Target Operating Model – Overview

In today’s rapidly changing financial landscape, companies are constantly pressured to adapt and evolve to meet the growing demands of customers, regulators, and shareholders. One of the critical drivers of success in this dynamic environment is the ability to have a clear vision of the organization’s future operating model. This chapter explores the concept of a Target Operating Model (TOM) and its role in shaping the future of financial services companies.

Defining a Target Operating Model (TOM)

A Target Operating Model (TOM) is a blueprint for how an organization will operate in the future to achieve its strategic objectives. It serves as a guiding framework that outlines the organization’s desired future state and provides a clear understanding of the transformation required to reach that state. A TOM typically covers the following aspects of an organization:

• Organization structure and governance
• Business processes
• Technology infrastructure
• People, skills, and competencies
• Culture and values

In the context of financial services, a TOM enables companies to streamline operations, enhance customer experiences, comply with evolving regulatory requirements, and drive innovation in products and services. It encompasses a clear and coherent vision for the future, and the steps required to achieve it.

The Need for a TOM in Financial Services

The financial services sector is undergoing a significant transformation driven by disruptive technologies, changing customer preferences, and evolving regulatory landscapes. Financial institutions must continuously adapt and align their operations with these changes to maintain a competitive edge. A well-defined TOM can help financial services firms achieve the following objectives:

• Gain a holistic understanding of the current state of operations and identify areas that need improvement.
• Develop a coherent strategy for transforming the organization to achieve its strategic objectives.
• Align the organization’s structure, processes, and technology with its business goals and customer needs.
• Enhance efficiency and effectiveness by streamlining operations, reducing costs, and eliminating redundancies.
• Improve risk management and ensure compliance with regulatory requirements.
• Foster a culture of continuous improvement and innovation.

The Components of a TOM

A Target Operating Model typically consists of the following components:

• Strategy: A TOM is anchored in the organization’s overall business strategy. It outlines the strategic objectives, growth ambitions, and competitive advantages the organization aims to achieve.

• Organization and Governance: This component defines the organizational structure, roles and responsibilities, and decision-making frameworks required to drive the transformation toward the target operating model.

• Processes and Operations: A TOM includes an overview of the core business processes, operational workflows, and functional interdependencies needed to deliver products and services in line with strategic objectives.

• Technology: This component outlines the technology infrastructure, applications, and systems required to support the organization’s target operating model. It also identifies opportunities for leveraging emerging technologies and digital capabilities to drive innovation.

• People: A TOM identifies the necessary skill sets, competencies, and talent to execute the transformation. This includes considerations for recruitment, training, development, and performance management.

• Culture and Change Management: A critical aspect of implementing a TOM is managing the cultural shift and change management required to transition from the current operating model to the target state. This component outlines the desired cultural attributes, values, and behaviors that support the organization’s vision and drive employee engagement.

Financial services firms can effectively develop a TOM that serves as a robust roadmap for their organization’s future by understanding the concept and components of a Target Operating Model. In the subsequent chapters, we will explore the importance of a TOM for financial services companies, the step-by-step process of building a TOM, common mistakes to avoid, the benefits of a well-crafted TOM, and best practices for successful implementation.

Why is a TOM Important for Financial Services Companies?

The financial services industry continually evolves, driven by disruptive technologies, changing customer preferences, and increasingly complex regulatory environments. These changes create unique challenges and opportunities for financial services firms. This chapter will discuss why a Target Operating Model (TOM) is crucial for navigating these complexities and unlocking value for financial services companies.

Unique Challenges Faced by Financial Services Companies

Financial services companies face several unique challenges that make a TOM an indispensable tool for success. These challenges include:

• Rapid Technological Advancements: The increasing pace of technological innovations, such as artificial intelligence, blockchain, and big data analytics, is disrupting traditional business models and creating new opportunities for value creation. As a result, financial services firms must adapt their operating models to leverage these technologies effectively.

• Changing Customer Preferences: Digital transformation is reshaping customer expectations, driving the need for personalized, seamless, and convenient experiences. A TOM helps financial services companies align their processes and technology infrastructure to deliver exceptional customer service.

