Target Operating Model (TOM)

McKinsey's 2025 data is clear: 63% of organizations now achieve most of their operating model redesign objectives, tripling the 21% success rate from a decade ago. The difference? Leaders stopped treating redesign as a structural reshuffle and started treating it as an integrated system. That shift is what a Target Operating Model makes possible.

What a Target Operating Model Really Is

A TOM is a structured design for how your organization will operate to deliver its strategic goals. It spans six dimensions: processes, organization and governance, technology and data, people and capabilities, performance metrics, and culture. 

Think of it as the bridge between strategy and execution. Your strategy says where you're headed. Your TOM specifies how work flows, who makes which decisions, what technology supports it, and what skills you need to build or acquire. 

Two states define the discipline. Your current state captures how the organization operates today. Your target state is the specific future configuration you're designing toward. The gap between them becomes your roadmap: the sequencing and dependencies required to close it. 

Here's where most designs break down: treating the six dimensions independently. You redesign process flows without adjusting governance. You deploy new technology without redefining the roles and skills needed to use it. The result? An operating model where components conflict with each other rather than functioning as a coherent system. 

Why TOM Design Matters More in the Agentic Era

Transformations that proceed without a clearly designed target operating model hit lower success rates for a specific reason: technology, process, and organizational changes made in isolation drift in inconsistent directions. A TOM gives your leadership team a shared, specific reference point for what you're actually building toward.

Redesigning work around human-plus-AI workflows, defining new decision rights, building governance for model risk and human oversight — these aren't add-ons to your existing operating model. They fundamentally change what the operating model needs to be.

McKinsey linked the jump from 21% to 63% success rates to integrated system design. Organizations that treat each dimension as interconnected close the gap between ambition and execution. 

How TOM Design Works in Practice

A credible TOM design follows a disciplined sequence:

• Current state assessment: Document existing processes, structure, technology, and capabilities.
• Target state design: Design a future-state model across all six dimensions, aligned to strategic priorities and built as an integrated system.
• Gap analysis: Identify the specific changes in technology, skills, and structure required to move from current to target state. 
• Roadmap sequencing: Prioritize changes into a phased plan, focusing on dependencies and high-value moves.
• Governance and iteration: Track progress and revisit the model as strategy and market conditions evolve. 

The sequence matters. Skipping the current state assessment or designing dimensions in parallel without checkpoints creates the misalignment that stalls transformations.

Firstsource's Approach to Target Operating Model Design

Your target state needs to reflect what actually works operationally — not just what looks right on paper. Firstsource's approach draws on direct experience running the functions clients are redesigning: healthcare revenue cycle operations, mortgage servicing, customer operations.

That grounding matters most in the technology and people dimensions. A target state that assumes automation levels or skill availability your organization can't realistically reach within its transformation timeline sets the program up to miss objectives — regardless of how sound the strategy itself is.

The approach also treats governance and performance metrics as first-class TOM dimensions rather than afterthoughts. A redesigned process without a redesigned decision-making structure tends to revert to old behavior once initial transformation energy fades. Tying success metrics to outcomes — faster cycle times, higher throughput, measurable cost reduction — keeps the model accountable. 

A TOM isn't a slide deck. It's the operational shape your strategy actually requires. The question worth asking: does your current operating model reflect where you're headed, or where you've been?

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