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Organizational structures: The benchmark indicators you cannot ignore

Editorial Team
01/12/2020 3:03 PM

Organizational Strucuture Definition

organizational structure
is the hierarchy of an organization and how the components of this hierarchy
work together to achieve the strategic objectives of the company (Ahmadya,
Mehrpourb & Nikooravesh 2016). If the structure of the organization and the
underlying design principles that construct it are not in alignment with the
core purpose of the organization and its operating environment, then it is
likely the organization will find it difficult to achieve its strategic
objectives (Arabi 2007).

The Importance of Aligning The Structure With
The Business Strategy

The key to profitable performance is the extent to which leadership,
organization, jobs, and people are aligned. An understanding of the
interdependencies of these business elements and the need for them to adapt to
change quickly and strategically are essential for success in the
high-performance organization. When these four elements are in harmony,
outstanding performance is more likely.

  1. Leadership - The individuals responsible for developing and deploying the strategy and
    monitoring results.
  2. Organization - The structure, processes, and operations by
    which the strategy is deployed.
  3. Jobs - The necessary roles and responsibilities.
  4. People - The experience, skills, and competencies needed to execute the strategy.

The organizational design process is the pivotal connector between the
business of the organization (e.g., top-level leadership and organizational
strategy and goals) and forms of HR support (e.g., workflow process design,
selection, development, and compensation). The strategy must continually drive
structure and must reflect and enable effective leadership.

Organisational Structure Design & Benchmarking

is the process of studying industry or competitive practices, functions, and
products and finding ways to meet them or improve upon them. Companies from all
different industries use benchmarking to gauge their successes and pinpoint
their shortcomings. The general process of benchmarking involves identifying
problem areas, selecting top competitors who excel where a company falls short,
and making the necessary changes.

are several key advantages to using benchmarking in an organization. However,
it is important to benchmark the organizational structure against universal benchmarks. The
downside of benchmarking your organizational structure against competitors is that you might
inherit weaknesses inherent in their organizational structures.  When benchmarking an organizational
structure, pay particular attention to the following metrics;

  1. Span of Control - This refers to the total number of people
    (subordinates or employees working under an individual) whom a manager or an
    administrator can effectively control and supervise. The average span of
    control is preferred for measuring the span of control. The average span of
    control is measured using a ratio of the number of managerial nodes and the
    total population. The ideal benchmark for this is 8-12.

  • Reporting Layers – This is the hierarchical arrangement of
    lines of authority, communications, rights, and duties of an organization.  Organizational structure determines how the roles, power, and
    responsibilities are assigned, controlled, and coordinated, and how information
    flows between the different levels of management. It is useful to test
    managerial structures against an ‘ideal’ benchmark. We usually set this at a
    maximum span of eight, with an ‘ideal’ of not more than five layers – usually
    referred to as the ‘8 x 5 test’.

  • Manager to Non-Management ratio – This is a
    key performance indicator that shows the ratio between the total number of
    managers and supervisory employees and the total number of full-time and
    part-time non–managerial (non-supervisory) employees. The ideal benchmark
    for this is 10:1.

  • One on One Reporting - This is an effective barrier to proper
    oversight, communication, and flow of information up and down the chain of
    command. It may block the main boss’s vision of the work being done or not
    being done.

  • Duplication -This
    is the repetition of the same task. Duplication of tasks results in a waste of
    human resources as the organization is paying employees to do the same task. To
    optimize operations of an organization’s various departments, all duplicated
    tasks should be identified and appropriate recommendations made to ensure all
    employees are in positions where they make the greatest positive impact towards
    achieving the organization’s strategic goals.

It is important to note that benchmarking cannot be done
in isolation. For an organizational
structure review exercise to be successful, there is a need to follow
the steps outlined below/

Step By Step Guide on Organisational Structure Review

Step 1. Baseline Review of Current Structure

baseline review should define the critical stakeholders and assess the company’s
operations with regards to:

  1. Strategy
    1. Main services provided by the organization
    1. Main stakeholders of the company
    1. Legislation (including statutory instruments), policies,
      and regulators governing the company
    1. Trends affecting the company (revenue, costs, industry

Step 2: Value Chain Analysis

value chain analysis should be conducted to identify the level of business
complexity. Value chain complexity will inform the optimum number of reporting
layers an organization should have. The value chain complexity can be
determined by assessing the organization against the dimensions explained

Table 1: Dimensions for Value Chain



Type of value chain

the activities that the organization performs to deliver a valuable product
for the market.