• Complex Regulatory Environment: The industry is subject to rigorous and continuously evolving regulatory requirements, necessitating robust risk management, compliance, and governance structures. A TOM ensures that financial institutions can maintain compliance while minimizing operational risks.

• Fierce Competition: The financial services landscape is characterized by intense competition, with new entrants and fintech disruptors continuously challenging established players. A TOM enables firms to create a competitive advantage by optimizing their operations and focusing on their core competencies.

• Cost Pressures: Financial services firms face increasing pressure to reduce costs, requiring them to streamline operations and maximize efficiency. A well-designed TOM helps organizations identify opportunities for cost optimization while ensuring the delivery of quality products and services.

Opportunities Presented by a TOM in Financial Services

By addressing the unique challenges faced by financial services companies, a TOM presents several opportunities to create value, including:

• Enhancing Customer Experience: A TOM can help financial institutions optimize their processes, technology, and organizational structures to deliver superior customer experiences that drive loyalty, trust, and long-term value.

• Improving Operational Efficiency: Implementing a TOM enables organizations to identify and eliminate redundancies, streamline workflows, and automate manual processes, leading to increased efficiency and reduced operating costs.

• Unlocking Innovation: A TOM can foster a culture of continuous improvement and innovation by identifying opportunities to leverage emerging technologies, enhance product offerings, and develop new business models.

• Ensuring Regulatory Compliance: A TOM can help financial services firms navigate the complex regulatory environment by establishing robust risk management frameworks, governance structures, and control mechanisms.

• Talent Development and Retention: A TOM provides a clear vision for the future, helping organizations to attract, develop, and retain the right talent to drive successful transformation.

How a TOM Helps Navigate Industry Complexities

A Target Operating Model serves as a powerful tool for financial services companies to navigate industry complexities and capitalize on opportunities by:

• Providing a Clear Vision: A TOM establishes a clear vision for the future, setting out strategic objectives and desired outcomes and aligning the organization’s resources and capabilities to achieve these goals.

• Facilitating Alignment: A TOM ensures alignment between the organization’s strategy, structure, processes, technology, people, and culture, enabling a coherent approach to transformation.

• Enabling Informed Decision-Making: A TOM provides a comprehensive framework for decision-making, allowing organizations to prioritize initiatives, allocate resources, and monitor progress effectively.

• Driving Collaboration and Synergy: A TOM encourages cross-functional collaboration and integration, breaking down silos and fostering a shared understanding of the organization’s strategic objectives and transformation journey.

• Encouraging Continuous Improvement: A TOM promotes a culture of continuous improvement and adaptation, helping financial services firms stay agile and responsive in a constantly evolving industry landscape.

• Mitigating Risks: A TOM helps organizations proactively identify and manage potential risks associated with the transformation process, including technology, regulatory, operational, and cultural risks.

• Measuring Success: A TOM establishes clear metrics and key performance indicators (KPIs) for evaluating the success of the transformation initiatives and ensuring the organization stays on track to achieve its strategic objectives.

A Target Operating Model is a critical tool for financial services companies as they navigate the unique challenges and opportunities the evolving industry landscape presents. A TOM enables these organizations to develop a clear vision for the future, align their resources and capabilities with strategic objectives, and ensure a coherent and practical approach to transformation. By embracing the principles of a TOM, financial services firms can capitalize on the opportunities created by rapid technological advancements, changing customer preferences, and complex regulatory environments, ultimately driving sustainable growth and long-term success in a competitive market.

Exploring the Components of a Target Operating Model

A Target Operating Model (TOM) is a comprehensive and coherent framework for transforming an organization to achieve its strategic objectives. Therefore, it is essential to understand its components and interdependencies to build a robust TOM. Here is an in-depth explanation of the features of a TOM, emphasizing their interrelatedness and the importance of each element in constructing a comprehensive model.

Strategy

The foundation of a TOM lies in the organization’s overall business strategy. The strategic objectives, growth ambitions, competitive advantages, and market positioning should guide the development of the target operating model. A clearly articulated strategy ensures that all TOM components align with the organization’s long-term vision and goals. The TOM should support and enable the execution of the strategy by providing the necessary structures, processes, technology, and capabilities.

