AN organisational structure is a configuration of reporting lines with the various functions within an organisation. It is an embodiment of power and authority vested in various roles.
While the ultimate aim of an organisation structure is to ensure that work is executed productively, in most cases, organisational structures are used to build empires that have nothing to do with achieving organisational goals.
When designing organisational structures, there are core principles that are followed to come up with an efficient organisational structure. Below I list the eight signs of a faulty organisational structure.
The span of control
There is always debate about how many people should report to an individual manager. A span of control that is too small or too large depending on circumstances is costly. For example, the span of control for a CEO ranges between five to as high as 18 people.
A misaligned span of control could create inefficiencies that cost your organisation significant amounts of money. Several factors influence the span of control. At the CEO level, the business model and complexity of that business model can affect the span of control.
More complex business models with high impact and risk tend to have smaller spans for the CEO.
Even in this kind of scenario with highly competent individuals at CEO and direct CEO reports, the span of control can be larger. That approach assumes that capable leaders do not need to supervise reports directly as they have the necessary expertise to run the show with very little supervision.
However, when the CEO is incompetent, giving them too many direct reports can create performance challenges. The same negative outcome is also often evident when a competent CEO supervises incompetent direct reports.
As you move into levels below the CEO, spans can be large if supervised individuals do homogeneous and routine work. In manufacturing and retail, sometimes a span as large as 25 people is ideal.
Operations staff vs support staff ratio
The way you work on operations staff (core business) versus support staff can lead to an inefficient organisation. Too may either side of the equation can lead to performance challenges.
The recommended mix is 70% core/operations staff versus 30% for support staff. However, that ratio could be less for support staff and higher for operations in highly digitalised organisations.
I am sure you have heard organisations being described as top-heavy. That tends to happen when there are too many management layers within the structures.
The recommended layers from the lowest person in the organisation to the highest are five levels. How many levels do you have in your organisation? Anything above five levels could be pointing to a faulty organisational structure.
Too many layers often result from leadership that wants to build empires to consolidate power and play politics.
The number of levels depends on the size and complexity of the business models. For most organisations, four levels would be ideal.
The best way to approach organisational structure design is to minimise the number of reporting layers where possible.
That will save you money and bring you efficiency. If you create an organisation with too many managers, you must know they would need corresponding benefits aligned to their status as managers. This includes vehicles and other benefits.
One to one reporting
This is another disease afflicting so many organisations. For example, you have an assistant director reporting to another director and everyone else in the department reports to the assistant director. What it means is that one of the directors is not needed and is acting as a buffer.
Such a structure tends to create a lot of inefficiencies. Again this is often found in organisations that strive for power and politics at the expense of organisational efficiencies.
Too many managers
As a rule, avoid creating any structure that has too many managers. More efficient organisations have a lean management team and plenty of specialist and coalface employees.
Structures with excessive management numbers encourage managers to get in each other’s path as they fight for control and power.
Head office staff
A bloated head of office staff is a sign of poor structures. If you decide to have people at the head office, make sure they are very few and necessary to drive your strategy. Most organisations create head office staff for prestige and to be at par with other organisations. Head offices waste resources if not properly structured.
Roles without authority
In some cases, you find organisations create roles that are supposed to have authority but operational they do not have. Such roles are often designed for political expediency.
High sounding job titles
Avoid getting tempted to give people high sound job titles. These tend to raise remuneration expectations for such individuals. Go with standard job titles common in your industry.
You should review your organisational job structures periodically. This ensures that the structures are still relevant and supporting your business strategy.
Nguwi is an occupational psychologist, data scientist, speaker and managing consultant at Industrial Psychology Consultants (Pvt) Ltd, a management and HR consulting firm. — ipcconsultants.com