This allows you to edit any division of your choice. To create a division, go to the tab ‘recruit and deploy’, then click “edit” on any division. In addition, send an attaché to get some of the army XP the country you're supporting earns. This means it is wise to send volunteers to foreign wars in order to earn army xp! Wars you can send volunteers to are the Spanish Civil War and the (second) Sino-Japanese war. Early in the game, army xp is earned by advisors, whereas typically most of your army xp comes from your divisions being in combat.
To design a template, you will first need army xp to edit templates.