This article originally appeared in The Australian Financial Review.
You can have terrific people working in the right teams and still not see the financial results you're hoping for. Why? It could be your organization’s structure is creating obstacles that compromise your workforce's performance.
One common culprit is out-of-control, tooth-to-tail ratios. In a war zone, some soldiers fight on the front lines. Others maintain supply chains, handle logistics and otherwise support those front-line troops. Military commanders know they can't let the tooth-to-tail (or combat-to-support) ratio become too low, or they'll wind up with a force that costs too much and can't win the battle. It's the same in a company. You have front-line employees who create what you sell or who deal directly with customers: software developers, sales representatives, call-centre staffers and so on. You also have support staff, including the people in marketing, finance, human resources and other functions. When the tooth-to-tail the ratio becomes too low, front-line people have to send every customer request or idea for improvement up through the bureaucracy and wait days or weeks for a response. That creates long delays for customers; and makes employees feel disempowered.
A second likely culprit is too many supervisory layers. Unnecessary supervisors create work and don't increase efficiency, lowering productivity. Companies often underestimate how expensive all those supervisors really are. My colleagues and I studied the cost of adding a manager or executive, and we found a kind of multiplier effect. When you hire a manager, he or she typically generates enough work to keep somebody else busy as well. Senior executives – senior vice-presidents and executive vice-presidents – are even more costly. These high-priced folk typically require support from a caravan of assistants and/or chiefs of staff. The support staff generate a lot more work for other people, too. The extra burden comes to 4.2 full-time equivalents per hire, including the executive's own time.
We've found three steps to be helpful in liberating employees from the organizational mire:
- Manage your tooth-to-tail ratios closely: Appropriate ratios naturally vary from one industry to another. But a company can gauge its performance against benchmark levels and make adjustments as necessary. If you can create standard processes for handling queries and ideas from front-line people, that will help them make and execute good decisions faster.
- Trim your supervisory layers: Compare your managerial spans – the average number of direct reports per supervisor – with industry benchmarks, and adjust your structure accordingly. Take into account, however, that different jobs require different spans of control. The lawyers in your legal department probably do highly specialized work that needs close supervision, thus requiring a narrower span of control. The custodians who clean your facilities, by contrast, can operate under a supervisor with a much broader span of control.
- Limit the caravans: It does little good to eliminate unnecessary supervisors if those who remain are as costly and inefficient as ever. In some companies, it's common for senior vice-presidents to have not just one assistant but a coterie. These caravans can generate just as much work as the executives themselves.
Chances are your top performers want to reach their full potential. Don't let these obstacles get in their way.
Michael Mankins is a partner at Bain & Company and heads Bain's organization practice in the Americas.