Lessons in Leadership

Span of no control

Multiple layers of management reduce effective communication and productivity

By Robert L. Bailey

Communication is inherently weakened when information is passed through multiple hands.

Procedures in many American companies remind me of an old childhood game that we sometimes played on cold winter days in a one-room Kansas school. The first person whispered a short story to the next child in a circle. The second whispered it to the third, the third to the fourth, and so on. The last person in the circle repeated the story aloud. The group usually laughed because as the story was passed from one child to the next, it usually changed enough that it had become nonsensical.

Through the years, the game has been called “Telephone” or “Gossip.” This game serves as an example of a concept in modern-day American business known as span of control. The term indicates how many people a manager is responsible for communicating to. In the telephone game each participant’s span of control is one. The more people getting “the message” through this narrow span of control system, the more distorted the message becomes.

I consistently see companies with spans of control that are too narrow, some even with one-on-one reporting arrangements. When one person has one direct report (or even two or three direct reports), generally someone is unnecessary. Narrow spans of control create multiple layers of management and costly bureaucratic overhead that makes communication, both upward and downward, nearly impossible. The span of control becomes a span of no control.

Giant corporations in America often have 15 to 20 layers of management. Mid-sized companies sometimes have 10 or 12. This is too many for effective communication. And this arrangement adds too much expense and makes decision making too slow. Efficient, nimble competitors will run circles around the stodgy organization burdened by too many layers of management.

It is better to have a span of control that is too wide than to have too many layers of management. Those of us in management positions may not like to hear this, but management is an overhead expense. Too many companies spend an inordinate amount of payroll dollars at the top of the management pyramid and are too quick to cut payroll at the bottom of the pyramid—the people on the firing line who are serving customers.

In my former company our policy was never to have more than five layers, and in many departments there were fewer. Even very large companies—significantly larger than ours—can operate with no more than five layers. Let’s do the math. If the span of control is capped at 10, a five-layer system can accommodate more than 11,000 employees. It may be advisable to have fewer direct reports at the top of the management pyramid and more direct reports at the bottom of the pyramid, but in any event five layers should be a maximum for most organizations.

In smaller organizations, with 10 to 50 employees, two or three layers would be more appropriate.

Information drain

Every management layer adds another communication hurdle. As in the childhood game I described, information is screened and distorted a number of times. Ultimately the boss gets inaccurate information or only knows what those at the lower levels want the boss to know.

Great ideas that would cut expense or improve service—from those best able to generate ideas, the people actually doing the work—never make it through the system. Someone someplace in the management structure lets it die. This inaction dries up the source of other great ideas. Good employees will say, “You didn’t take action on my last idea. Why should I submit others?” If a good idea actually survives the multiple layers, it isn’t unusual for others to take credit. Surveys have shown that as many as 70% of employees say their managers or supervisors have taken credit for their ideas. In the future these folks likely will be unwilling to make other suggestions that would benefit the organization.

Multiple management layers slow down the decision-making process. And when the decision is made, it may be made based on incomplete information because all of the facts surrounding the matter didn’t make it through the management maze. The successful company of the future must be nimble, adjusting quickly to economic and competitive developments.

Several days ago I talked to a long-time friend who sells a service that I was impressed with. It has the potential of saving money and increasing income significantly. “The problem I’m having,” he said, “is that nobody is in a position to make a decision other than the CEO. The CEO won’t take the time to look at our service. He delegates it to others who have a vested interest in leaving things just as they are.”

My arbitrary five-layer limit won’t solve this problem. But with as few layers as possible, it’s more likely that information on new products, new services, competitive challenges, and market demands will reach the decision-making level.

Then there’s the issue of cost. Some companies allocate two-thirds of their payroll to management-level employees and only one-third to those who are actually serving customers. There’s something wrong with this picture.

Co-managers don’t work

This may not be a trend—I hope it isn’t—but I’m seeing with some frequency companies with co-supervisors, co-managers, and even co-CEOs. The most successful co-anything I’ve ever found is marriage, and it works only about 50% of the time. In a business environment, co-whatever will work less often.

While this arrangement is healthy in a home environment, it’s still a struggle at times. Kids ask mom if they can go to a movie. She says “no,” so they ask dad. Before long they know whom to ask for what. They learn that dad is more likely to let them go to the movies with the other kids; mom is more likely to let the youngster borrow the car to visit a friend. The kids work one against the other.

So it goes at work. Employees will learn which co-manager will more likely react favorably to certain issues. Communication, upward and downward, becomes even worse as both co-managers are kept somewhat in the dark. You can bet that the co-managers are just as unhappy (and probably more unhappy) than the people who work for them.

Why are co-managers appointed? Perhaps there are valid reasons that I’ve been unable to unearth, but the co-managers I’ve observed were selected because their superiors (or boards of directors) had two good people they didn’t want to disappoint. When both were chosen, both were disappointed. Top management’s unwillingness to make a decision caused a good organization to become weaker.

What about co-CEOs? It’s war from the first day. One will win the political battle; the other will probably leave the organization. During the skirmish, the organization suffers.

Great leadership isn’t rocket science. A company that will succeed and prosper through the years must have a worthwhile mission, and there must be a team interested in helping achieve that mission. They must be excited about the journey. Everybody must willingly pull on the same rope and in the same direction.

This is accomplished through leadership. Every dimension of leadership requires thorough, effective, ongoing communication. But you can be sure that communication is inherently weakened when information is passed through multiple hands. Too much is lost in the process and too many facts are distorted.

The successful organization of the future must be lean, relatively flat, have excellent upward and downward communications, and must be responsive to changing conditions. This is not possible in a bureaucratic organization with too many layers of management. *

The author
Robert L. Bailey is the retired CEO, president and chairman of the State Auto Insurance Companies. He now speaks professionally on leadership, ethics, strategic planning, sales and similar business issues. He is the author of the book Plain Talk About Leadership. He can be reached at (941) 358-5260 or bobbailey1@comcast.net.