An organisation consists of much more than just its leadership

Recently, Jon Ingham and Pavel Charny highlighted the need for companies to think carefully before deciding to simplify their organisational structures by removing layers. The discussion around streamlining isn't new, but integrating a solid theoretical framework into this conversation is crucial. After all, these structures significantly shape our work experience.

Organisations often seek to streamline their structure to boost efficiency—a belief that is not unfounded but shouldn’t be indiscriminate. Not long ago, Dutch newspapers covered a story about a notable company removing two management layers, raising questions about which layers were chosen for removal and why. During my visits to organisations, I frequently ask why they maintain their current number of management layers, and the answers are often vague, indicating a theoretical gap in managing an organisation’s structure.

The crux of the matter involves figuring out the ideal number of management layers a company should have. This leads to several straightforward yet critical questions: How many layers of management are necessary? Is having ten layers excessive, or are fewer than five insufficient? How do we differentiate one layer from another, and how does strategy flow through these levels? Is it possible, or even advisable, to skip certain layers, and what would the implications for control be? Additionally, the link between Talent Management and the structure of an organisation is crucial but often overlooked or underplayed.

The structure of an organisation profoundly influences how employees feel, the quality of their interactions, their behaviours, and their opportunities for growth. Therefore, an effective organisational structure must achieve at least three goals:

1. Achieve the organisation’s purpose.

2. Attract and recruit the best people at the right time for the appropriate roles.

3. Ensure different parts of the organisation cooperate smoothly.

To meet these goals, a deep understanding of organisational structuring is essential—and the field is vast. In my quest for fresh insights, I delve into academic papers and consultancy reports regularly. Indeed, as the saying goes, nothing is as practical as a good theory.

For guiding organisations on the ideal number of management layers, I often refer to stratified systems theory, which evolved into the Requisite Organisation (RO) theory or work-level theory. This framework comprehensively addresses layers (or levels of work complexity), human capability, accountability, and managerial leadership practices with well-researched and proven concepts.

From my perspective, no other theory fulfils the previously mentioned objectives as satisfactorily. Supported by thousands of articles and studies, including PhD research, it is extensively documented. Ken Craddock , PhD, has compiled an exhaustive bibliography of RO publications, available at GlobalRO. Despite being the most thoroughly researched and validated theory, it remains, regrettably, one of the least recognised…

In the sections that follow, I will outline common organisational issues and link them to organisational design. I will touch on the theoretical underpinnings that inform the building of an organisation's vertical structure. Lastly, I will shortly outline ways to optimise an organisation and discuss the potential benefits of an improved structure.

The Context

Employees frequently voice concerns about product quality, unclear decision-making, lack of direction, insufficient scope for personal initiative, inadequate support, poor communication, silos, failure to embody core values, and limited growth opportunities. This extensive laundry list of issues includes compensation, layering, career development, interpersonal tensions, ineffective leadership, problematic performance appraisals, planning, discipline, and counterproductive behaviours. It's unsurprising that such challenges lead to disengagement from the organisation.

These grievances are consistently voiced in various settings, including banks, insurance companies, hospitals, schools, welfare organisations, courts, and media companies, and affect staff at every level—from senior management to front-line employees. Occasionally, specific individuals may be identified as the root of these issues due to their inadequacies or difficult personalities. However, a deeper inquiry often reveals that these pervasive problems stem from fundamental flaws in the organisational structure.

The vast knowledge and experience of professionals who assist others in navigating these issues, such as coaches, trainers, and consultants, typically highlight a universal challenge: a widespread uncertainty regarding the extent of individuals' authority and responsibilities.

Therefore, one of the first steps in addressing organisational issues involves clarifying the relationships of authority and accountability. Yet, this is easier said than done. Authority is frequently mistaken for 'leadership', leading organisations to send their staff to training or leadership development programmes in the hope of resolving these issues.

We've all seen it happen: a manager returns from an inspiring training programme full of energy and new ideas, only to slip back into old habits within weeks. The initial optimism for change dissipates as it becomes apparent that, despite their newfound enthusiasm, the unchanged organisational structure forces them to revert to their previous behaviours. This cycle illustrates a critical point: while leadership development can be transformative on a personal level, it often fails to address the systemic issues present within an organisation. Without structural changes, individuals are compelled to adapt to the existing environment, sometimes to the extent of leaving the company in search of a better setting.

This reliance on leadership development is rooted in the mistaken belief that the individuals themselves are the problem within organisations. The hope is that by altering people's personalities or psychological make-ups, the organisational issues will be resolved. Unfortunately, this is rarely the case.

Leadership development illuminates an organisational blind spot: the failure to recognise that organisational structures consist of roles designed to fulfil the work necessary for achieving strategic goals, independent of the personalities filling those roles. Running a successful organisation over time cannot be done by #charismatic #leadership alone. Structures and systems need to exist to survive the individuals.

Some Background

Organisational layering is essentially a response to environmental demands, with each added management level designed to tackle increasingly complex and broad challenges. The work-level theory presents a framework for determining the necessary number of main management levels an organisation requires to effectively implement its strategy and fulfil its mission.