Organization and Governance

A TOM’s organization and governance component defines the organizational structure, roles and responsibilities, and decision-making frameworks required to drive the transformation. It entails:

Designing an organizational structure that supports the strategic objectives and promotes efficiency, agility, and collaboration.

Defining clear roles, responsibilities, and reporting lines for individuals and teams within the organization.

Establishing governance structures and decision-making processes that support accountability, transparency, and effective risk management.

The organization and governance component is closely linked to other elements of the TOM, as it sets the stage for the successful implementation of processes, technology, and talent initiatives.

Processes and Operations

Processes and operations are at the core of a TOM, as they define how an organization delivers value to its customers and stakeholders. This component involves:

• Identifying and optimizing core business processes to support strategic objectives and enhance customer experiences.
• Establishing transparent operational workflows and functional interdependencies.
• Implementing adequate controls, risk management, and performance measurement systems.
• Processes and operations are closely related to a TOM’s organization and governance, technology, and people components, as they determine how resources are allocated and utilized to deliver products and services.

Technology

• Technology is critical in enabling a TOM, as it supports the organization’s processes, operations, and strategic objectives. The technology component includes:

• Assessing the current technology infrastructure and identifying gaps or areas of improvement.
• Determining the technology applications and systems required to support the target operating model.
• Leveraging emerging technologies and digital capabilities to drive innovation and enhance competitive advantage.
• The technology component is interdependent with other elements of the TOM, as it enables the organization to streamline processes, improve operational efficiency, and deliver innovative products and services.

People

People are the driving force behind the successful implementation of TOM. This component involves:

• Identifying the necessary skills, competencies, and talent required to execute the transformation.
• Developing a talent strategy that supports recruitment, training, development, and performance management initiatives.
• Fostering a culture that encourages collaboration, innovation, and continuous learning.
• The people component is closely related to other elements of the TOM, as it ensures that the organization has the right talent and capabilities to execute its strategy and achieve its goals.

Culture and Change Management

A critical aspect of implementing a TOM is managing the cultural shift and change management required to transition from the current operating model to the target state. This component includes:

Defining the desired cultural attributes, values, and behaviors that support the organization’s vision and drive employee engagement.

Developing and implementing a comprehensive change management plan that addresses the needs of different stakeholders and manages resistance to change.

Monitoring and measuring the success of the cultural transformation and adjusting the change management approach as needed.

Culture and change management is integral to all other components of the TOM, as it ensures a smooth and effective transition across the organization, enabling the successful implementation of new processes, technology, and talent initiatives.

Interdependencies and Importance of the Components

The components of a TOM are highly interdependent, and their collective alignment is critical to building a comprehensive model. Therefore, the success of TOM relies on the harmonious interaction of these components:

The strategy component sets the organization’s direction, guiding the other components’ design and implementation.

The organization and governance component establishes the foundation for effective decision-making and resource allocation, enabling the successful execution of processes, technology, and talent initiatives.

Processes and operations are shaped by the organization’s strategy, technology infrastructure, and talent capabilities, ensuring efficient and value-creating workflows.

Technology supports and enhances processes and operations, enabling the organization to deliver innovative products and services while maximizing operational efficiency.

The people component ensures that the organization has the necessary talent and skills to execute the strategy and achieve its goals, making it integral to successfully implementing the other features.

Culture and change management ensures a smooth transition to the target operating model, driving employee engagement and enabling the successful transformation of the organization’s processes, technology, and talent capabilities.

Understanding the interdependencies and importance of each component is vital in building a comprehensive and practical TOM. By considering these components holistically and ensuring their alignment with the organization’s strategic objectives, financial services companies can create a robust roadmap for transforming their operating model, driving sustainable growth and long-term success in a rapidly changing landscape.

A deep understanding of a TOM’s components, interdependencies, and importance is crucial in building a comprehensive model that serves as a guiding framework for financial services companies. By considering each component holistically and ensuring their alignment with the organization’s strategic objectives, financial services firms can create a robust roadmap for their transformation journey, driving growth, efficiency, and long-term success in a competitive and constantly evolving industry.

Guide to Building a Structurally Sound and Strategically Aligned TOM for Financial Services Firms

Here is a step-by-step guide for financial services firms to build a Target Operating Model (TOM) that is structurally sound, strategically aligned, and leverages the firm’s core competencies. The process will include stakeholder engagement, gap analysis, prioritization of initiatives, and the creation of a detailed implementation roadmap.

