Analysis

Organizing to thrive

Understanding supervisory burden to create a value-driven organization design

Many companies that attempt to reorganize to support both growth and cost objectives often find their redesign achieves only one outcome: cutting costs. Is it possible to do both?

Reconciling cost-cutting and growth objectives

Deloitte’s 2016 biennial US cost survey, Thriving in uncertainty, finds that many US companies are pursuing seemingly conflicting goals of aggressive growth and aggressive cost improvement.

Simultaneously—likely spurred by their growth and cost-cutting goals—many companies are also pursuing organizational changes. As noted in The new organization: Different by design, Deloitte’s Global Human Capital Trends 2016 report, more than 92 percent of surveyed companies believe that redesigning the organization is important or very important, making it the highest-ranked trend for 2016.

Reorganizing around teams

This organizational restructuring is different from what we have seen previously. Company structures are becoming more product-and customer-centric by flattening hierarchical layers and moving managerial tasks into dynamic networks of highly empowered teams to execute activities in innovative and expedited ways. Many companies have already moved away from functional structures, and many identify themselves as matrixed organizations that work across functions to get things done. However, even within their matrixed structures, their employees report to and identify themselves as part of one organizational function.

This is caused by the gap between how a company is organizationally structured and how employees actually work within the organization (see 1). Moreover, only 14 percent of surveyed executives believe their companies are ready to effectively redesign their organizations and only 21 percent feel expert at building cross-functional teams. When it comes to team-based capabilities, only 12 percent understand the way their people work together in networks.

So, the challenge for organizations is how to close these gaps and quickly pivot to flatter, team-based structures while reducing costs to drive strong business growth. This is where supervisory burden analysis comes in.

Figure 1: Organizational design—network of teams

Designing to meet cost targets and growth objectives lies within assessing your Supervisory Burden

The role of managers shifts in team-based organizations, but the way companies measure the value managerial layers bring to their organization has not evolved. Defining the true cost, value, and importance of these enhanced roles has become more complex.

A cost-centric approach to rationalizing hierarchical layers often results in a regular cycle of cost cutting, followed by a resurgence of unplanned organizational growth (and a corresponding lack of management resources).

To break this cycle, what’s needed is a new approach to reduce hierarchical costs and divert savings to the managerial areas that drive a greater share of business performance at the right cost. Supervisory burden analysis can facilitate these efforts, helping you surgically reduce hierarchical costs in order to boost the organization’s ability to grow and help it evolve into the team-based model of the future.

Supervisory burden is calculated by assigning a score to each role in a department based on four components: nature of work, degree of standardization possible, complexity of work, and interdependency of work. These scores are then aggregated based on the role composition of each department.

The first step requires companies to identify the areas of growth they can create from cost restructuring via supervisory burden and where those savings should be reinvested. In our experience, five categories of organizational value can help guide companies in designing an organizational structure that delivers business growth where it matters most: product/service utility, customer exchanges, distribution effectiveness, financial performance, or organizational agility. Without knowing how a redesign will reinvest the cost savings gained, you risk implementing a quick-fix only to have it backfire.

To avoid problems from short-term fixes while supporting the long-term goal to thrive in uncertainty, the next step is to determine the degree of supervisory burden incurred by the managers within your organization. Our supervisory burden framework can help you assess and target the managerial and hierarchical layers within your organization to arrive at a design that supports cost-reduction and growth.

Why measure supervisory burden?

Understanding your organization’s supervisory burden:

  • Tests leaders’ intuitions or perceptions that “we’re too hierarchical” or “everyone is stretched too thin.”
  • Provides the strategic and operational context to justify why your spans of control are appropriate (or why they should be adjusted), even if they run counter to benchmarks.
  • Drives shared insights between the business (to make better decisions about how to organize more effectively) and managers (to gain an understanding of the factors driving their jobs so they can better manage their role and their teams accordingly).
  • Leads to targeted organizational adjustments to help relieve managerial burdens that contribute to the “overwhelmed employee” phenomenon that has become so prevalent.
Wheat grass
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