“Business operating system” is a relatively new term but the concept has been around a long time. The jargon has morphed over the years, and you may have previously heard it called “company management system” or “operating model.”
Contrary to how it sounds, a business operating system is not a computer program or a replacement for an ERP or CRM. It’s the processes, systems, and roles and responsibilities that allow organizations to operate consistently and efficiently.
Put simply, a business operating system is an operating model where an organization’s mission, vision, and strategy influence how they do business.
Too often, norms and processes in an organization are morphed out of individual leadership capabilities. Finance adheres to a set of norms, IT adheres to a different set of norms, and so on—but they conflict with one another. It creates inconsistencies, inhibits collaboration, and prevents organizations from scaling effectively.
A strong business operating system allows departments and functions across the organization to align and collaborate. A BOS sets an organization up to scale faster, improve cash flow, and drive more value because every person and/or function operates to the benefit of the organization. Think of a BOS as the core of operations.
We’ve put together a toolkit organizations use to develop a business operating system. The tools listed further down serve as a framework for a business operating system in which every person, function, and activity drives strategic value and cash flow.
Before jumping headfirst into the toolkit, organizations must prioritize the following. This is the starting point that lays the foundation for a business operating system.
Guiding principles are short statements that describe core values. They outline goals for interacting with and serving the rest of the business. For guiding principles to have a real impact, they should be based on input from all other areas of the organization. These guiding principles serve to provide structure and direction. Without them, it’s a little like riding a horse without a bridle. You’ll get somewhere, yes, but it might not be where you intend.
A process improvement vision is a picture of how well a company wants to perform across key processes and what capabilities are needed to accomplish goals. Creating a process improvement vision helps companies decide what peak performance looks like for each department.
A RACI is a tool enabling organizations to identify roles within processes established in the Process Improvement Vision. The RACI identifies who is Responsible, Accountable, Consulted, and Informed for each business activity. A well-constructed RACI identifies duplication of efforts and allows organizations to streamline roles and decision making. It’s often used to ensure the organization isn’t wasting money on excess staff.
Performance metrics identify key leading and lagging indicators of an organization’s success. Performance metrics give individuals and teams a way to measure success in alignment with overall organizational goals. An integrated and well-defined performance metrics program helps teams and individuals know what’s important to success and drives them to focus on achieving what’s important.
Service level charters rationalize the work being done in each role and drive accountability for meeting efficiency targets. Defining responsibilities and accountabilities can prevent duplication and reduce error rate. A service level charter that defines roles between departments improves communication, provides a source of accountability, and increases efficiency for everyone involved.
Initiative charters are a way to scope and prioritize project work that needs to be accomplished within the organization. Initiative charters are a mini business case and scope document containing the rationalization, scope, milestones, risks, and resources for each initiative. Initiative charters hold teams and individuals accountable for success and ensure the organization is aware of upcoming changes across teams.
After implementing this framework, it’s important to establish governance to maintain it. As things change, we recommend setting a regular cadence for refreshing materials and making updates. Frequency of updates will differ across industries and depend on the volume of changes made each year.
We’ve further outlined key steps, examples, and do’s and don’ts regarding each tool in our Business Operating System Guide. Get the guide here.
