Original scientific article ∗ Janko M. Cvijanović∗∗ Jelena Lazić∗∗
The Use of the Span of Control in the Design of Organizational Structure∗∗∗
Summary: This reading dealt with modality of using span of control in process of organizational structuring. For basik solution of macroorganizacional structure we use the constant value of span of control , but in final solution span of control is varied throughout whole hierarchy. Keywords: Span of control, management intensity, organizational structure Rezime: U radu se razmatraju modaliteti korišćenja raspona kontrole (raspona rukovođenja) u procesu projektovanja makroorganizacione strukture preduzeća. U polaznom rešenju hijerarhijske strukture figuriše fiksni raspon kontrole, u konačnom predlogu raspon kontrole varira po dubini hijerarhije i po pojedinim hijerarhijskim nivoima. Ključne reči: Span of control, management intensity, organizational structure
∗ ∗∗ ∗∗∗
t is useful and desirable to be unsatisfied with the existing level of organization, while organizational development is necessary not for a change in itself, but as a response to the changed interests and needs. This applies especially to the degree of hierarchical structuring of an organization. The view (see /1/) that there is unambiguous dependence between hierarchy and humanity (less hierarchy more humanity) causes a false dilemma: humanity or productivity (read: hierarchy), which can be regarded as a social utopia or organizational science fiction. One most often goes astray due to the narrow understanding of hierarchy.
The paper was accepted on 31 August 2005. Economics Institute, Belgrade, e-mail: email@example.com This paper forms part of the results of research on Project 1324, “Improving the Organizational Structure as the Key Contingent Factor of the Enterprise“, financed by the Serbian Ministry of Science and Environmental Protection.
The Use of the Span of Control in the Design of...
Namely, hierarchy is a multidimensional organizational structuring complex, which is not confined to the superior-subordinate relationship. Its broader complex includes: aims, interests, order, power, coordination, processing and other conditionalities, etc. It is probably still early for organization theorists to formulate something like the law on the maintenance of hierarchy (because the sum of all hierarchical dimensions of an organization is probably constant), although it has already become clear that different hierarchical dimensions supplement and support each other. Some characteristics of hierarchy (such as: personal responsibility, possession of hierarchy, arrangement of relations into ranks, specialization, dominance of bilateral communication, monopoly over information and, thus, over decisionmaking, pronounced interdependence of the superior and the subordinate, etc.) have a positive role, but it is not rare that they become distorted and cause difficulties. It is dangerous to underestimate these distortions, but it is still more dangerous to overestimate their impact and attribute the difficulties in their removal to something that is beyond the logic of hierarchy. Because, the magic of the pyramid is an omnipresent phenomen and we are actually organized hierarchically in our society, at work and at home. In essence, the basic structure of a corporate hierarchy has virtually been constant for a longer period, although there have been some changes aimed at establishing more flexible or less evident hierarchical systems. As we have already mentioned, it is still impossible to perceive this complex problem in full. The quantification of some structural aspects of hierarchy in this paper is an attempt to gain an analytical insight into the complex of hierarchical corporate structuring, thus making a small contribution to the understanding of this issue.
