Designing for efficiency and adaptability

Optimizing managerial spans and layers can help you find the right balance

Posted by Michael Puleo, Don Miller, Omar Aguilar, and Tiffany McDowell on October 4, 2018.

The speed of digital and market disruption is putting many businesses under tremendous pressure to improve how they operate, compete, and grow. S&P longevity is getting shorter: If current and forecasted rates hold true, nearly 50 percent of the current S&P 500 will be replaced over the next 10 years.1 Deloitte’s Human Capital Trends insights over the last few years also point to organizations struggling to cope:

  • 92 percent of surveyed organizations are not correctly structured to operate in this new environment
  • 95 percent say “agility and collaboration” are critical, yet only 6 percent are highly agile today
  • 50 percent are in the middle of reorganizing how they work, but only 11 percent feel confident in their ability to get it right2

What does “getting it right” mean? It means designing your organization to be able to execute at its appropriate balance of adaptability and efficiency. Designing only for efficiency is right for some areas of business operations, but in others, organizing for adaptability can maximize the value achieved through design efforts. Understanding this balance when analyzing an organization’s managerial spans, layers, and supervisory burden can help you balance efficiency and adaptability in your design.

Understanding the work done by each function is a key factor behind designing for efficiency and adaptability. Transactional work lends itself to opportunities for outsourcing, automation, and designing for efficiency, and the nature of deep problem-solving or creative work aligns to designing for adaptability.

Source: Deloitte Consulting LLP

Organizations today need to be adaptable and efficient, which generally means becoming flatter (fewer layers) and less hierarchical, while increasing managerial span of control. However, too many organizations try to achieve those objectives by blindly imposing generic span-of-control targets that don’t reflect the unique needs of the business. That’s a mistake. Done right, eliminating unnecessary management layers and increasing management’s span of control can help an organization greatly improve its efficiency and adaptability, reducing costs while positioning the business to quickly capitalize on growth opportunities. Done wrong, it can do exactly the opposite—destroying productivity and efficiency and crippling the organization’s ability to make decisions and take action.

Optimizing for both efficiency and adaptability starts with understanding your spans and layers

Span of control refers to reporting relationships within the organization. A manager’s direct reports compose his or her span of control. Layers are just what you’d think—the levels of management in an organization. Optimizing these spans and layers can not only reduce management overhead costs, but also increase business adaptability by speeding up decision making and enabling the organization to take action more quickly, while at the same time helping improve the quality of decisions by ensuring the right people are involved.

What’s more, optimizing spans and layers provides the foundation for creating efficiency where it makes sense and unleashing speed and agility where it is needed; helps the organization tackle emerging challenges such as digital disruption; and can reduce organizational roadblocks and dead wood, creating opportunities for employees with the kinds of skills that today’s businesses need to be successful. Also, it can boost morale and productivity by providing employees with the right level of management support to perform their very best.

Source: Deloitte Consulting LLP

A smarter approach

Effectively optimizing an organization’s spans and layers requires a thoughtful, fact-based approach that carefully considers the unique needs and complexities of the business at every point in the management hierarchy in order to determine the appropriate “supervisory burden” for each management position.

Deloitte’s analytical approach measures supervisory burden by considering four key factors: nature of the work, degree of standardization possible, complexity of the work, and interdependency of the work.

The four components of supervisory burden

Source: Deloitte Consulting LLP

Why measure supervisory burden?

A quantified approach to assessing supervisory burden provides objective support to confirm or challenge leaders’ intuitions and perceptions that “we are too hierarchical” or “everyone is stretched too thin.” In addition, it provides a strategic and operational context to justify why existing spans of control are appropriate (or why they should be adjusted), even if they run counter to standard benchmarks. For example, work that has a high degree of standardization suggests optimizing for efficiency, while work that is complex and interdependent suggests optimizing for adaptability.

Fact-based analysis helps the business make informed decisions about how to organize itself. It also helps managers better understand the factors that drive their jobs so they can manage their role and teams more effectively. The resulting targeted organizational adjustments help relieve managerial burdens that contribute to the “overwhelmed employee” phenomenon that has become so prevalent. Further, the places where complexity and interdependency are high become great candidates for designing network-based teams, further enhancing the organization’s speed to market.

A smarter tool for a smarter approach

Analyzing supervisory burden can be a smarter way to optimize spans and layers; however, the analysis itself can be very labor intensive and time consuming, typically requiring 3-6 weeks of painstaking full-time effort to manually analyze and categorize each individual employee’s true position in the organization structure based on a variety of clues, such as job title, department, physical location, and reporting relationships. However, use of cognitive technology can greatly accelerate this process.

For example, a large automotive OEM (Original Equipment Manufacturer) needed to streamline its organization to reduce costs, while at the same time retaining critical talent and positioning itself to develop the strategic capabilities necessary for future success. Simplifying and optimizing management spans and layers across its worldwide organization was part of the overall effort. This required cleansing and classifying HR data for a large subset of the company’s employee population—more than 30,000 employees in total. If done manually, this complex and time-consuming task would likely have required 3-6 weeks of painstaking full-time effort. However, by using a tool with cognitive and analytics capabilities, the team was able to complete the task in just two weeks of part-time work (20 percent of the usual effort). The project is expected to save the company $80–$100 million annually, while increasing its focus on critical talent and strengthening its strategic position in the marketplace.

HR can help the business get started

In situations where HR business partners see the signs that spans and layers may be out of sync, they can help business leaders better understand managers’ supervisory burden. Blindly adhering to standard industry benchmarks is a recipe for failure. Instead, HR can help leaders fully think through the process: articulate the end goal (e.g., Are they trying to reduce cost to manage? Is the organization too bureaucratic? Are they trying to optimize the workforce and use talent more effectively?); asses the current state; identify improvement opportunities; determine their appetite and pace for change; and develop a plan for designing the new organization to be both adaptable and efficient. An objective, fact-based analysis that takes full advantage of the latest digital technologies is an effective way to position a business to thrive in a world where digital disruption and increased competition are the norm.

Michael PuleoMichael Puleo is a managing director in the Strategy & Operations practice of Deloitte Consulting LLP. He focuses on assisting companies with organizational effectiveness initiatives, operating model design, and strategic cost reduction.
Don MillerDon Miller is a managing director in Human Capital Practice of Deloitte Consulting LLP. He serves as the US Analytics leader for Deloitte’s Human Capital Organization Transformation & Talent practice and also serves on Deloitte’s Global Organization Design and Decision Solutions leadership team.
Omar AguilarOmar Aguilar is the global leader of the Strategic Cost Transformation service offering for Deloitte Consulting LLP, focused on supporting and serving multinationals and local clients across the globe.
Tiffany McDowellTiffany McDowell is an Organization Transformation & Talent principal in Deloitte Consulting LLP’s Human Capital practice, where she focuses on helping companies improve performance by building organization structures to execute new capabilities through their workforce.

1 Scott D. Anthony, S. Patrick Viguerie, Evan I. Schwartz and John Van Landehem, “2018 Corporate Longevity Forecast: Creative Destruction is Accelerating” Executive Summary, Innosight.
2 Source: 2016-2018 Deloitte Global Human Capital Trends Reports.

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