Organizations evolve over time. Leaders regularly make organization design decisions tailored to a specific person or a unique business need at that particular moment. Perhaps they are giving a high performing resource an opportunity to grow and learn a new part of the business, so they move another function under their purview. Perhaps a manager suddenly departs, and another manager is asked to lean in cover both areas, and then that open manager position somehow never gets filled. Perhaps a growth opportunity arises but the size of the new business does not warrant its own leader, so they add the new portfolio to a strong leader who is talented and always says yes.
Spans of Control and Flattening the Hierarchy
Spans of control refer to the way relations are structured between leaders and subordinates. A wide span of control exists when a supervisor oversees numerous subordinates. A narrow span of control exists when a manager oversees few subordinates. A flat, broadly spanned organization tends to spread downward from the top in a broadening pyramid, each managerial layer having a larger number of employees who report to it than the one above, with the lowest layer having the highest number of managers.
Many organizations have sought to gain competitive advantages by creating leaner, more streamlined structures. By increasing spans of control and reducing organizational layers, companies have the opportunity to reduce costs. The success of flattening a hierarchy is predicated on the well-known benefits of delegation:
- Decisions made closer to the locus of knowledge
- Positive motivational effects on people
- Growth opportunities.
These must be balanced with the potential loss of control and of COORDINATION. We should not be complacent about the costs of pushing authority downward. We should consider the talent strategies that must change with flattening a hierarchy, including:
- Performance management
- Decision making
Organizations Getting “Out of Shape”
There are always very good reasons why organizations get “out of shape,” thus regular reviews and reshaping are needed to keep the structure aligned to the strategy. Looking at employee data to calculate spans, layers, and location reveals symptoms of problems to which people intuitively relate.
For example, let’s say we go into a company and the primary complaints we hear from stakeholders is that they feel micromanaged, and that their creativity is stifled by their direct supervisor spending a lot of time on tactics. Without a doubt, we know we will find many 1-over-1 or 1-over-2 reporting relations, as the spans are too narrow, and leaders are not spending enough time on long term priorities as they are operating more like individual contributors.
Upward Spans Have Limits
On the other hand, if we hear that management is not connected to the issues on the front line, that folks never get any feedback, and/or we see a lot of coordination roles with titles such as Chief of Staff, invariably we find spans upwards of 10 or more to one leader. If we hear that there are too many middle managers who are measuring the KPIs of other teams KPIs, we know that we will find too many layers in the organization and find a lot of cost/waste in the middle where folks are often focused on special improvement projects, but not directly adding value to their customers.
In order for upper management to get the right pulse for what is happening on the ground, and to have customer facing resources aligned to the right executive priorities, the correct number of levels and the proper span of control need to be implemented. This allows the right cost structure for the work in question, with limited “coordination” roles and wasted project time. The optimal connection, commitment and creativity can all be predicted by the optimal organization structure.
Determining Spans of Control
Spans of control are determined by:
- Stability of work: high dynamic of change = more managerial effort to align employees to changes (and vice versa).
- Job complexity: more complex jobs = more managerial input (and vice versa).
- Job similarity: similar jobs = more employees per manager (and vice versa).
- Geographic proximity: dispersed locations = more supervision (and vice versa).
- Amount of coordination between employees needed to complete tasks: high need for coordination = more supervision (and vice versa).
Spans of control are dependent on industry type, organization size, and nature of work, and they can be broad or narrow. While no universal or ideal span of control exists, it is important that organizations examine managerial spans, as they ultimately determine the number of levels—and thus transactional costs—in an organization.
At EY, we have evolved our organization design practice to look not only at spans and layers, but also the horizontal data that describes the cross-functional networks of teams. We add this data set to the traditional employee data analysis to move from analyzing only human capital to analyzing social capital, which is what predicts growth, innovation, and probability. My next blog in this series will describe the exciting insights we are able to reveal and act upon. Stay tuned!
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