2. THE SPAN OF MANAGEMENT
Every job in an enterprise has (see /1/) two dimensions: (1) the prescribed job content (with the detailed instructions, standards relating to inputs, outputs, processes, required knowledge, etc. and with the cost and expenditure normatives) and (2) discretionary job content (within which an employee or executive reacts freely to the current situation and makes an appropriate decision autonomously). The prescribed job content relieves the employee from his responsibility for all unforeseen events and situations, while the discretionary job content anticipates personal relationship and responsibility for actions taken, which should be based on the employee’s greater knowledge and greater interest in his job and job performance. The time-span of discretion is the period within which the subordinate makes a decision freely (i.e. at his discretion) within the aims, authorities, rights, obligations and tasks assigned to him by his superior. As a rule, that is the period during which the effects of a decision made or action taken manifest themselves. The longer the period of free (discretionary) decision-making, the wider the scope for free action, the more generalized the operating instructions
Industrija 2/2005 and the less defined the jobs. In addition, an increase in the time-span of discretion increases the possibility that the decision-maker’s interests would be taken into account to a greater extent. The time-span of discretion determines, in large measure, the depth of hierarchy to which the level of decision-making can be lowered. In fact, the quality of this process is also improved if one is better acquainted with the qualities and shortcomings of subordinates, due to which time-spans of discretion for different employees at the same hierarchical level may be different. According to /3/, it is actually the question of decentralized decision-making, whose optimal measure, in essence, originates from the time-span of discretion as well. First of all, decentralization must be distinguished from divisionalization. Namely, in the case of decentralization it is the question of extending decisionmaking rights to a lower hierarchical level (consequently, this refers to decisionmaking at one hierarchical level in general, or at that workplace). In the case of divisionalization, the subject criterion is applicable and this means that one (usually limited) part of responsibility for decision-making is transferred to all hierarchical level of the organizational entity that has been formed according to the subject principle. As already mentioned, by decentralizing decision-making, one deliberately assumes the risk of having a limited number of errors in decision-making at a lower level. The three most important criteria for determining the degree of decentralization are: (1) the superior’s conviction in the competence of his subordinate; (2) availability of adequate and reliable information required for decision-making at the lower level to which decision-making rights have been exteded (in other words, decisions should not be made at the level being below the level of information required for decision-making), and (3) a wrong decision must not jeopardize other organizational entities, especially those at a higher hierarchical level. The problem of decentralization (see /4/) is especially dealt with in the theory and practice of managing large organizational systems (large enterprises, economies, states), where the modalities of decentralization are primarily related to different dimensions of the (organizational) system. The span of management (which is often called the span of control) is the number of subordinates of one superior. For a real hierarchy (i.e. for a given number of employees), the span of control is an independent variable and the number of hierarchical levels a dependent variable. In practice, the span of control is not constant throughout the hierarchy. Since the time-span of discretion is larger at the top of hierarchy, it is logical that the span of control is smaller at the top of hierarchy and the largest at the bottom. In essence, research on an optimal or adequate span of control is confined to the determination of the time-span of discretion, although many of them are not aware of that fact. The span of control has been dealt with by numerous organization theorists and practitioners (see /2/). This problem was addressed first by I. Hamilton in 1921 and then was defined (in its current sense) by V. A. Graicunas in 1933. A 3
The Use of the Span of Control in the Design of...
significant contribution has also been made by L. Gulick, L. Urwick, H. Ulrich, E. Jaques, Keren and Levhari, as well as many others. All of them have opted for an optimal span of control ranging from three to ten at the highest hierarchical level and from twenty to sixty at the lowest. In practice, the span of control logically varies along the height and width of the hierarchy. For a given number of employees and the adopted span of control – on a theoretical assumption that the span of control is constant throughout the hierarcy – one can obtain the number of hierarchical levels or, in other words, the overall corporate hierarchy. For example, if the total number of employees is 128 and the span of control 2, a total of 127 executives arranged at 7 hierarchical levels (a total of 255 rank-and-file employees) is obtained. For approximately the same number of employees (125) and the span of control 5, the total number of executives at 3 hierarchical levels is 31 (the total number of rank-and-file