Step 1: Define the Strategic Objectives and Vision

The first step in building a TOM is to define the organization’s strategic objectives and vision. This involves:

Identifying the company’s long-term goals, competitive advantages, and market positioning.

Articulate a clear vision reflecting the organization’s values, culture, and aspirations.

Ensuring that the TOM will support and enable the execution of the strategic objectives and vision.

Step 2: Engage Stakeholders

Stakeholder engagement is a critical element of the TOM development process. This step entails:

Identifying key stakeholders, including senior management, employees, customers, regulators, and shareholders.

Communicating the strategic objectives and vision to the stakeholders, ensuring buy-in and support for the transformation.

Gathering input and feedback from stakeholders to help shape the TOM’s design and implementation.

Step 3: Conduct a Gap Analysis

The next step is to conduct a gap analysis to assess the organization’s current operating model against the desired target state. This involves:

Analyzing the current organization structure, processes, technology, people, and culture to identify areas of improvement.

Assessing the company’s existing capabilities and resources against its strategic objectives and vision.

Identifying gaps and areas of misalignment between the current operating model and the target state.

Step 4: Prioritize Initiatives and Projects

Based on the gap analysis, prioritize the initiatives and projects required to bridge the gaps and achieve the target operating model. This step entails:

Identifying the initiatives and projects that will significantly impact achieving the strategic objectives and vision.

Prioritizing initiatives based on feasibility, resource requirements, ROI, and alignment with strategic goals.

Developing a high-level plan for implementing the prioritized initiatives and projects.

Step 5: Design the Target Operating Model

With the prioritized initiatives and projects identified, design the TOM using the insights gathered from the previous steps. This includes:

Defining the desired organization and governance structure, including roles, responsibilities, and decision-making frameworks.

Designing optimized processes and operations that align with the strategic objectives and vision.

Selecting the appropriate technology applications and systems required to support the target operating model.

Developing a talent strategy that identifies the necessary skills, competencies, and resources to execute the transformation.

Establishing a culture and change management plan that promotes the desired values, behaviors, and cultural attributes.

Step 6: Develop an Implementation Roadmap

The final step is to develop a detailed implementation roadmap that outlines the tasks, milestones, and timelines for executing the TOM. This involves:

Defining the tasks and activities required to implement the prioritized initiatives and projects.

Establishing milestones, timelines, and success metrics to track progress and ensure accountability.

Identifying potential risks, challenges, and dependencies and developing contingency plans to mitigate these risks.

Allocating resources, including personnel, budget, and technology, to support the implementation of the TOM.

In conclusion, building a structurally sound, strategically aligned TOM for financial services firms involves a systematic, step-by-step process that includes defining the strategic objectives and vision, engaging stakeholders, conducting a gap analysis, prioritizing initiatives and projects, designing the target operating model, and developing an implementation roadmap. By following this guide, financial services

companies can create a robust TOM that leverages their core competencies, drives transformation, and ensures long-term success in a rapidly evolving landscape.

Step 7: Monitor, Measure, and Refine the TOM

Once the implementation of TOM begins, it is essential to monitor and measure the progress of the transformation continuously. This step entails:

Tracking the success metrics and key performance indicators (KPIs) defined in the implementation roadmap to evaluate progress.

Gathering feedback from stakeholders, including employees, customers, and management, to identify improvement areas and validate the TOM’s effectiveness.

Adapting and refining the TOM as needed based on the feedback and performance measurement data.

Step 8: Embed a Continuous Improvement Mindset

Organizations should foster a culture of continuous improvement to ensure that TOM remains relevant and effective in the long term. This involves:

Encouraging employees to identify opportunities for improvement and innovation within the TOM.

Regularly reviewing and updating the TOM to adapt to changing market conditions, customer preferences, and technological advancements.

Investing in the development and upskilling of employees to support the ongoing transformation and maintain a competitive edge in the industry.

Step 9: Communicate Success and Celebrate Milestones

Effective communication and celebration of milestones are crucial in maintaining stakeholder engagement and motivation throughout the transformation journey. This step includes:

Regularly updating stakeholders on the progress and successes of the TOM implementation.

