Research Proof That Optimizing Organization Design Improves Performance
Optimizing Organization Design® is the Capelle Associates approach to improving organization performance. The proof that our approach works is evident in 24 research studies completed over the past 25 years and our client experience across more than 100 large scale projects.
Capelle Associates has developed an extensive Benchmarking Database that includes over 59,000 manager – direct report relationships from 76 organizations. In addition, the database contains over 13,000 employee satisfaction responses from 38 organizations.
Our research, while done independently, also builds on more than 50 years of accumulated research. We take this opportunity to mention a few of these thought leaders and their work that has helped our research:
- Dr. Elliott Jaques and his colleagues – Their work related to a measure of the complexity of work (time span); a measure of individual capability (information processing capability); and the derivative manager – direct report alignment
- Marcus Buckingham and Curt Coffman – Who have shown that the manager – direct report relationship is related to productivity, profitability, retention and customer satisfaction.
- James Heskett and his colleagues – Their work on the service profit chain showing that there is a relationship between the employee (including satisfaction and loyalty); the customer (including value equation, satisfaction and loyalty); and financial performance (including revenue growth and profitability).
Manager – Direct Report Relationship: The Most Important Factor In Organization Design
The concept of manager – direct report alignment is based on the work of Jaques and his colleagues. They developed a measure of the complexity of work called time span. With it, one can determine how many layers or strata an organization should have, and place every position in the correct layer or stratum. More specifically, one can develop optimal manager – direct report alignment. This is a situation in which a manager is exactly one layer or stratum above a direct report.
While there is this one optimal situation, there are two suboptimal situations:
1. A manager and direct report are operating at the same level or stratum (called compression). We would expect that the following might happen in this situation:
- The manager would be micromanaging
- The manager would not be adding sufficient value
- The direct report would not use her / his full capability
2. A manager and direct report are operating more than one level or stratum apart (called gap). In this situation:
- The manager could tend to feel “pulled down into the weeds”
- The manager could perceive that the direct report has no “initiative”
- The direct report could see the manager as not providing appropriate direction
Our Benchmarking Database of over 59,000 manager – direct report relationships shows that manager – direct report alignment is sub optimal nearly 50% of the time! This is, in our view, a huge waste of human resources. On the positive side, it is a significant opportunity for performance improvement.
Manager – direct report alignment is fundamental to the direct report relationship with the manager and also with employee satisfaction. One can also see how it could be related to customer satisfaction and financial performance. All of these factors are closely interlinked. Quite frankly, we have been surprised at the robustness of manager – direct report alignment. While we would have expected that organization design would be related to these outcome measures, we would not have expected that any of the sub factors would be robust enough to do so. Manager – direct report alignment has proved us wrong.
Overview of Research Findings
We have also seen from our research that the most important part of organization design is the manager-direct report alignment. Every employee should have a manager exactly one level (or to use our technical term, stratum) above.