A Commentary by Wendy Ferguson – BHRLR, CPHR
Organizational structure refers to the arrangement of authority, responsibility, reporting relationships and the number of layers within the organization. The height of an organization represents the number of levels between the CEO and the lowest level of the organization.
Organizations evolve for so many reasons: organic growth, economic conditions, competition, industry trends, technology, global expansion, and so on. Often the challenge that CEOs and managers face is ensuring the org structure supports the latest stage in the businesses life cycle so it supports the business to achieve its strategic objectives.
Additional layers of authority are bound to emerge, especially when growth is left unmonitored. Most of us can think of an organization where the reporting structure may have not served to support the business. I’m not an organizational design specialist by any means, but I’ve seen these problems time and time again. ‘Honor promotions’ lead to excess layers that only increase the bureaucracy and frustration for everyone in the organization. Excessive layers of management can cause significant problems. If you’ve been pondering the root cause of workplace culture or engagement problems, consider that your organizational structure might just be the problem.
Signs Your Organizational Structure Is No Longer Serving You:
- People are too close in ability & management accountability
- Managers tend to look over shoulders and micromanage
- Too many levels get involved in any problem and process = organizational clutter
- Too much interference in simply getting the work done
- Some employees are overloaded while others coast
Consequences of Having Too Many Layers:
- Demotivated Employees and Staff Turnover
- Slow Pace of Innovation and Change
- Inflated Salary Budget
Bottom line → more levels = more managers. Managers generally receive hefty salaries, benefits, health care, pension plans, etc. More levels also suggest more employees and administrative staff, which result in inflated expenses for organizations!
- Communication Delays and Problems
Timely, clear and uninterrupted communication lies at the core of an efficient organization. As we all know, the shorter the distance between the sender and the receiver of a message, the clearer and more effective the communication. Organizations with too many levels are often inundated with communication problems because messages must funnel through multiple layers before reaching their intended destinations. This will inevitably distort the message and slow communication.
- General Confusion and Inefficiencies / Declined Productivity
- Managers are unclear as to where their accountability begins and ends
- Employees detour the ‘chain-of-command’, bypassing their manager because of decision making delays
- Quick decisions lead to faster results and greater organizational efficiency, but decision making is sluggish in organizations with multiple levels. Managers at the highest levels, who are responsible for making company-wide decisions, are often not equipped with complete or timely information to do so because it takes a substantial amount of time for information to even reach them. Slow decision-making increases organizational costs, impedes performance and often results in organizational failure.
Should You Consider De-Layering?
If you are seeing the signs, perhaps consider it. One of the most powerful changes you can make in your organization is to increase your managers’ spans of control. This easy shift can empower employees, simplify processes and reduce costs! Span of control means how many people report to a single manager. Once the spans are increased, you are able to compress the number of hierarchical layers. For example, instead of one manager having 5 direct reports, each with 3 people reporting to them…the middle management layer could be eliminated and the manager would then have 15 direct reports. Not only does having fewer managers reduce costs, it also allows information to flow efficiently up and down the organization.
Keep in mind that most modern managers no longer function to control their employees’ activities, but rather to encourage teamwork and communication and provide motivation and direction. They should be leading, not controlling. Once managers stop exercising personal control over their subordinates, the number of their direct reports can considerably expand.
De-layering can be applied as long as these changes drive greater employee empowerment and simplification in the organization. This can lead to increased productivity with cost-reduction as an added benefit!
It’s the responsibility of management to constantly monitor spans of control and organizational layers, rather than waiting until a corporately directed reorg. Again, keep in mind that over the course of time people, products, projects, services, geography are all added and it is very easy for spans to contract and layers to multiply. Being aware of how to prevent that from happening is a vital part of being a successful leader. If you wait until your organization is threatened, it may be too late to consider…proactive organizational change is much more effective!