Control staff turnover:

http://www.businesslink.gov.uk/bdotg/action/detail?
r.s=m&r.l1=1073858787&r.lc=en&r.l3=1074410820&r.l
2=1074450319&r.i=1082066228&type=RESOURCES&
itemId=1074411627&r.t=RESOURCES

Organization’s size and span of control

Organization’s size is determined by number of its employees, the largeness of its
operation, and its market reach and share. It also poses a very different challenge for
the organization’s leaders, while small organizations are build for innovation, large
are meant for operational efficiency. The skills necessary for entrepreneurship are
quite different from that of running a large and diverse organization, large
organizations requires more concern for people, controlling specialized departments
and a talent for sensing issues buried deep in the organization.

Why organizations strive for growth?

1. Better customer service: Organizations grow their revenue by increasing
their customer base, as a consequence, the product and services need more
changes and support. To serve the customer better, the organization has to
employee more resources.
2. Grow for survival: Small organizations are more easily affected by the
sudden changes in the external environment; hence the business leaders feel
compelled to grow or perish.
1. Control more resources: Growth ensures that the organization has
better control over the necessary external resources like raw material,
skilled workers and technological advancement.
2. Increase market share: Growth also ensures that the organization can
compete globally, can penetrate new markets and can provide good
service and influence customer loyalty.
3. Deter competition: Big organization can invest in complex products,
has means to control cost and can be aggressive in marketing
strategies. All such measures result in stabilizing the market in long
term and act as deterrent to new entrants.
4. Diverse product lines: Having several products and technologies
provides better market intelligence for new products and changing
customer preferences. It ensures that while older products lose market
share and turn out to be obsolete, the newer are in queue to replace
them.
3. Exciting employee opportunities: A growing organization provides exciting
and vibrant work environment, better career growth opportunities and can
attract best available brains. It should be noted that a growth is the stage of
becoming large, once it has attained the large status, it may get stagnant and
might only provide a long and stable career.
Characteristics of organizational size
1. Technology required to produce the product is major determinant of size,
an airplane, space shuttles, communication satellites, cable bridges, a sport
stadium etc require technology that requires a large number of people.
Consequently a large organization must be producing something that cannot
be produced efficiently with smaller size; otherwise it indicates excessive cost
& overhead and needs to be corrected. Hence both technology and size are
interrelated and influence the structure of the organization.

Size, technology & structure

2. Amount of task specialization increases with size, the work design is

focused and require individuals and teams to deliver a well defined quality of
task.
3. Management hierarchy grows with size: Increased size results in more
specialization and decentralization of decision making, the tasks are delegated
to teams and are managed by the lower level managers or supervisors. The
span-of-control discussed later, makes it necessary to add more management
layers for better control of resources and inter-organizational interactions.
4. The rate at which the size influences the organizational structure
decreases as the size increases, thus the impact of size increase in more in a
small organization.
5. Job satisfaction decreases as the size increases, more specialization and
focused work design causes an increase in peer competition; thereby reduces
the career growth opportunities.

Differences between large and small organizations

Large Small
Stabilizes market Introduces competition
Produce complex task & products, has Produces innovative concepts &
capital and resources to do so. products
Predator of small firms, tends to acquire Prey for large firms, get’s bought and
them. since mergers are rarely successful, it
finally gets dissolved.
Better  resistance towards adverse Growth & existence is dependent on
external environmental changes. external environment.
Serves mass markets, tends to have Serves niche customers and markets and
global reach. strives to grow.

What is Span of control?

The span of control refers to number of employees that directly report to a single
manager. Span of control determines the structure of an organization, a narrow span
of control results in hierarchal organization while broad span of control leads to flat
structure.
 Since management represents the activities that do not directly result in productivity,
they are rather a overhead, span of control determines the additional operational cost.
Quantitatively,  companywide overhead can be calculated by dividing the total
number of management staff with the size of organization.

Span of control formulation

 What is an optimal ratio of manger to direct reports without compromising the
productivity? It is a fundamental problem in designing the structure of an
organization, empirically this range is pretty wide, from 4 to 22 depending upon the
nature of work. In 1933, V. A. Graicunas, a paris based consultant formulated the
span of control based on number of direct and indirect relationships that a superior has
to manage. Graicunas identified three types of relationships:

1. Number of direct relationships between manager and subordinate, it

represents the span of control.
2. Number of peer-to-peer relationships, it represent issues due to interpersonal
conflicts. Note that each pair of peers represent 2 relationship and not 1, if
there are two subordinates, dick and jane, dick might have different concern
for jane than jane’s concern for dick. Hence for a manger, they represent 2
different set of problems and not one.
3. Direct relationship between manager and subset of subordinates. Similar to
previous peer-to-peer relationship, the manager “bill” will have to behave
differently with dick when jane is also present.