employees is 156). Management intensity represents a significant quantitative indicator of hierarchical structuring. It is the ratio between the total number of executives and the total number of employees. The outstanding methodological problem is the problem of staff positions, that is, the positions providing direct support to executives (it is mostly the question of top level executives) in absorbing the amount and diversity of information, on the basis of which a manager can make a decision. Mintzberg, Kieser and Kubicek (see /3/), as well as many others add the number of staff members to the number of executives, while some other authors add staff members to employees. So, for example, Blau and Scott (see /1/) explain such a view by the logic of social distance. The difficulties in adding staff members also arise from the fact that in an enterprise there are not only line and staff relationships, but there is also something in between. Pure staff members solve the problems relating to the amount and/or diversity of information with which a staff decision-maker is supplied. However, there are staff specialists or, more exactly, function specialists who have no line authority, but perform more than 95% of their job directly, through informal channels. Their authority is indirect (because it originates necessarily from the line authority of their staff decision-makers), while their decisions are formally the decisions of their superior although, in an operational sense, he does not see them. It is evident that such staff members have real line rights informally, since they have no decision-making rights formally. All things considered, we hold that the first view is more correct (i.e. staff members should be added to executives) not only because of the nature of the job and a relatively small number of executives’ staff members, but also because the effect of the numerator on the value of the fraction (i.e. management intensity) is much smaller than that of the denominator. This inevitably raises the question of optimal management intensity. Some authors define only the entry into a suboptimal zone. Jaques (see /1/) lays down the rule that it is not good for an enterprise to have more than 6 levels of management and the span of control smaller than 6. It is questionable as to 4
Industrija 2/2005 whether it is possible to fit the macroorganizational structure of every enterprise within these two limits. Modern views on organization give precedence to lower management intensity or, more precisely, to lower and wider organizational pyramids and this implies a larger span of control. A larger span of control implies a higher degree of autonomy and more democracy, which also contributes to the greater popularity of thick and low hierarchical pyramids in organization theory. However, practice is something else. Within the same span of control, management intensity increases insignificantly with an increase in the number of employees. immediate executors. To make a more detailed analysis one can observe management intensity at the adjoining levels, in case the span of control is not constant throughout the hierarchy.
3. THE SPAN OF MANAGEMENT AND ORGANIZATIONAL STRUCTURING
To use the span of control in the design of organizational structure it is necessary to bear in mind the following facts, which are logical and known, but are easily overlooked in organizational structuring. First of all, by its nature (and definition), the span of management is greater than zero by a whole number. This means that it is pointless to determine the average span of management. In fact, the average span of control represents the reciprocal value of management intensity, which is of no use in practice, because it is impossible to manage a fractional number of subordinates. In practice, the span of management changes along the depth of the hierarchy, as well as across its levels. Thus, it is possible to speak only about the span of management at a specified level, or in the overall hierarchy. This property of the span of control means that it can be used as an independent variable in the design of organizational structure only if it is constant throughout the hierarchy. This is an ideal case which is used in the preliminary design of organizational structure. For a given total number of employees and the (tentatively) adopted constant span of control (it is usually 3), individual levels of management and their total are determined. Thereafter, this preliminary design is tested against the Jaques constraints with respect to the number of hierarchical levels, in particular, and then is adjusted in accordance with the specific requirements of the business process in question, at specified hierarchical levels, while at the same time taking into account the specific characteristics of organizational culture, information system, dominant technology, etc. When opting for the initial constant span of control we actually opt for a greater or lesser number of hierarchical levels, with slower or faster information flows along the height of the hierarchy. For low management intensity, that is, for a large span of control, the pyramid is lower and the flow of vertical information is faster. In that case, however, we enter the zone of a larger time-span of discretion, which is not acceptable for all business processes and activities. Within the initial solution, by a detailed analysis we obtain the final value of the span of management at each point of hierarchy ramification. That value is
The Use of the Span of Control in the Design of...
