Gary Neilson, Joe Saddi
October 1, 2003
Do you recognize the hourglass organization (see Exhibit 1)? If you look closely at the management ranks of many Fortune 500 corporations, you’ll see this unfortunate phenomenon: excessive layers and narrow spans of control, particularly among mid-level directors and managers. The result is often bureaucratic buildup, bottle-necked decision-making, and a general lack of innovation. Employees laboring at the customer-facing end of this attenuated organization structure are hamstrung by vertical decision-making and multi-matrixed reporting relationships. Their career prospects are unenticing and their creativity diminished. The view at the top is equally uninspiring … and crowded. Organizations like these need to look beyond simple headcount reductions to find more lasting and effective methods for getting in shape.
As the lead initiative in an overall global effectiveness program, a Fortune 100 client of Strategy& launched a “spans and layers” program designed to reduce high G&A costs driven by organizational complexity. Recognizing that the existing multi-matrix structure was costly, sluggish, uncoordinated, and inwardly focused, management was convinced that a flatter and more streamlined organization model was critical to effecting its strategy and competing in a global marketplace. The team charged with leading this effort followed a four-step process over a period of 12 weeks, first baselining the existing spans and layers, then sizing the prize from a top-down perspective, then designing and implementing solutions to reduce layers and optimize the organization model. In the end, the company realized approximately $200 million in savings, which constituted 25% of the total cost savings generated by the entire global effectiveness program.