Hub-and-Spoke Model: The Operating Design That Scales Without Breaking Your Business

Why this problem exists (root causes) ?
Most enterprises did not design their operating models. They accumulated them over time.

Three forces collide.

1. Local optimization becomes enterprise drag

Business units naturally build processes optimized for local speed and constraints. Individually, these decisions make sense. At scale, they create:

• • • • Process proliferation
      • Inconsistent controls
      • Higher technology and integration costs

Global organizations typically maintain 5–10 variants of the same core process (e.g., Order-to-Cash or Procure-to-Pay).
Each additional variant increases rework by 8–12% and control exceptions by 15–20%.

For a global Order-to-Cash process handling $10B+ in annual revenue, unmanaged variation can lock up $150M–$300M in working capital and delay cash realization.

2. Central functions grow—but without outcome ownership

Shared services and centralized teams often inherit tasks, not accountability.

They process transactions but lack authority to fix upstream issues such as:

• • • • Poor master data quality
      • Ambiguous policies
      • Broken handoffs
      • Weak controls

Deloitte’s Global Shared Services research shows that over 65% of shared services organizations fail to achieve expected ROI within 24 months, largely due to unclear scope and weak decision rights. 
Organizations targeting $40M–$120M in annual run-rate savings frequently see 30–40% of that value erode within three years when ownership and governance are not redesigned.

3. Digital investments amplify weak design

Automation, analytics, and AI do not fix broken operating models.

They scale whatever already exists. 
Global studies by McKinsey and Bain indicate that 30–50% of automation and AI programs fail to scale beyond pilots. The average large enterprise spends $20M–$50M annually on digital platforms, yet captures less than 40% of potential value when processes lack stability and ownership. 
Organizations that redesign operating models before automating achieve 2–3x higher ROI and 12–18 months faster payback.

Business Impact Across the Enterprise

When the operating model is misaligned, the impact is systemic.

Financial

• • • • Rising run-rate costs and duplicated roles
      • Inconsistent working capital performance
      • Uncontrolled exceptions and value leakage

Enterprises without standardized execution models often carry 10–18% higher SG&A as a percentage of revenue than peers.

Operational

• • • • Wide cycle-time variability across regions
      • SLA misses and quality escapes
      • Constant escalation-driven firefighting

People

• • • • Role ambiguity and burnout
      • Shadow teams created to “get work done”
      • Limited internal mobility and unclear career paths

Gartner estimates role ambiguity alone can reduce enterprise productivity by up to 20%, equating to $80M–$150M in lost productivity annually for a 20,000-employee organization.

Risk & Compliance

• • • • Fragmented controls
      • Higher audit remediation costs
      • Slower regulatory response

According to PwC, fragmented operating models lead to 2–3x higher audit remediation costs and 25–40% more control exceptions per audit cycle. Regulatory failures can cost $5M–$50M per incident, excluding reputational damage.

If leaders do nothing!!!

• • • • Cost rises faster than revenue.
      • Risk exposure increases.
      • Leadership responds with more controls, more reporting, more approvals—slowing execution further.

This is how complexity becomes a strategy tax.