HCM GROUP

HCM Group 

HCM Group 

Summary

The traditional organizational hierarchy is not dead—but it is no longer sufficient on its own. As companies seek to become more responsive, innovative, and resilient, a new approach is emerging: the dual operating system. This concept, introduced by John Kotter and developed further by agile practitioners and organizational designers, involves running a hierarchical structure alongside a more flexible, agile network of teams. This guide provides a comprehensive, actionable roadmap for HR leaders seeking to implement and sustain a dual operating system within their organization.

Part I: Understanding the Dual Operating System Concept

1. Define the Purpose of the Dual Operating System

Before designing a dual operating model, organizations must be clear on what they hope to achieve by introducing agility alongside hierarchy.

Context: A dual operating system supports both the stability of core operations and the flexibility of innovation and change. The hierarchical system ensures reliability and efficiency, while the agile network enables speed and adaptability.

Actions:

• Identify strategic challenges that require faster decision-making, collaboration, or experimentation
• Clarify how agility will complement, not replace, traditional management structures
• Communicate the rationale across leadership to build alignment and urgency

2. Identify Where Each System Adds Value

To build a coherent design, it’s critical to distinguish the domains where hierarchy versus agility provides the most value.

Context: Hierarchical systems are ideal for regulated, routine, or scale-driven activities. Agile networks are best for innovation, customer-centric problem solving, and transformation initiatives.

Actions:

• Map your business value streams and classify them into "core operations" and "innovation or change initiatives"
• Determine the fit-for-purpose structure for each domain
• Designate parts of the business where dual modes must coexist (e.g., operations + digital innovation)

3. Learn from Pioneers of Dual Systems

Companies like Haier, Bosch, and ING have implemented dual operating models with measurable success.

Context: These companies maintain strong core businesses while enabling autonomous, cross-functional units that drive transformation.

Examples:

• Bosch created agile cells for product development, while maintaining its manufacturing hierarchy
• ING restructured into tribes and squads for customer journeys, with back-office services still under traditional management
• Haier operates with micro-enterprises empowered to pursue market-driven goals, under a shared corporate platform

Part II: Designing the Agile Network Component

4. Create a Network of Agile Teams with Clear Mission Areas

The agile component should not be a loose collection of projects—it needs a coherent design.

Context: Agile networks operate through cross-functional teams, often aligned to value streams or strategic domains.

Actions:

• Define mission areas (e.g., customer journeys, product innovation, digital acceleration)
• Build agile squads or tribes aligned to each area
• Ensure teams have end-to-end accountability and the capabilities to execute

5. Assign Enabling Roles for the Network

A functioning network requires new roles beyond those found in the hierarchy.

Context: Roles like product owner, tribe lead, agile coach, or chapter lead ensure clarity and flow.

Actions:

• Design roles and responsibilities tailored to agile operations
• Clarify how these roles interact with traditional managers and executives
• Invest in capability building and mentoring to fill these roles effectively

6. Establish Lightweight Governance and Funding Mechanisms

Agile networks need autonomy to act—but within guardrails.

Context: Too much oversight paralyzes; too little alignment causes chaos.

Actions:

• Set strategic objectives and key results (OKRs) to align efforts
• Create transparent prioritization processes for initiatives
• Use rolling, outcome-based funding instead of annual project budgets

Part III: Connecting the Two Systems Without Friction

7. Clarify the Interface Between the Hierarchy and the Agile Network

The relationship between traditional functions and agile teams must be well-structured to avoid duplication and conflict.

Context: Without clarity, both systems compete for resources and authority.

Actions:

• Define decision rights across systems (e.g., hiring, budgeting, prioritization)
• Use service-level agreements or team contracts to establish working norms
• Ensure leaders in both systems share joint accountability for outcomes

8. Appoint Dual System Translators or Integrators

Few people understand both systems well. Organizations need integrators to help them operate in parallel.

Context: Translators help bridge cultural and operational gaps, enabling mutual understanding.

Actions:

• Identify or develop leaders who can speak both "hierarchy" and "agile"
• Assign these individuals to integration teams, strategic programs, or transformation offices
• Give them clear mandates to align processes, language, and priorities

9. Balance Cultural Signals and Incentives

Mixed signals in behavior, rewards, or recognition can derail the dual system.

Context: Employees need to see that both operating modes are valued.

Actions:

• Harmonize performance evaluation criteria across both systems
• Reward cross-boundary collaboration and innovation
• Showcase success stories from both agile teams and traditional functions

Part IV: Scaling and Sustaining the Model

10. Build Leadership Capability for Dual-System Thinking

Leading in a dual operating system requires a shift from control to orchestration.

Context: Leaders must navigate ambiguity, trust autonomous teams, and balance operational continuity with strategic transformation.

Actions:

• Run leadership development programs focused on agility, systems thinking, and adaptive decision-making
• Use 360° feedback and coaching to develop dual-mindset leaders
• Establish forums for peer learning and reflection

11. Create Shared Platforms and Infrastructure

Shared infrastructure connects and supports both systems.

Context: Technology, data, and knowledge-sharing platforms must span across hierarchy and networks.

Actions:

• Invest in collaboration tools that enable transparency and speed
• Use a unified talent platform to support fluid team formation and career progression
• Build a central team responsible for managing and evolving shared infrastructure

12. Monitor Systemic Health, Not Just Project Metrics

The true test of a dual system lies in its ability to sustain agility and stability over time.

Context: Over-indexing on agile KPIs or hierarchical efficiency misses the point.

Actions:

• Track metrics across multiple dimensions: strategic outcomes, employee engagement, learning velocity, and organizational coherence
• Use regular health checks and retrospectives to refine the model
• Adjust the balance between hierarchy and network as business needs evolve

Final Reflections

Balancing hierarchy with agility through a dual operating system is not an either/or proposition—it’s a strategic integration of stability and flexibility. HR leaders play a pivotal role in designing, enabling, and evolving both systems in concert. By championing a systems-thinking mindset and bridging the structural divide, HR can help organizations stay grounded in their mission while moving at the speed of change.

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