In simpler terms, the RO theory is invaluable because it provides clear guidance on essential organisational aspects: structuring the hierarchy of management levels, defining the capabilities required at each level, establishing clear accountability, and promoting effective managerial and leadership practices. This approach ensures that the organisation is well-equipped to navigate its environment, adapt to changes, and achieve its strategic objectives.

This theory does more than just prescribe a set of rules; it offers a lens through which we can view the complexities of organisational design. It helps us understand that each layer of the organisation must add value by enabling decisions that match the scope and complexities of its environment. Furthermore, it recognises the importance of aligning the abilities of its people with the demands of their roles, ensuring that each part of the organisation not only works well on its own but also contributes to the whole.

The outcomes one can expect for organisational structuring address the three bullet points above are the following:

1. A structure appropriate to achieve its mission, strategy, goals and objectives.
2. Clarity about the process for staffing it with employees fully capable of doing the work in their roles
3. Managerial leadership practices that provide appropriate recognition and reward to employees for that effort.

The practical application of these principles can significantly improve an organisation's structure. By using the Requisite Organisation framework to evaluate and adjust the number of management levels, clarify roles, and ensure that individuals' capabilities are matched with the demands of these roles, organisations can enhance their efficiency, agility, and employee satisfaction. This, in turn, can lead to improved performance, greater innovation, and a more engaged and motivated workforce, and make a positive contribution to the society in which the organisation operates.

Outline of an optimisation

Using these concepts to optimise an organisation requires foresight, dedication, and commitment. Requisite Organisation is not the goal, but it provides tools that help create more effective leaders and build a healthy place to work. For many organisational leaders, understanding the concepts gives structure and meaning to their experience.

From lessons learned from organisations that applied RO, here is an short outline for optimisation:

• Invite an expert to inform your senior leadership team about key organisational structuring concepts and principles. This will help you make sense of your experience and focus on your organisation's pain points. You will most likely be impressed discovering how much more of your organisation’s potential you can bring to fruition.
• Once you understand your organisation's full potential, you can create a plan to optimise it based on your priorities and timelines. This involves a logical and systematic procedure in which employees at all levels actively participate. It involves setting up an implementation team with a strong internal project leader. The size of the team will depend on the size of the organisation and the speed at which the implementation is desired.
• The implementation team will be guided by the expert in reviewing the current organisation to understand how it is designed and how it actually works. Then, the first thoughts about the future organisation will follow, including the implementation steps.

Testimonial

I would like to share these few lines from Jos Wintermans because they are telling.

“The results were tremendous? -- and almost instantaneous.”

"... They told us we had 11 layers of management, when we should have had five," he says. "I hadn't anticipated that it would be that bad-but it was. Having the right number of layers really works, and it works fast. In January, the year-over-year increase in revenues was 8%. By April, it was 22%. The only thing that can account for that is the restructuring. People knew what their jobs were and what was expected of them. The results were tremendous and almost instantaneous.”

Jos Wintermans

CEO, Canadian Tire Acceptance Ltd.

This is an impressive turnaround; with the right guidance and strategies, you can replicate it in your organisation.

Hungry for more?

Are you inspired by Jos Wintermans' story and wondering how you can achieve similar results? The journey to organisational efficiency and clarity begins with understanding the unique dynamics of your business. My expertise in organisational development and the Requisite Organisation framework positions me to offer you tailored solutions that align with your specific needs and objectives.

Reach out at [email protected], and let's discuss how we can replicate this impressive achievement in your organisation, unlocking the full potential of your team and operations.

Resources

For an introduction to Requisite Organization theory, download The Global Organization Design Society’s book, Organization Design, Levels of Work and Human Capability: Executive Guide. It is available for free at: Executive Guide. (same link as below)

If you have limited time, focus on these articles:

The Long View of Leadership

An Executive’s Guide to RO-based Organization Design

How Did Dennis Turcotte Become Canada’s CEO of the Year?

The Inglis Story: How It Became The Number One Appliance Company in Canada

Teams Can’t Be Better Structured Than Your Organization: How Roche Canada’s Created High-Performing Cross-Functional Product Launch Teams

The Global Organization Design Society – formed in 2004 to promote the RO approach – has a website with articles, books, and video interviews. Go to: https://www.GlobalRO.org

There’s a useful, keyword-searchable, 1,000-page bibliography at: Requisite Organization Annotated Bibliography - 6th Edition - Part I (Intro) and Part II

About

Hi, I’m Robert Teunissen. I worked for more than 30 years in organisational development. I set up CaC Management 15 years ago to assist senior managers in understanding and utilising effective structure, staffing, and managerial practices to build positive and effective organisations. My work is rooted in Requisite Organisation. Within this wide field of work, I specialise in organisational design and managerial leadership practices, helping organisations determine the correct number and shape of managerial layers and applying critical leadership practices.

#JonIngham #pavelcharny #testimonial #KenethCraddock #globalro #talentmanagement #managementlayers #leadershipdevelopment #organisationalefficiency #OrganizationalDesign #ChangeManagement #ManagementConsulting #ExecutiveLeadership #eodf #BusinessTransformation #corporateculture #hrinnovation