Graicunas also formulated the minimum relationship in case where there was only one
relationship between peer-peer or manager-subordinate subset cases, this occurs if
each subordinate are provided independent task, minimizing their interactions. This
however doesn’t undermine the role of a team, it is assumed that the manager is
responsible for a project that is carried out by his team, but the subtasks are designed
to minimize direct dependencies.

The following table demonstrates Graicunas formulation of span of control, its

minimum and maximum cases and it also shows that relationship complexity
increases tremendously as 5th or 6th subordinate is added.
 Direct Cross Group Total
n (max) n(n-1) n(2n-1-1) n(2n-1+n-1)
n ( min) n/2(n-1) 2n-n-1 2n+n/2(n-1)-1
4 12max, 6min 28max,11min 44max , 21min
5 20max,10min 75max , 26min 100max, 41min
6 30max,15min 186max,57min 1296max,78min

Size and Structural Paradox

The reason why I have discussed span-of-control in the context of size is because it
determines the level of hierarchy required to mange it. The table below demonstrates
the relationship between the span of control, hierarchy and total number of employees
(size).

Hierarchy 2 3 4 5
Span of control
4 21 85 341 1365
5 31 156 781 3906
6 43 259 1555 9331

As an organization grows in size, it either needs more managers to control the

productivity, thereby adding layers of management hierarchy, or it increases the
span-of-control, increasing exponentially the management complexity.  This
paradox also questions the feasibility of horizontal organizations when the internal
factors demand smaller span-of-control. Perhaps, in practicality, the organizations
grow naturally into hierarchical organizations due to this paradox. Given a choice, the
management will always tend to choose more control; it gives them the confidence
and power.

This analysis also explains why employee/job satisfaction decreases as the size grows,
hierarchical growth depletes employee empowerment while larger span-of-control
simply makes the manager ineffective and the team situation chaotic. 

Comparison of span-of-control
Narrow Span Broad Span
Close supervision & directed control. Overloaded supervisors, loss of control.
Many levels of management, high cost of Low management overhead, better
management staff. operational cost and profit margins.
Less independence and decision authority Encourages empowerment through
for subordinates. delegation of authority and decision
making.
Large distance between top management Employees have better communication
& bottom staff. Poor executive with the top management.
communication and visibility.
Factors influencing span-of-control
1. Environmental Stability: When the external environment is more stable than
dynamic, more employees can be supervised by a single manager. Stable
environment is less demanding and reduces the need for quick response,
thereby provide more flexibility in time and schedules.
2. Nature of work: Routine jobs, tasks that require limited skills or are focused,
require only occasional management decision and coaching, thus can have
wider span of control. On the other hand, the tasks that are inherently
complicated; loosely defined and require frequent decision making would
require narrow span of control.
3. Experience level: When the average job related experience of employees is
high, they require little training or direction, the tasks can be easily delegated.
Under such situations, span of control of managers can be increased.
4. Budget Constraints: When an organization is facing financial hardship or is
downsizing, it needs to increase the span of control. On the contrary, when an
organization gets more investment, it tends to reduce the span and inflate it’s
management.

Methods to maximize the span-of-control

1. Information technology:  Use of efficient communication tools like online
wiki’s, videos, project management and tracking tools, and other decision
support systems can reduce the overall relationship complexity, thereby
encouraging managers to supervise more subordinates.
2. More training: Investing in training the employees for the current job skills
and also future skills makes them more independent. Constantly involving the
employees in various trainings not only increases the collective intelligence
within the organization but also results in readily available resource pool in-
house.
3. Work design: If the tasks are designed to be independent, loosely coupled
with few interdependencies and probable conflicts, the relationship complexity
can be reduced.

Controlling the size

1. Identify and correct units with unbalanced/skewed ratios between supervisors
and subordinates.
2. Watch for narrowing of span of control over period of time, take corrective
actions that might include restructuring, trainings or downsizing.

Source: http://www.practical-
management.com/Organization-
Development/Organization-s-size-and-span-of-
control.html