The Real Building Blocks of a Target Operating Model

When organisations design a new target operating model, attention often rushes to structure, technology and process. These elements feel concrete and therefore safe. Yet an operating model only works when the people and culture underpinning it are clear, consistent and aligned. That is why understanding the difference between values, behaviours, capabilities and core functions is not basic groundwork. It is the foundation that determines whether the operating model becomes a living framework or a theoretical diagram.

Values sit at the highest level of organisational culture. They articulate what the organisation believes in and what it stands for. Values offer a moral and operational compass, shaping leadership choices and guiding decisions, especially when change creates ambiguity. Without clearly defined values, staff are left to interpret what matters most and how far they are expected to stretch during transformation. Well chosen values provide steadiness during periods when roles, systems and expectations are shifting around people.

Behaviours translate these values into something observable and workable. They are the repeatable actions that demonstrate culture in practice. A value such as collaboration becomes meaningful only when it is expressed through behaviours such as sharing insight, avoiding siloed practice and seeking the perspectives of people who experience frontline impact. Behaviours close the gap between aspiration and reality. When leaders reinforce them consistently, they create a culture that is designed rather than accidental.

Capabilities sit in a different space. They describe what the organisation must be able to do in order to achieve its purpose and strategy. Capabilities can be technical, such as financial modelling or regulatory insight, or they can be relational, such as influencing skills or partnership management. Capabilities define the competence required at team and organisational level. They provide the basis for workforce planning, resourcing decisions and investment in skills.

Core functions are more structural. They set out what the organisation exists to deliver and the essential activities that make the system work. A core function is not a skill but a responsibility. For example, strategic commissioning, customer experience, programme delivery and performance assurance may be core functions in a public sector authority. They are the pillars of the organisation’s operating model and determine how work flows and where accountabilities sit. Capabilities describe how well you perform. Core functions describe what you must deliver.

Understanding the distinction between capabilities and core functions prevents organisations from drifting into confusion. A core function such as digital service delivery requires capabilities such as user centred design, data literacy and iterative development. When these layers are blended, organisations risk investing in skills that do not support priority functions or designing structures that do not reflect the capability needed to deliver them.

Strategic alignment is the thread that ties all of this together. An operating model must reflect the organisation’s strategic intent. If values, behaviours, capabilities and core functions are not aligned to the strategy, the operating model becomes fragmented and staff feel they are being pulled in competing directions. Alignment ensures that people understand not only what is changing but why, and how their work contributes to the wider mission.

The most effective target operating models begin with clarity. Values anchor the organisation ethically and emotionally. Behaviours bring culture to life. Core functions define what the organisation must deliver. Capabilities define the strengths needed to deliver it well. When these elements are designed with intention and aligned with the strategy, the organisation gains a coherent framework that supports performance, confidence and stability during change.

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