If you go to business school to get your MBA, you'll likely learn about a concept known as "span of control." In short, span of control means how many employees any one manager might have directly reporting to them.
Based on numerous academic studies that have researched this topic, the optimum number of direct reports for any manager should be the lucky number seven, plus or minus a few.
But when it comes to designing your organization, you might want to adjust this number based on a couple of different variables. Maybe your span of control should be lower-or maybe higher. We know, for instance, that managers in "flatter" organizations tend to have more direct reports compared to those who work in more hierarchical management structures. These flatter organizations tend to be less formal and have better information flow. More hierarchical organizations with lower spans of control tend to be more formal. In other words, when it comes to answering the question of how many direct reports should your managers have, the answer is: it depends, but it's an important element of organizational design and culture, so you can't just assume this will work out.
Let me explain.
1. Complexity of the work
The first variable in assessing the span of control in your organization is to establish the complexity level of the work being done. If you run a call center that employs fairly standard routines for every employee, for example, then perhaps a manager can have as many as twenty or even thirty people directly reporting to him or her. But of you run a professional consulting firm, where the complexity of the work changes by the project, managers might be more effective with a smaller span of control to ensure employees get the attention and resources needed to get the work done.
2. Employee skills and experience
On the flip side of the equation, you will also need to consider the skill level and experience of your employees. Even the best managers can handle training only so many new people on the job. If the people in our call center example are newly hired and have less than a few weeks experience, then you might need a much lower span of control as those new workers are trained on the job. But if most of the employees in the call center have worked there for two to three years, many of whom who may even have written the procedures everyone uses, then you get away with a much larger span of control.
3. Acceptable error rate
Finding the right span of control also depends on the nature of the work being done, especially the allowable error rate. That means that the more precise the work needs to be, the fewer direct reports a manager should have. For example, if you run a family-style casual restaurant, you might be able to get away with a larger span of control because the customers will tolerate mistakes fairly readily. Or, worst case, you might have to comp a meal every now and again due to a server error. But if you run a Michelin three-star restaurant, your customers will tolerate nothing but elite service-or you run the risk of losing your rating. Everything, from the placement of the silverware and napkins to the pouring of the wine, needs to be precise. In such a case like this, your span of control should be much narrower.
4. Managerial experience
Another key factor in assessing the span of control for your organization is to assess the skills and experience level of your leaders. An extremely seasoned CEO, for instance, might be able to effectively manage thirteen to fifteen VPS and directors. That's because the CEO has such a deep well of experience working in different roles within the business that he or she can remain effective even if their span of control is nearly double what the book number says. If you have promoted a fairly new leader into the CEO role, on the other hand, you may still want to limit their span of control for the first few years.
5. Dynamic environment
The final element in determining the ideal ratio of direct reports to managers is to evaluate how dynamic the work or market environment is. As a rough rule, the more dynamic things are, the narrower the span of control should be. For example, if you operate in the tech industry, where new products are coming out monthly or even weekly, you risk overloading your managers by having too many people reporting to them. The opposite is true, of course, if you work in a very predictable and stable environment.
6. Use of Technology
The pervasive availability of technology has allowed managers to increase their span of control because the tools allow more information flow. There isn't a need for regular update meetings with you use a strategy deployment tool like Khorus to keep every project updated. This includes extending to remote employees that the manager might rarely see face-to-face. So highly technology enabled firms can operate with a larger span of control.
So, when it comes to designing your organization and deciding on the optimum span of control, you can start with the book number of seven. But a more thoughtful approach will be to modify that number based on these five variables to see what your magic number really is.