required to run their operations and manage costs.
It produced a substantial cost benefit and had the added advantage of the frontline departments bringing more of the core processes into their control. Accountability could be increased with leaders, in particular, held to account for the overall operational and cost performance.
The model reduced the number of people by 51 and payroll costs by £2.8 million and raised the organisation’s ability to improve operational performance.
Client testimonial
‘We needed The Orgworks to come in and lead the TOM project. There was a realisation that the operating model that had been designed and which was being implemented was not going to work. The incumbent consultancy was not delivering, and you were the obvious choice to replace them and develop TOM 2.0.
We chose you based on your reputation and our relationship established through a previous successful change programme. The Orgworks has decades of specialist experience, and you are bloody good at what you do.
Your knowledge, clever computer system (The Cube), analysis and approach to organisation design are unrivalled.
The Orgworks ensured the successful delivery of the TOM transition project. The level of structure and governance you brought to the delivery was needed. A good plan, good reporting, and, when necessary, a gentle kick up the backside when we were not delivering helped keep momentum.
We would definitely use your services again. You are reliable, trustworthy, and know your stuff.
Your service is specialist, and your knowledge of organisation design is beyond anyone else. Why would you go and get a bland flavour from a KPMG or an EY, or go and get a lean consultant who thinks they know the topic but doesn’t really? You are the trusted experts in this field.’