CEOs increase direct reports – mainly from functions

An April 2012, Harvard Business Review’s “How many direct reports?” quoted some research from Booz and Co with some interesting findings: over the last 20 years, CEOs average span of control (measured by the number of direct reports) has doubled from about five in the 1980s to 10 today.

This has happened despite a sharp increase in the amount of complexity of these organizations as many became more global and more integrated.

Interestingly, new CEOs had broader spans of direct reports: as they gained more experience and confidence, they reduced their spans of control back to around six.

The consequences of this development – the increased span of control –  include:

• More people at the table bring a range of perspectives but can also lead to inefficient meetings. A good team size for effective cooperation is 4 to 6 people. A meeting of 10 people will necessarily include many topics that are only relevant to a subset of the people. CEO’s should be thinking of managing their meetings as sub teams of 4 to 6, rather than having everyone attending low relevance discussions.
• By having direct oversight of a wider range of jobs, there is a risk that CEOs become more operational and get sucked into unnecessary levels of detail. This can easily lead to micromanagement.

The research also finds that 80% of the increase in positions reporting to the CEO were taken up by functional leaders.

This is interesting: one of the major developments over the last 20 years is the increasing prevalence of a matrix organization structure where the power of the ‘vertical’ functions is balanced by horizontal activities, often driven by global business units or common processes. It seems that, at same time, the role of the function has been strengthened.

Perhaps, as organizations globalize, the ‘function’ is becoming the natural unit of global integration?

More integrated global functions provide a powerful mechanism for connecting together global organizations. A more integrated IT or HR function is often the place where organizations start when they globalize.

Given that many organizations introduce a matrix specifically in order to break the power of the traditional vertical silos and make organizations more connected across the World, it is interesting that the functions continue to have such a strong – and strengthening -role.

The reality, of course, is that the ‘function’ still provides the framework for capability development, careers, and the organization of a lot of work. So long as people are managed within the functions, and see their development and careers within the function, traditional silos will remain.

The skill, the, is to find factors which balance this power to make ensure that people think more broadly across the organization. The skill of making the matrix work is in finding factors to balance the vertical power and to make people think in a more joined up way about activities that cross the traditional silos.

The HBR article also suggests that the higher the level of cross functional activity and the more integrated the organization, the smaller the span of control that is optimal. Even for large, complex organizations, keep it small and simple where we can is a great mantra.

What has happened to span of control in your organization?