Peak organizational performance is a function of leadership reporting arrangements, and the culture in which the direct reporting structures are to function.
We increasingly hear these questions in the field…
Hospital CEOs and Boards ask: How many direct reports should a health system leader have to optimize their results-oriented performance? When does the number of direct reports become so great that it impacts focus and effective leadership or leads to burnout? How can health systems design organizational charts that can flex as internal workloads and external opportunities expand and contract? These are the strategic questions facing many health system boards and executive teams as they move into the turbulent and uncharted waters of accountable care, value-based payer contracts, and population health.
So, is there an optimal number of direct reports? Unfortunately, there is no perfect management structure for all hospitals or health systems, nor a perfect number of direct reports per leader. The right span of control depends on several factors, including level of leadership, experience and talent, size of the hospital, system status, budget and need for innovation and agile responsiveness.
This call to examine organizational design and a pursuit for “de-layering” is now global.
In a recent Asia study, Accenture observes that organization de-layering looks at both the efficiency and effectiveness of a company’s existing organization structure.[i]
Span of control and layers: Is the span of control and management layers optimized to facilitate effective managerial control and faster decision making? Size: Does the organization size reflect simplification through the elimination of duplication and redundancy. Customer focus: Is the organization structure aligned to support customers? Does it drive customer focus and proximity?
Clarity of focus: Does the organization design clearly articulate who does what and when for key decisions and activities? Standardization: Does the organization structure incorporate standard business processes and reporting and communication? Centralization: Does the organization drive scale and specialization and is there potential to create a center of excellence and shared services?
When addressing these questions, what most organizations conclude it is that the work should shape organizational design and reporting arrangements. For example, in a call center the span of control can be numbers over 100, while executive functions – with high degrees of collaboration and interaction – could productively tolerate no more than four or five direct reports. So the nature of the work being performed, and how much attention it requires should govern the assignment of personnel to a manager; not an arbitrary ratio or industry ideal.
The organization’s hierarchy culture can also drive the appropriate span of control:
Flat organizations have a ‘wide’ span of control and Tall organizations have a ‘narrow’ span of control. While there are pros and cons with both tall and flat structures, a company’s structure must be designed to suit the business (both the customer and markets) and enhance with the workforce’s capability to achieve the organization’s mission, vision, and goals.
The Society for Human Resource Management (SHRM) finds that some key factors to review when determining the appropriate span of control within an organization include the following:[ii]
- Organizational size. Large organizations tend to have a narrow span of control, whereas smaller organizations often have a wider span of control. This difference is usually due to the workforce cost involved with more managers and the financial resources available to an organization. Communication may be slower with narrow spans if it must pass through several levels of management.
- Workforce skill level. The complexity or simplicity of the tasks performed by the employees will affect the number of desirable direct reports. Generally, routine tasks involving repetition will require less supervisory control of a manager, allowing a wider span of control, whereas complex tasks or dynamic workplace conditions may be best suited for a narrower span of control where managers can provide more individualized attention.
- Organizational culture. Organizations need to determine the culture needed for success when designing their spans of control. Flexible workplaces usually have a wider span of control because employees are given more autonomy and flexibility in the production of their work. The quality, responsiveness, and creativity may be greater as the level of autonomy increases, but ideally the efficacy of the work also improves the work’s value proposition.
- Manager's responsibilities. Review whether the organizational expectations allow the managers to be effective with the number of direct reports they have, especially related to individual responsibilities, departmental planning and training. For instance, executives often have fewer direct reports than other managers in the organization. The type of oversight needed for the work will drive the time and effort required to manage each employee.
In a recent Advisory Board study of various types of health sector organizations, they found different spans of control by each level of management.[iii]
Source: Advisory Board, Seven Insights from Hospital Span of Control Benchmarks
Health systems are expected to make flatter/wider spans of control in order to achieve:
- Lower administrative costs
- Faster decision-making
- Improved innovations for process improvements
- Improve control over work priorities
- Foster a culture of greater professional encouragement and development
- Encourage a culture of interdisciplinary collegiality
As health systems struggle with reducing operational costs and embrace principles of a LEAN organization, spans of control tend to broaden[iv]. Front-line staff should be the focal point for ongoing problem-solving efforts. In a Lean Healthcare organization, one of a front-line leader’s primary responsibilities should be teaching and coaching problem identification and problem solving methods to staff. In order to provide adequate time for this, as well as allow sufficient time for day-to-day managerial duties, a relatively small span of control is ideal. A smaller span of control enables expedient communication regarding outcomes and results, performance problems, and their causes and solutions. A small span of control may also encourage mutual enhanced respect and a cooperative attitude toward improving performance.
