Occupational psychologist Memory Nguwi says poorly designed structures are a source of overstaffing in many organisations.
Organisational structures can be a source of inefficiency that impacts on the ability of the organisation to deliver its mandate. If the process of how structures are designed is not managed properly and allows self-interest to dominate, it may encourage managers to engage in empire building. Executives must note that poorly-designed structures are a source of overstaffing, which breeds inefficiency. Below I list some of the factors you need to take note of when you a designing your organisational structures.
1. Direct Reports to the CEO – How many people should report directly to the CEO and what level should those employees be at? I see a lot of organisations struggling with this. Remember a faulty top structure impacts negatively on the ability of the organisation to perform. The recommended number of direct report averages between eight and 12. However, this tends to vary by industry and complexity of the work to be supervised. You will get fewer people reporting to the CEO in high-risk areas to enable the CEO to have a complete picture of where the business is going. The other assumption that affects the number of direct reports is that it is often assumed that the direct reports are specialists in their areas and would not need close supervision. In practice, we find that CEOs sometimes build structures to serve their own personal needs instead of those of the organisation.
2. Reporting layers – Try by all means to minimise the number of reporting layers in your structures and make structures as flat as possible. A structure with too many layers breeds inefficiencies. In better-managed organisations, you will find flat structures, which empower employees, resulting in motivated staff and better performance. Communication is the major casualty in tall structures characterised by having too many reporting layers.
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3. One-on-one reporting – Eliminate one-on-one reporting in all parts of your business. This can prevent proper oversight, communication and flow of information up and down the chain of command.
4. Reporting to the CEO and your grade - It does not mean all the direct reports must be at the same level. What makes people report to the CEO is the functional importance of an area. You can have eight people reporting to the CEO belonging to different grades. Over and above this, the same people do not have to carry the same title prefix, e.g. Director, Head or GM.
5. Duplications – Eliminate all duplications and remember that duplications bread inefficiencies and cost your organisation money. During good times, most organisations accumulate unnecessary structures that do not evolve fast enough in line with changes in business models and general market conditions.
6. Core staff versus support staff – Some organisations employ support staff above the benchmark threshold of 75 percent core and 25 percent support staff. In cases where you have a large percentage of your staff in support functions rather than your core business, you will always struggle with staff costs.
Periodically having your organisational structures reviewed by an independent outsider can add a lot of value to your business through streamlining inefficient structures.
Memory Nguwi is an occupational psychologist, data scientist, speaker, and managing consultant at Industrial Psychology Consultants (Pvt) Ltd, a management and human resources consulting firm.