Recognizing and celebrating the achievements of individuals and teams contributing to TOM’s success.

Reinforcing the TOM’s value and benefits to ensure ongoing stakeholder commitment and support.

Step 10: Review and Iterate

As the organization evolves and the industry landscape changes, it is vital to periodically review the TOM and its components to ensure continued alignment with the strategic objectives and vision. This involves:

Conducting regular reviews of TOM’s performance against the strategic objectives and desired outcomes.

Identifying new opportunities and challenges that may require adjustments to the TOM, such as emerging technologies or regulatory changes.

Iterating and refining the TOM as needed to maintain its effectiveness and alignment with the organization’s goals and vision.

By following these steps, financial services firms can build a TOM that is structurally sound, strategically aligned and leverages their core competencies. A robust TOM drives successful transformation and enables organizations to adapt to a constantly evolving industry landscape, ensuring sustainable growth and long-term success.

Mistakes in Creating a Target Operating Model

Here are some common mistakes that financial firms make while envisioning a Target Operating Model (TOM) and provide insights on how to avoid these pitfalls to ensure a successful transformation journey.

Mistake 1: Lack of Clear Strategic Objectives and Vision

A common mistake financial firms make when developing a TOM is failing to establish clear strategic objectives and a vision that guides the transformation process. Without a well-defined strategy, the TOM’s components may not be aligned with the organization’s long-term goals.

Solution: Ensure that the organization’s strategic objectives and vision are clearly articulated and serve as the foundation for the TOM. This alignment ensures that all components of the TOM support the overall business strategy and desired outcomes.

Mistake 2: Insufficient Stakeholder Engagement

Another common mistake is neglecting to engage key stakeholders throughout the TOM development and implementation process. This lack of engagement can lead to resistance, misalignment, and a lack of ownership among stakeholders.

Solution: Identify and engage critical stakeholders, including senior management, employees, customers, and regulators, early in the process. Effective communication and collaboration are essential to gather input, secure buy-in, and ensure that the TOM addresses the needs of all stakeholders.

Mistake 3: Overlooking the Importance of Culture and Change Management

Financial firms often underestimate the significance of culture and change management when envisioning a TOM. However, without addressing the cultural shift and managing the change effectively, the transformation journey may encounter resistance and fail to achieve the desired outcomes.

Solution: Develop a comprehensive culture and change management plan that addresses the needs of different stakeholders, manages resistance, and fosters the desired values, behaviors, and cultural attributes. Continuous communication, training, and support are crucial to promote a smooth transition and ensure employee engagement.

Mistake 4: Failing to Conduct a Thorough Gap Analysis

An incomplete or superficial gap analysis may lead to an inadequate understanding of the organization’s current state and areas for improvement. This oversight can result in a TOM that does not adequately address the gaps between the present and desired state.

Solution: Conduct a thorough gap analysis that evaluates the organization’s existing capabilities, resources, and operating model against its strategic objectives and vision. This analysis should identify areas of misalignment, inefficiencies, and opportunities for improvement to inform the design of the TOM.

Mistake 5: Underestimating the Complexity and Interdependencies of TOM Components

Financial firms often underestimate the complexity and interdependencies of the TOM components, which may lead to a disjointed and ineffective model. This lack of cohesion can hinder the transformation process and prevent the realization of strategic objectives.

Solution: Recognize and address the interdependencies and complexity of the TOM components, ensuring a holistic and coherent approach to the transformation. This understanding helps to align the organization’s resources, processes, technology, and talent with the strategic objectives and enables a more effective transformation journey.

Mistake 6: Focusing Solely on Short-term Results

Another common mistake is prioritizing short-term results over long-term strategic objectives, leading to a TOM that may deliver quick wins but fails to sustain long-term success.

Solution: Balance short-term goals with long-term strategic objectives to ensure TOM remains relevant and effective in the ever-evolving financial services landscape. This balance involves investing in developing capabilities, technologies, and talent to drive sustainable growth and support the organization’s long-term vision.

Mistake 7: Neglecting to Monitor and Adapt the TOM

Failing to monitor and adapt the TOM during and after implementation can result in a model that becomes outdated or misaligned with the organization’s evolving needs.