Geographical footprint

physical presence of the organization i.e. Local, regional, national,
international or global

Financial position

total operating revenue amount  


assess the organization’s breadth of products and market position


its image and reputation are key business drivers


it has several functional departments, corporate services, and shared


level of focus on quality, safety, cost reduction, control, efficiency, and
best practices


organization’s focus on value control, value creation, and improving

Step 3: Determining Role Complexity (Levels of Work)

to the theory on the level of work complexity, work in organizations occurs in
distinctive layers of increasing complexity that can be distinguished from one
another. The work required in each layer, called stratum is qualitatively
different from work in another layer. The
level of work in a stratum, according to Jaques is the “target completion time
of the longest task, project or program assigned to that role”.

Link each organizational layer to a specific
time-horizon and differentiate by clearly defined work-themes, discretionary
capabilities, and varying time-spans for review as shown in figure
below. Measure the level of work according
to the individual’s time-span of discretion, i.e. the time horizon measured in
months or years. The longer this period, the greater the scope and

1: Stratified Systems Theory

Weatherby (2017)

Step 4: Role Profile Analysis

the nature of all jobs within the current organizational structure. Assess the
nature of work and how it is divided into roles.  Each role is to be analyzed using a role
description profile covering:

  • Accountabilities
  • Authority
  • Role
    Relationships (Vertical and Horizontal Relationships)
  • Knowledge/Skill

Step 5: Functional Alignment

Functional Alignment is one of the techniques
for examining the leanness of a structure. Functional Alignment enables you to
quantify a population by its location, functions, and professional classifications.
For example, in some organizations, jobs in finance, HR, logistics,
engineering, and other generic occupations can be found scattered across a wide
range of territorial locations or business units.

business reporting rarely provides any analysis from this perspective, when
such data is exposed for the first time it can reveal a worrying profile of
jobs scattered randomly without process logic or functional theme. This can be
the key to opportunities for making the organization leaner by realigning the
structure so that the same or similar jobs are given more effective managerial
cover and perhaps assembled into more robustly designed and effective
processes. The ideal proportions are usually thought to be in the region of 70%
(Core) and 30% (Support). 

Key Considerations

are key elements that should be considered when designing the appropriate

  1. The organization’s strategy - Assess, what are the
    strategic imperatives for the client? The starting
    point for the design of the organization process is typically the
    identification of the main outputs that the organization intends to deliver (Daft 1998). You should assist the client to subsequently structure
    the organization in a way that reinforces the strategic imperatives of the
    organization. For the organization to achieve its strategic goals and
    objectives, the organization's structure and strategy should be properly configured.

  • The organization’s size -
    In developing the
    appropriate structure, you should consider the size of the organization and
    headcount for all departments. In doing so, you should watch for duplication of
    roles and job redundancy. At this point, you should consider which skills the
    client should have permanently or casually.

  • The organization’s technology - Technology
    impacts the structure of the organization. Heavily mechanized organizations
    tend to be more inclined towards increased productivity. However, if management
    does not properly adjust its structure, this envisaged result may not be
    achieved (Rabbinz 2012). One of the reasons
    attributed to low productivity is the organizational structure that remains mechanistic
    and not compatible with the technology. Management should properly structure
    the organization to achieve superior performance and higher productivity
    through the use of available technologies.

  • The organization’s operating environment - A critical consideration in structuring
    the organization is the environment in which the company operates. The
    environment here refers to not only the physical environment but the political
    and economic environment as well. The environment also refers to the key
    stakeholders (shareholders, customers, community, government departments &
    agencies, etc.) that the business interacts with. The company should be
    structured in a way that assists in effectively managing relationships with key
    stakeholders. The structure of the company should also assist in efficiently
    and effectively adjusting to the changes in the operating environment.

  • The organization’s culture - Organizational structure defines how job tasks are formally
    divided, grouped, and coordinated. Critical to this is the type of culture that
    management wants to reinforce. The culture of the organization is reflected in
    the hierarchical relations among members of the organization and is viewed as
    facilitating interaction and communication for coordination and control of the
    organization’s activities. Management should be clear about the culture that
    the structure will support. Assist them in doing so.

Carl Tapi is a Consultant at Industrial Psychology Consultants (Pvt)
Ltd, a management and human resources consulting firm.
https://www.linkedin.com/in/carl-tapi-45776482/ Phone +263 (242) 481946-48/481950 or cell number +263 772 469 680 or
carl@ipcconsultants.com  or visit our website at www.ipcconsultants.com

Editorial Team

This article was written by one of the consultants at IPC

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