Management Gaps Can Prove Lethal
(a summary of an article published in the Globe and Mail, November 15, 1999)

Executives who want their corporations to enjoy a competitive advantage in the marketplace would be wise to pay special attention to the relationship between managers and direct reports, an expert in organization design told a Toronto conference of chief executive officers.

According to Dr. Ron Capelle, president of Capelle Associates Inc., a manager should be exactly one layer above the direct report. If the two are in the same layer, the result is compression. This will lead the manager to micromanage and the employee will under-perform. If they are more than one layer apart, there will be “gaps” and the employee will not get enough direction.

“Compression is a waste of money. Gaps, on the other hand, can kill you,” he said. Dr. Capelle pointed out that it was gaps that allowed Nick Leeson, a rogue trader with Barings Bank, to run amok and literally bankrupt the institution in the process.

“The layering of managerial function creates the spine of the organization,” said Dr. Capelle. “If the spine not well aligned, when you layer in all the other levels, they’re not going to be positioned properly.”

Nearly half of all manager-direct report relationships are designed sub-optimally, said Dr. Capelle. He noted that - with the trend to downsize companies - he has been seeing almost twice the number of gaps that he used to see. “The reason gaps have increased is that organizations have often done delayering without appropriate analysis,” he said. Dr. Capelle’s research reveals that gaps occur in more than 20% of companies; compressions occur in 26% of companies.

see also Disciples Preach Organization Design
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