Solution: Establish success metrics, key performance indicators (KPIs), and regular review processes to monitor and evaluate the progress of the TOM implementation. Gather feedback from stakeholders, track performance against goals, and identify areas of improvement. Then, adapt and refine the TOM based on the feedback and performance measurement data to ensure continued alignment with the organization’s strategic objectives and vision.

Mistake 8: Inadequate Resource Allocation

Insufficient allocation of resources, including personnel, budget, and technology, can hinder the successful implementation of the TOM and limit its effectiveness in driving transformation.

Solution: Conduct a thorough assessment of the resource requirements for each initiative and project within the TOM. Allocate resources appropriately to ensure the successful execution of the transformation plan. Establish contingency plans and buffers to account for potential risks and challenges during implementation.

Mistake 9: Overlooking the Need for Continuous Improvement

Financial firms may make the mistake of considering TOM as a one-time, static endeavor rather than an ongoing, evolving process. Unfortunately, this mindset can prevent the organization from adapting to changing market conditions and technological advancements, ultimately limiting TOM’s long-term effectiveness.

Solution: Foster a culture of continuous improvement within the organization, encouraging employees to identify opportunities for innovation and enhancement within the TOM. Regularly review and update the TOM to adapt to changes in the industry landscape, customer preferences, and technological advancements, ensuring that it remains relevant and practical.

Mistake 10: Poor Communication of the TOM’s Benefits and Progress

A lack of effective communication regarding target operating model benefits, progress, and milestones can lead to disengagement, confusion, and skepticism among stakeholders, ultimately hindering the transformation journey.

Solution: Develop a comprehensive communication plan that clearly articulates the benefits and objectives of the TOM, updates stakeholders on progress, and celebrates milestones and achievements. This plan should include regular updates, presentations, and feedback sessions to ensure ongoing stakeholder commitment and support.

Avoiding these common mistakes when envisioning a TOM is crucial to ensure a successful transformation journey for financial services firms. By recognizing and addressing these pitfalls, organizations can develop a robust and effective TOM that drives sustainable growth, adapts to the ever-changing industry landscape, and supports long-term strategic objectives.

The Benefits of a Well-Crafted Target Operating Model

Here are the benefits of a well-crafted Target Operating Model (TOM) for financial services firms. A well-designed TOM can drive numerous advantages, including cost savings, enhanced customer satisfaction, improved regulatory compliance, and better decision-making.

Cost Savings

One of the most significant benefits of a well-crafted TOM is the potential for cost savings. By optimizing processes, rationalizing resources, and leveraging technology, a TOM can identify and eliminate inefficiencies, reduce duplication of efforts, and streamline operations. These improvements lead to cost savings in personnel, IT infrastructure, and operational expenses, positively impacting the organization’s bottom line.

Enhanced Customer Satisfaction

A well-designed TOM focuses on delivering exceptional customer experiences by improving the organization’s service offerings and aligning its operations with customer needs and expectations. A TOM can enhance customer satisfaction by optimizing processes, implementing customer-centric technologies, and fostering a customer-focused culture, leading to increased customer retention, loyalty, and advocacy.

Improved Regulatory Compliance

Financial services firms operate in a highly regulated environment with complex, ever-evolving rules and regulations. A well-crafted TOM can help organizations navigate this landscape by embedding regulatory compliance into their processes, systems, and culture. This alignment ensures that the organization stays up-to-date with regulatory changes, mitigates compliance risks, and avoids costly fines and penalties associated with non-compliance.

Better Decision-making

A robust TOM enables better decision-making by providing a clear and comprehensive view of the organization’s operations, processes, and systems. This transparency helps leaders and managers make informed decisions, prioritize initiatives, and allocate resources effectively. Furthermore, a well-designed TOM can foster a data-driven culture that leverages analytics and insights to support decision-making, drive innovation, and identify opportunities for improvement.

Increased Agility and Adaptability

A well-crafted TOM can make organizations more agile and adaptable in the ever-changing financial services landscape. As a result, organizations can quickly seize opportunities, address emerging challenges, and maintain a competitive edge by establishing a flexible operating model that can respond to market conditions, customer preferences, and technological advancements.