determined by a great number of factors, such as: the complexity and diversity of decisions that should be made at that level; frequency of the problems on which decisions are made; homogeneity of business activities; specifics of the production programme; specifics of locations; technological complexity and updatedness; the degree of interaction between the activities that should be controlled; knowledge and skills of all employees; communication accessibility of subordinates, superiors and managers at the same hierarchical level, etc. Organization theorists, researchers and managers are unable to give a recipe for the design of organizational structure (the so-called normative approach to the design of organizational structure is evidently limited), because theoretical knowledge and empirical experience are evidently still very limited in scope relative to the complexity of the structuring problem and an increasing number of variables and factors, which certainly exert influence on business processes and the supporting organizational structure. Due to such a situation, scientists, researchers and managers show a decided preference for a partial problem solving, especially in the field of management and, to a lesser degree, in the field of organizational structuring. Such a narrow focus facilitates the pragmatic transformation of theoretical findings into practical rules and instructions, thus providing greater scope for the use of the common sense and intuition in perplexing situations. The useful crystalization of modern organization theory and its successful use in practice are reflected in the following recommendations for the design of organizational structure. 1. 2. 3. 4. Only one CEO (chief executive officer) can “translate“ the corporate mission and goals into specific instructions for the actions of managers at lower hierarchical levels; Managers of the key business functions, COOs (chief operations officers) must be directly responsible to the CEO; Clearly defined responsibility must be brought into balance with clearly defined rights (line, that is, position authority); The authority of staff or project specialists – regardless of whether thet exercise line prerogatives to a greater or lesser degree – originates from line authority and, if there is any ambiguity, priority is given to line decisions; The function of a deputy should be a supplementary and occasional activity in the absence of the regular function holder (e.g. technical, financial or some other manager replaces the general manager only in his absence; when he is in the enterprise, they perform only their duties) and it should not be regarded as an advantage, but as a shortcoming when his successor is elected).
In any case, in practice, the partial improvement and adjustment of organizational structure are more frequent (although this option is not recommended, because it usually causes new, even greater problems). This also applies to intervention in the field of control and management, which is a better option despite its limited scope because, in principle, structural problems 6
Industrija 2/2005 are solved only by structural changes (a benefit can be derived only if intervention is aimed at harmonizing the practice of control and management and the existing organizational structure). In our consulting practice, the most frequent problems - which are associated with the organizational structure or collision between structure and functioning in the minds of the employed in an enterprise - are as follows: (a) undefined or obsolete corporate aims; (b) unclear assignment of competences to organizational entities (so that nobody performs that job); (c) unnecessary complexity of the decision-making complex procedure; (d) unclear situation about the superior-subordinate relationship in some organizational configurations (say, design and division managers in the event of a dispute, when a matrix configuration is in question); (e) excessive paper work; (f) professional over-dimension of some employees; (g) redundancy of levels of management (operationally justified and/or necessary yet not articulated structurally), and (h) the lack of a long-term plan of business changes and the appropriate structural adjustment of an organization.
4. CONCLUDING REMARKS
The use of the span of management in the design of organizational structure is necessary and useful but, unfortunately, its effect is limited. It can be recommended that the span of control should be used only in the preliminary design of macroorganizational structure, after which the span of control along the depth of the hierarchy and across the levels of management should be precisely defined. In conclusion, we must point out that, no matter how the new macroorganizational structure has been perceived and adjusted to the specific features of the business process, significant resistance to its introduction is unavoidable. The change of an enterprise’s organizational structure is regarded as a radical change and the only thing on which most employees agree is to offer resistance to macrostructural organizational changes. Every individual is, by instinct, against organizational changes, especially because they pose a threat to his safety and status (regardless of the current situation) and imply a change in his behaviour to a greater or lesser degree. The regrouping of employees means that one may have to change the group, which implies the termination of one’s affiliation to the group and the loss of current of potential protection which the group offers to its members. The list of sources and forms of active and/or passive resistance to organizational changes is very long, while the list of adverse effects is even longer. However, that is not the central topic of this paper. The issue has been mentioned only with the aim to emphasize the need to anticipate the methods and techniques for overcoming resistance to the introduction of a new macroorganizational structure into the enterprise in one’s plan of organizational changes, in addition to devoting attention to the quality design of the new organizational structure.
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1. 2. 3. 4. Cvijanović, J. M., J. Lazić: Strukturiranje organizacionih entiteta, “Industrija“, 1/2005. Kemball – Cook, R. B.: The Organization Gap, Allen & Unwin, 1972. Koontz, H., C. O’Donnell: Management – A Book of Readings, McGraw-Hill, 1964. Morris, W. T.: Decentralization in Management Systems, Ohio State University Press, 1968.