Fortunately, achieving the ideal span of control does not require adding new layers of management or additional staff. It is typically possible to reorganize front-line supervisors (often called Team Leaders or Patient Care Leads) around care teams of approximately 10 staff that are focused on serving patients.
Such positions are enriched when they encompass both traditional managerial duties (creating staff work schedules, editing staff timecards, performing staff orientation and on-boarding, providing oversight and guidance to staff regarding company policies and procedures, etc.) and Lean-related tasks (leading continuous improvement projects, using Lean tools to drive operational improvements, coaching staff in the use of Lean tools, facilitating the development of A3 project plans, etc.). The people selected to fill these positions will experience a broader and more enriching scope of responsibilities, maintain their clinical skills, and often find their jobs more meaningful and fulfilling.
Of course, the same is true for all levels of leadership. Coaching and mentoring one’s direct reports is a key component of every leader’s job, and a smaller span of control allows leaders to mentor and support their direct reports in both Lean-related skills as well as general leadership skills. A smaller span of control also allows time for leaders to effectively handle their administrative roles and responsibilities.
As Boards and CEOs review and refine their investments for reporting relationships, you may find it helpful to consider the following key characteristics.'
Characteristics of a Flat Organizational Structure (Wide Span of Control)[i]
- Encourages delegation: managers must better delegate to handle larger numbers of subordinates, and grant opportunities for subordinates to take on responsibilities
- Agility: improves communication speed and quality
- Reduces costs: more cost effective because of fewer levels, thus requiring fewer managers
- Development: a wide span of control often means developing a broader range of skills and abilities
- Engagement: focusing on empowerment, autonomy and self-direction improves engagement and job satisfaction
- Workload: increased number of direct reports means more time and effort required for regular tasks like overseeing status updates and conducting performance reviews and coaching
- White Space: giving employees broader oversight may require skills that are not yet fully developed, which could lead to ineffectiveness for a period of time
- Limited Oversight: can lead to a gap in awareness of work being done and slow effectiveness if employees are underperforming without strong oversight
Characteristics of a Tall Organizational Structure (Narrow Span of Control)
- Communication: small teams make it easy to communicate clearly and quickly
- Oversight: groups are smaller and easier to control/manage
- Specialization: division of labor into specialized skillsets or service lines
- Upward Mobility: more and better opportunities for employee promotion
- Communication: vertical communication can take too long, hampering decision-making
- Silos: may develop and prevent cross-functional problem solving
- Micromanagement: can occur if a leader has a smaller, more specialized team
- Employees may feel powerless if they do not have access to senior leadership or feel disconnected to the broader function of the organization
Ultimately, the span of control that is right for your organization will take careful consideration and expertise in order to develop your most effective leadership structure and organizational culture. Unfortunately, many organizations evolve and change as they grow without taking time to pause and assess whether their structure supports their mission and goals in the context of the changing healthcare environments.
As a hospital or health system experiences changes in its structure, size, or partnerships, it behooves the Board and leadership team periodically pause and reflect on the effectiveness of your leadership reporting structure from time to time. For example, when a health system absorbs a smaller community hospital, creates a new service line, or integrates in a physician group, it is important to assess whether or not the current organizational structure best supports the organization or if modifications should be made. Often we look too closely at organizational structures at a micro level without taking the time to look at the broader macro picture, which is often more important for long-term strategic success.
All of the concepts and decision-points above will help an organization review its structure to determine if there are opportunity for savings and improved effectiveness and engagement as the leadership structure is optimized.
Health system leaders need to begin asking some of these questions focused on how their organizational structure can best support their goals and vision. Boards must make this a part of their strategic planning process, assessing structural effectiveness at least annually. In particular as healthcare structures and priorities face critical decision-points and fundamental changes in how they deliver care in the 21st
century, healthcare leaders must be aligned in their pursuit of spans of control which optimize the success of their health system.