Common errors in organisational design

In my working life, I have never been a fan of the organisational restructure to solve leadership issues. I have always found that when leadership is lacking, the results will be the same no matter what the organisation’s structure looks like. To me, it has always been a case of rearranging the deck chairs on the Titanic.

However, there are some errors in organisational design which do impact the performance of well led teams. I find them often in small to medium size organisations which have grown with a reasonable degree of rapidity.

Lack of separation of governance and operation

In one client, the writing and auditing of processes was conducted by the person who also had operational responsibilities. The organisation had staff of more than 250 people, so it was not a matter of the organisation being too small to afford a person solely concentrating on the development and monitoring of processes. It was an organisation that relied on processes to have an appropriate sale-to-costs ratio and maintain a good reputation within the industry for issues such as privacy.

Auditing of processes must be kept separate from operations which execute the processes. In the example above, our employee could have been auditing the execution of their own processes. Given that the organisation was in the financial services industry, this was an unacceptable high risk.

Organisational design should separate elements of roles which have a governance context. Even it means developing a part time or contract role. Some examples are quality assurance, internal audit and quality control. This does not mean to say that operations staff should not perform quality control checks and have a role in quality assurance; they should. It does not mean that managers should not be responsible for self assessing their processes independently of an internal audit function. It means that governance of the controls included in a quality assurance or quality control system must be independent.

If you have an organisation where the governance of controls is undertaken by operational staff, change the organisational design. If there are insufficient hours to create a full time role and you do not wish to create a contract or part time role, then include tasks like training in the role.

Creating roles for the individual

Roles should be designed to contribute to the goal of the organisation. Too often, I find roles have been created for an individual.

The rationale for creating a role for a person is to keep them in the division or organisation for longer than would be the case. However, unless the role has a bona-fide purpose that helps the organisation reach its goal, then it is unwise to create such a role.

In my experience, good people put into a role which is not a challenging, bona-fide role in driving the organisation towards its goal, resign within six months in any case. They get bored, de-motivated, and leave.

One client repeatedly created new roles in a desperate effort to retain who they thought were exceptional staff. Reviewing the history of the organisational design, it was apparent that three things occurred:

  1. Layers were added to the organisation which were unnecessary and slowed decision making
  2. Roles were added to the organisation which did not disappear when the person they were created for moved on
  3. Most, if not all, of the individuals did not stay with the organisation.

What was less apparent was that talented individuals considered being “behind” the people for whom new roles were created, also left – thinking that they were not considered to be as valuable.

Span of control too wide

A typical design flaw is having a span of control greater than eight direct reports. Eight is generally the number that can feel and act as a team. If the membership of the group is very diverse, for example, from technical to advertising people, the preferred number is below eight and possibly as few as five. Similarly, if the environment is stable, then a larger number of direct reports is fine and if the environment is unstable, a lower number of direct reports is acceptable. [To learn more about span of control, look for research around the topic of The Dunbar Number.]

One client had 15 direct reports, ranging from advertising to research and development. The organisation was chaotic, lacked transparency and had a poor record of getting things done. These characteristics usually, associated with bureaucratic organisations with too many layers, also characterises organisations with too wide a span of control in search of the “flat” organisation much favoured by today’s organisational design commentary.

Span of control too narrow

While most organisations keep the span of control from the first to second layers in an organisation at an acceptable level, they often neglect to follow the same rationale at lower levels of the organisation.

One client had (including the team managers) a marketing team of three, an advertising team of two and a telephone lead generation group of four, separated into different teams. The result was higher costs than necessary, and difficulty in getting a coherent approach to generating leads for sales people. The structure was created as the general manager believed that marketing, advertising and telephone sales were very different skills and should be kept separate. While this logic has some resonance, the difference in skills was not worth the cost of two managers’ salaries and the diffusion of strategy and tactics created.

No recognition of the impact of diversity

As noted in the discussion of span of control, greater diversity of roles implies that a manager should have fewer reports. However, there are other elements of diversity which also have an impact on appropriate span of control and on the “seniority” of the person required to fill the role.

Managers who have a diverse cultural team working for them, for example, a regional manager for Vietnam, Singapore, Thailand, Cambodia, Malaysia and Laos, has a very diverse group of people to manage in terms of national and business culture. Even though their business may not be as large as a regional manager for Australia and New Zealand, the degree of difficulty in managing the cultural differences should lead to a lower expectation of span of control and an equal level of seniority.

No recognition of the importance of roles to deliver the goal

I observe on many occasions in small to medium organisations that roles such as human resources, and occasionally finance, are filled by what one would regard as junior people, are paid lower salaries than operational managers and are generally seen as roles that are required to be filled rather than roles which can truly assist in driving the organisation towards its goal and reducing risk along the way.

It is probable that this is a leftover of the owner controlling those roles themselves when the organisation is small and believing that they only need help to share the workload when the organisation grows. When organisations grow beyond 100 people, however, these roles can become value adding with the right incumbents. They should be filled with very good exponents of their trade and given seniority in the organisation.

While the roles of finance and human resource management are commonly undervalued roles, other roles are often undervalued and staffed inappropriately. The important consideration is that the leaders of the organisation understand what roles create or reduce risks to achieving the organisational goal. These are the roles which should be elevated in importance in an organisational design.

Comments are closed.