What Is Organizational Structure?

Span of control deals with the number of subordinates a manager can effectively direct. The wider an organization can make its managers' spans of control the more efficient it will be. Wider spans of control save money.

Consider the span of control of the company represented in the drawing above in blue. The blue company has 5,461 employees and six levels of managers to manage them (all but the bottom layer of 4,096). Let's say those managers make $50,000 apiece. The total payroll for 1,365 managers making $50,000 apiece is $68,250,000.

If we look at the green company, we still have a bottom layer of 4,096, but less managers overall managing them. If the green company's 585 managers each make $50,000, the green company's total payroll for those managers is $29,250,000. That's a huge savings.

Small spans of control are not only expensive, but they tend to complicate communication up and down the organization. The more layers, the more the message has to travel from manager to manager. Narrower spans of control also encourage overly tight supervision and less employee creativity and empowerment. In recent years, the trend has been toward wider spans of control.