Organizational Structure for Process Improvement

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Part 2 of a four-Part Series

In the previous article we discussed the organizational design principles that lead to the foundation required for successful process improvement programs. This week we are going to look at Organizational Structure — your Org Chart.

Have you ever wondered if your Organizational Structure is hurting your process improvement efforts? Well, chances are your org chart is having a dramatic affect. It’s not so much your org chart or structure that is the problem but rather the issue is the evolutionary process that your organization has gone through to produce your chart.

You see company growth, from a smaller organization into a bigger one, occurs through evolution. Companies evolve, aligning by department or function to save money, and they never seam to stop to look at the TCO – Total Cost of Ownership. So let’s take a look.

Sample Org Chart

Span of Control

If your organization is like most, then it has grown through an evolutionary process that has resulted in your current organizational structure. Over time, your structure has probably been re-engineered to be more effective and address your changing business needs. New managers added, teams created and people downsized, re-arranging your org chart repeatedly. So, why are you still waiting for that boost in performance?

It’s probably a matter of conflicting goals, measures, and incentives that are preventing your organization from dealing with the real issues. Lawrence Miller wrote the book on business evolution called Barbarians to Bureaucrats: Corporate Life Cycle Strategies. In it, he explains some of the nascent issues of evolving organizations and proposes specific action steps to correct them. In his discussion of structure, he highlights the 20th century’s focus on span of control as one of the causes of organizational dysfunction today.

The number of employees directly reporting to you, as a manager, represent your “span of control”. So if you have five people reporting to you than your span of control is five. Miller questions why most companies are built based on the idea that it is the manager’s job to define measure and control the work of employees.

Note the focus on control versus creativity or commitment. This has lead to the notion, taught in most MBA programs today, that an appropriate span of control is seven (this number came from empirical studies of US companies). The reason being that a manager cannot control the work of more than seven subordinates.

Why Can’t The Workers Control Their Own Work?

If the workers are competent then there is truly little need for a manager to guide them. Therefore, span of control is inversely proportional to subordinate competence, trust and layers of management. The higher your span of control, the fewer the layers of management you need to run your organization of competent workers.

The funny thing about all of this is that your layers of management are a lot more expensive than improving workers effectiveness through increased training performance, and yet we focus on adding management layers instead of worker performance.

Employees aren’t The Cause of Inefficiency, Management is;

Low spans of control indicate that employees are being micro-managed, and there is too much emphasis on hierarchy in getting work done. By increasing the number of employees each manager supervises, an organization “flattens” allowing productivity to increase. But, to realize this increased productivity, you will need to make sure your workers are competent through training and aligned to the product flow instead of by function.

In the next article, we will talk about organizational alignment by product flow, and the total cost of ownership.

To learn more about using process improvement programs for your organization attend the next How to Align a System of People and Processes for Results class. If you are eager to learn more about creating more order out of the chaos you are feeling at work then the How to Create Well-Defined Processes class is right for you. ISO 9000 Quality Auditor classes are forming now for Internal Auditor or Lead Auditor.

Call for information on having your own private in-house classes today.

Part 1: Organizational Design for Process Improvement
Part 2: Organizational Structure for Process Improvement
Part 3: Organizational Structure — Alignment by Product-Flow
Part 4: Organizational Leadership for Process Improvement