The concept of "span of control," also known as management ratio, refers to the number of subordinates controlled directly by a superior. It is a particularly important concept for small business owners to understand because small businesses often get into trouble when the founder ends up with too wide a span of control. Span of control is a topic taught in management schools and widely employed in large organizations like the military, government agencies, and educational institutions. "Yet few entrepreneurs know the term or are willing to admit any limit to the number of people they directly oversee," explained Mark Hendricks in an article for Entrepreneur magazine. When a small business owner's span of control becomes too large, it can limit the growth of his or her company. Even the best managers tend to lose their effectiveness when they spend all their time managing people and their issues and are unable to focus on long-term plans and competitive positioning for the business as a whole.
The concept of span of control was developed in the United Kingdom in 1922 by Sir Ian Hamilton. It arose from the assumption that managers have finite amounts of time, energy, and attention to devote to their jobs. In studies of British military leaders, Hamilton found that they could not effectively control more than three to six people directly. These figures have been generally accepted as the "rule of thumb" for span of control ever since. More than a decade later, A.V. Graicumas illustrated the concept of span of control mathematically. His research showed that the number of interactions between managers and their subordinates—and thus the amount of time managers spent on supervision—increased geometrically as the managers' span of control became larger.
It is important to note that all managers experience a decrease in effectiveness as their span of control exceeds the optimal level. In other words, the limitations implied by span of control are not shortcomings of certain individual managers but rather of managers in general. In addition, it is important to understand that span of control refers only to direct reports, rather than to an entire corporate hierarchy. Even though a CEO may technically control hundreds of employees, his or her span of control would only include the department heads or functional managers who reported to the CEO directly. "When given enough levels of hierarchy, any manager can control any number of people—albeit indirectly," Hendricks noted. "But when it comes to direct reports, the theory [of span of control] suggests entrepreneurs must respect managers' inborn limits."
Entrepreneurs and small business owners are particularly susceptible to overextending their span of control. After all, many of these people have started a business from the ground up and are wary of losing control over its operations. They thus choose to manage lots of people directly, rather than delegating tasks to middle managers, in an effort to continue being involved in key decisions as the business grows. But this strategy can backfire, as Hendricks explained: "Extending span of control beyond the recommended limits engenders poor morale, hinders effective decision making, and may cause loss of the agility and flexibility that give many entrepreneurial firms their edge."
Establishing the optimal span of control for managers is one of the most important tasks in structuring organizations. Finding the optimal span involves balancing the relative advantages and disadvantages of retaining responsibility for decisions and delegating those decisions. In general, studies have shown that the larger the organization, the fewer people should report to the top person. Managers should also have fewer direct reports if those subordinates interact with each other frequently. In this situation, the supervisor ends up managing both his or her relationship with the subordinates and the subordinates' relationships with one another.
Some other factors affecting the optimal span of control include whether workers perform tasks of a routine nature (which might permit a broader span of control) or of great variety and complexity (which might require a narrower span of control), and whether the overall business situation is stable (which would indicate a broader span) or dynamic (which would require a narrower span). Other situations in which a broader span of control might be possible include when the manager delegates effectively; when there are staff assistants to screen interactions between the manager and subordinates; when subordinates are competent, well-trained, and able to work independently; and when subordinates' goals are well-aligned with those of other workers and the organization.
There are advantages and disadvantages to different spans of control. A narrow span of control tends to give managers close control over operations and to facilitate fast communication between managers and employees. On the other hand, a narrow span of control can also create a situation where managers are too involved in their subordinates' work, which can reduce innovation and morale among employees. A wide span of control forces managers to develop clear goals and policies, delegate tasks effectively, and select and train employees carefully. Since employees get less supervision, they tend to take on more responsibility and have higher morale with a wide span of control. On the other hand, managers with a wide span of control might become overloaded with work, have trouble making decisions, and lose control over their subordinates.
With all of these factors to consider, small business owners might become overwhelmed with the task of finding the optimal span of control. But Hendricks claimed that evaluating the situation and making a decision should not be too difficult. "The rule of thumb that an executive should supervise three to six people directly held up fairly well against challenges from efficiency experts, team-building zealots, technology buffs, empowerment boosters, megalomaniacs, and others determined to increase the accepted span of control," Hendricks wrote. "If the calculations are too much for you, just take a look at the amount of hours you're working. When workdays for the people at the top are twice what they are for others, span of control is out of whack."
For small business owners who feel that they have too many direct reports and need to reduce their span of control, the solution may involve either hiring middle managers to take on a portion of the owner's responsibilities, or reorganizing the reporting structure of the company. In either case, small business owners must balance their own capabilities and workload against the need to control costs. After all, reducing the entrepreneur's span of control may involve the costs of paying additional salaries for new hires or training existing employees to take on supervisory responsibilities. Despite the potential costs involved, Hendricks argued that adjusting span of control toward the optimal level can lead to vast improvements for small businesses. "There's the real possibility that paying attention to span of control could usher your business into a new era of rapid, sustained, profitable growth," he told entrepreneurs. "You could even find running your business easier and more fun."
Harrison, Simon. "Is There a Right Span of Control?" Business Review. February 2004.
Hendricks, Mark. "Span Control." Entrepreneur. January 2001.
Visser, Bauke. "Organizational Communication Structure and Performance." Journal of Economic Behavior and Organization. June 2000.