Alignment of Organizational Resources

A well-designed TOM ensures that the organization’s resources, including people, processes, and technology, are aligned with its strategic objectives and vision. This alignment helps drive synergy, focus, and efficiency, enabling the organization to achieve its goals and deliver value to its stakeholders.

Enhanced Innovation and Growth

A well-crafted TOM can foster a culture of innovation and drive sustainable growth for financial services firms. By optimizing processes, investing in cutting-edge technologies, and nurturing a culture of continuous improvement, organizations can stay ahead of the competition, develop new products and services, and expand their market presence.

Improved Employee Engagement and Retention

A well-designed TOM can positively impact employee engagement and retention by fostering a culture of transparency, collaboration, and growth. By providing employees with clear roles and responsibilities, access to necessary resources and tools, and opportunities for development, a TOM can improve job satisfaction, engagement, and retention.

A well-crafted Target Operating Model offers numerous benefits for financial services firms. By driving cost savings, enhancing customer satisfaction, improving regulatory compliance, enabling better decision-making, increasing agility and adaptability, aligning organizational resources, fostering innovation and growth, and improving employee engagement and retention, a robust TOM can transform organizations and secure long-term success in an ever-evolving industry landscape.

Best Practices for Building and Implementing a Target Operating Model

Here are the best practices for building and implementing a Target Operating Model (TOM), offering practical advice and recommendations for financial services firms seeking to optimize their operating model and drive sustainable growth.

Align Target Operating Model with Strategic Objectives and Vision

Ensure your TOM aligns with the organization’s strategic objectives and vision. This alignment forms the foundation for your TOM and ensures that all its components work together to support your overall business strategy and desired outcomes.

Engage Key Stakeholders

Engage key stakeholders throughout the TOM development and implementation process, including senior management, employees, customers, and regulators. This engagement is essential for gathering input, securing buy-in, and ensuring that the TOM addresses the needs of all stakeholders.

Conduct a Thorough Gap Analysis

Perform a comprehensive gap analysis to assess the organization’s capabilities, resources, and operating model against its strategic objectives and vision. This analysis should identify areas of misalignment, inefficiencies, and opportunities for improvement to inform the design of the TOM.

Prioritize Initiatives Based on Impact and Feasibility

When designing your TOM, prioritize initiatives based on their potential impact and feasibility. Focus on initiatives that deliver the most significant benefits and align with the organization’s strategic objectives while considering cost, timeline, and resource requirements.

Develop a Detailed Implementation Roadmap

Create a detailed implementation roadmap that outlines the sequence of activities, initiatives, and projects necessary to implement the TOM. In addition, this roadmap should include milestones, timelines, and success metrics to track progress and ensure accountability.

Invest in Change Management and Culture Transformation

Recognize the importance of change management and culture transformation when implementing a TOM. Develop a comprehensive change management plan that addresses the needs of different stakeholders, manages resistance, and fosters the desired values, behaviors, and cultural attributes.

Leverage Technology and Data Analytics

Embrace technology and data analytics to optimize processes, improve decision-making, and enhance customer experiences. Invest in cutting-edge technologies that align with the organization’s strategic objectives and leverage data-driven insights to identify opportunities for improvement and innovation.

Monitor, Measure, and Refine the TOM

Continuously monitor and measure the progress of the TOM implementation using success metrics and key performance indicators (KPIs) defined in the implementation roadmap. Gather feedback from stakeholders and adapt the TOM based on performance measurement data and evolving business needs.

Foster a Continuous Improvement Mindset

Cultivate a culture of continuous improvement within the organization. Encourage employees to identify opportunities for improvement and innovation within the TOM and invest in the development and upskilling of your workforce to support ongoing transformation.

Communicate Progress and Celebrate Success

Effectively communicate the progress, milestones, and successes of the TOM implementation to maintain stakeholder engagement and motivation. Recognize and celebrate the achievements of individuals and teams who contribute to TOM’s success, reinforcing the value and benefits of the transformation.

By adhering to these best practices, financial services firms can build and implement a robust and effective TOM that aligns with their strategic objectives, optimizes their operating model, and drives sustainable growth. In addition, a well-crafted TOM enables organizations to adapt to the ever-evolving industry landscape and ensures long-term success and a competitive advantage in the marketplace.