Do not underestimate the strength of job evaluation in the Organisational Design process.
Shaun Barnes explains how…
“Many companies are rightly worried in today’s world about the efficiency of their organisational structures.
Questions that often come up are:
- Do we have the right structure?
- How could our structure be more effective?
- Do we have too many managers?
- Do we have too many layers and departments?
- Do we structure according to business need or according to people in roles?
“The problem lies with analysing a structure – how exactly does one do this? What methodology can be used and against what standards or benchmarks can the structure be evaluated?
“Companies often ask what the “benchmark industry structure” is, forgetting that all companies are different in size, scope, complexity, and culture and often have differing IT platforms and processes to boot. External benchmarking is very often not the answer. This is even less so if the company is in an industry in which there is a smaller pool of players.
“When talking about a structure, it is important to distinguish between the two components of a company structure being:
- The macro-structure: This is the top level of a company and describes in overarching terms how the company is set up. The macro-structure often refers to the Executive structure and the layer below the executives; and
- The micro-structure: This is the full management, supervisory and staffing complement that makes up the rest of the organisation.
“These two structures are tested and analysed in different ways:
- The best method to test a macro-structure remains checking its effectiveness when judged against the stated strategy, business model, value chain and operating model of the company. These elements provide the guidance as to whether a structure is efficient and will deliver the required results.
- There are a number of tests that can be conducted to check the micro-structure of an organisation. These tests include a gap analysis, staff ratios (including management to staff and operational versus support staff) as well as management levels and Spans of Control.
“What is not well understood is that the tests for the micro-structure yield the best results when based upon job grades. I hear the response to this already – do I mean job grades that are arrived at through traditional job evaluation and that are then used to determine the level of remuneration and promptly forgotten about? Yes, believe it or not, the grades of jobs form one of the best quantitative foundations to test the efficacy of structures.
“Job grades allow structures to move from qualitative boxes with titles to jobs that are accurately placed on the correct level. This will guide you in testing the logic of your structures.
“Job grades introduce a quantifiable element into the process that is organisational design, moving beyond subjectivity and conjecture. There are a number of ways in which job grades can do this:
- Gap Analysis: The gaps between positions, especially positions within a designated career path or identified as successor positions, will assume a new clarity when viewed from a job grade perspective.
A “Gap Analysis” between positions within a function, department or job family can be very useful in showing where career gaps exist. International research by various consultancies and universities over the years has resulted in a clear path of the ability of staff to move through grade levels. Bearing in mind that each new grade level represents an increase in complexity, we have an accurate idea of how many grade levels can successfully be moved within a single promotion or appointment.
Studies indicate that the ideal ‘gap’ between a management/supervisory position and the next identified successor role is two traditional grades. Should the gap be three grades or more, the increase in job complexity will start to become a risk and the greater the grade ‘gap’, the higher the chance of failure for the successor upon their promotion. By the same token, the grade ‘gap’ between positions within a career path should also not exceed two job grade levels, as the same risks will be present.
- Spans of Control: The Span of Control (or SOC) is the number of employees a manager can supervise as effectively as possible. The addition of new hierarchical layers makes the organisational structure steeper.
A large Span of Control leads to a flatter organisational structure, which results in lower costs. A small span of control creates a steeper organisational structure, which requires more managers or supervisors and which will consequently be more expensive for the organisation. It is therefore useful for an organisation if its managers have the correct span of control.
The theory of spans of control was first touched on academically by Vytautas Andrius Graiciunas (1898-1952), a French management consultant and engineer. Graiciunas mentioned three types of superior-subordinate relationships, namely direct single relationships, direct group relationships, and cross relationships. According to Graiciunas, as the number of subordinates increases arithmetically (like 1, 2, 3, 4, 5, 6, etc.) the number of relationships which the superior has to control also increases almost geometrically (like 1, 6, 18, 44, 100, 244, etc.). Therefore, a superior can only control a limited number of subordinates, and anything beyond this limit is very hard to control.
So, according to this initial body of work, a top-level manager can effectively manage only 222 relationships. Therefore, a top-level manager should not have more than 6 direct subordinates. Similarly, a lower-level manager should not have more than 20 direct subordinates. These variances increase or decrease according to the grade of the managerial job as well as the grade levels and diversity of functions of the team.
Job grades can thus not only be instructive in providing greater clarity with career paths and succession plans within structures, but can also be used to assist with SOC studies to check what the acceptable span of control for a management level should be.
- Grade Spread: Titles and pay levels can be misleading when conducting an analysis to determine the spread of resources across divisions or departments. To truly determine whether some departments are more ‘resource-heavy’ than others without having the results being skewed by legacy pay issues, using job grades to determine the ratios of staff within and across departments provides the most accurate way of arriving at a credible hypothesis.
A well-conducted grade spread analysis can also indicate which levels in the organisation are under- or overstaffed as well as identifying ‘bottle-necks’ in terms of layers and levels.
“As demonstrated, the job grades within an organisation, when analysed in conjunction with structure and levels, can provide quantifiable guidance that is hard to come by within a traditional organisational design project.
“This should help dispel the perception that job evaluation is a one-dimensional process that provides results that can only be used in benchmarking remuneration and benefit levels for staff.
“If properly understood and utlised, job grades can provide a rich resource for accurate structural analytics. “
Written by Shaun Barnes, Executive Director at 21st Century
About 21st Century:
21st Century, a level 2 BBBEE company, is one of the largest Remuneration, Reward, HR, Organisation Development and Change Management consultancies in Africa, specialising in sustainable business solutions, with a team of more than 60 skilled specialists, servicing over 1700 clients – including non-profit organisations, unlisted companies, government, parastatals and over two-thirds of the companies listed on the JSE. 21st Century offers bespoke business and strategy planning services, operating model and organisational design, creative reward practice modelling, change, stakeholder and culture management, training courses and comprehensive human capital and talent plans. These are all underpinned by our analytic and survey capability tailored to the African environment. 21st Century continues to offer solutions via a combination of virtual channels and on-site presence.
21st Century has expanded its services to offer a full turnkey sustainable business and remuneration service. Beyond remuneration and reward consulting, 21st Century offers local analytics for business advantage; remuneration and HR training; change management services; talent and people solutions; and end-to-end organisational design and development.
21st Century is the Africa representative for the GECN group of companies, specialists in global executive remuneration and governance.