What is the proper span of control? Are we organized to achieve profitable growth?
Thoughts about a healthy company’s organization.
Span of control in business describes the number of employees reporting to a manager or supervisor in an organization. The original concept apparently derives from military organizations. Numerous studies have been undertaken to identify the “magic formula” for the optimal number of direct reports for each level in an organization, but to date, no such formula exists.
While there are guidelines that work in some industries, a lot of the decision making about span of control will depend on these factors:
Type of job/work – It makes sense that if the job is repetitive and standardized, the need for a lot of management attention is minimal. If the job involves a lot of unique high-level skills, there may be fewer individuals reporting to a manager so that the manager has the bandwidth to respond to his/her team members as needed.
Tenure of employees – Do you have a lot of new employees who will require training and supervision until they are proficient in their positions in your company? You may have a smaller span of control, at least while this situation lasts, than a company with seasoned employees who can work much more independently.
Use of technology – The world has changed significantly with the tools we have to interact with each other at any time. The support for activities that may have been “paper based” in the past that are now handled electronically is incredible, when you think back to just ten years ago. These tools allow for an expansion of the span of control of a manager.
Experience of the manager – In general, an experienced manager will be able to manage a larger number of employees than an inexperienced one. The time needed to assess a situation requiring attention and determine what to do is much less than it would be with a new manager who is dealing with an issue for the first time.
Geographical distribution – If you have groups of employees spread out over several locations in a region, you may need a manager for each location. This level of attention allows the manager to align with the customers that her/his employees are serving and with those employees reporting to a location other than one centralized yard.
Multi-tasking managers – In many companies, the manager is expected to handle additional responsibilities to his/her management duties. For example, a high-level customer service/relationship building role may be added to a branch manager’s duties of hiring, training, and managing employees and making sure operations are run and reported to headquarters regularly. That manager’s time will be spent with customers as well as employees, so her/his span of control may be narrower than a branch manager without those specific additional duties.
How can a buyer tell if your organization’s span of control is optimal? First, there are ranges that will identify outliers. If you have a manager supervising no more than three people at all levels in the organization, someone will wonder why. You may have a good reason for it, but this would be so “outside of the norm” that it would require justification. Similarly, if your company has 20 people reporting to one manager, you will probably have questions from the buyer. Here too there may be logical and appropriate reasons for such a wide span of control, but you will have to explain your particular facts and circumstances.
Second, there are industry norms that apply to any types of businesses and landscaping is no exception. There are benchmarks that will help in identifying the span of control for certain positions for both the owner and the potential buyer as they evaluate your company’s health and “salability.”
Is your company optimally organized to achieve profitable growth? If you’d like to discuss your company’s organization from a buyer’s perspective, or the health and salability of your company’s anticipation of selling or otherwise transitioning your business, feel free to give us a call or email. We are also happy to discuss other ways to prepare your company for sale for now or for the future.
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