An operating model is the set of decisions, rules, ownership, and constraints that determine how a company actually operates day to day.
It’s not an org chart.
It’s not a set of SOPs.
And it’s not what the company says it does.
An operating model is what the organisation runs on.
Why operating models matter
Every company has an operating model — whether it’s defined or not.
It shows up in questions like:
- who can approve what
- how exceptions are handled
- which rules apply in edge cases
- when something escalates
- who ultimately owns an outcome
When these answers are clear and consistent, execution feels smooth.
When they aren’t, execution slows down, decisions escalate, and leaders stay involved to keep things moving.
Explicit vs implicit operating models
The key distinction between operating models isn’t good vs bad.
It’s explicit vs implicit.
An implicit operating model:
- lives in people’s heads
- depends on memory and context
- changes informally over time
- works well when teams are small
An explicit operating model:
- defines ownership clearly
- makes rules visible and enforceable
- applies consistently across teams
- can evolve without losing history
Most growing companies operate with an implicit model far longer than they realise.
That’s when execution quality starts to plateau.
What an operating model is made of
In practice, an operating model consists of four core elements.
Ownership
Who is responsible for which decisions and outcomes.
Not job titles — decision ownership.
Decisions
The recurring decisions that govern day-to-day execution.
These decisions determine how work actually moves through the organisation.
Rules and constraints
The boundaries within which decisions are made.
These include policies, thresholds, standards, and non-negotiables.
Feedback and learning
How outcomes are observed and used to improve future execution.
Without this, the operating model resets instead of improving.
Together, these elements define how the company operates — regardless of what’s written in documentation.
Why documentation isn’t an operating model
Many companies believe they have an operating model because they have:
- playbooks
- SOPs
- internal wikis
- process diagrams
These are useful, but they don’t run anything.
Documentation describes intent.
An operating model governs execution.
When the model lives only in documents:
- rules drift
- enforcement becomes informal
- exceptions accumulate
- learning is lost
The organisation looks organised, but execution remains fragile.
How operating models break as companies grow
Operating models usually break gradually.
What once worked through proximity and shared context stops working as:
- teams grow
- responsibilities fragment
- decisions span functions
- turnover increases
The original operating logic still exists — but no one can point to it with confidence.
At that point:
- decisions escalate unnecessarily
- leaders become the bottleneck
- execution quality depends on who’s available
The issue isn’t effort or alignment.
It’s that the operating model never evolved from implicit to explicit.
What it means to make an operating model explicit
Making an operating model explicit means:
- defining decision ownership clearly
- specifying which rules apply in which situations
- making constraints visible and enforceable
- recording outcomes and changes over time
Instead of relying on memory or judgement calls, the organisation relies on structure.
This doesn’t remove human judgement.
It removes ambiguity.
Why operating models are the foundation of execution
Execution quality is not primarily a tooling problem.
It’s an operating model problem.
When the operating model is explicit:
- teams move faster
- decisions are more consistent
- leaders step out of routine execution
- improvement compounds instead of resetting
Without an explicit operating model, every attempt to improve execution is temporary.
In one sentence
An operating model is the set of ownership, decisions, rules, and constraints that determine how a company actually operates — and when it remains implicit, execution inevitably slows as the organisation grows.
