Does Your Firm’s Structure Make Sense?

The structure of your organization defines the way you serve your clients. Two industry CEOs led an active discussion of what that really means at an Oct. 23 workshop session at ASPPA 2018 Annual Conference.

Petros Koumantaros, Managing Director /CEO of Spectrum Pension Consultants, and Sam Mitchell, President/CEO Sentinel Benefits & Financial Group, outlined three common types of organizational structures:

• Functional, i.e., business units for different functions, like sales, customer care, etc.
• Divisional, e.g., around products, services or geographical regions.
• Matrix, which would include aspects of both functional and divisional.

Both Spectrum and Sentinel have developed multi-channel, functional organizations, Mitchell and Koumantaros said, as seems most common in the industry.

Mitchell listed some of the benefits of the functional approach that he has noted, both at Sentinel and in other firms in the industry, including:

• Operational clarity
• Allows your business to scale and specialize
• Associate career pathing (within and between different business lines)
• Cross-discipline expertise (e.g., phone center and operations support/management)
• Succession/replacement planning

But there are some risks associated with the functional approach as well, Koumantaros noted, including:

• A silo mentality (each group focuses only on their issues)
• Accountability (the “not my job” mentality)
• How do you monitor multi-team processing and progress?
• Weakening of cultural bonds like mission and values

Span of Control

Among attendees of the workshop, the number of direct reports a manager has was a major shared concern, in both growing companies and stable ones.

Koumantaros noted that a narrow span of control facilitates more direct contact between managers and subordinates, but at higher costs than at organizations with wider spans of control. Among attendees, a limit of eight direct reports seemed somewhat standard.

How can an executive best determine what span of control is appropriate? Koumantaros discussed four main considerations:

Organizational Size. Generally, larger organizations have a narrower span of control and smaller organizations have a wider one. This is usually due to costs, with more managers and financial resources available at larger firms. Also communication may be slower with narrow spans if it must pass through several levels of management, he noted.

­Workforce Skills. The complexity or simplicity of the work will affect the number of desirable direct reports, Koumantaros noted. That is, routine tasks involving repetition require less supervisory oversight allowing a wider span of control (for example, payroll data processing and plan operations), and complex tasks are best suited for a narrower span of control (for example, consulting, plan design, sales)

Organizational Culture. “Organizations need to determine the desired culture when designing their span of control,” Koumantaros said. “Flexible workplaces usually have a wider span of control because employees are given more autonomy and flexibility in the production of their work.”

Manager Responsibilities. Koumantaros noted the importance of reviewing whether the organization’s expectations allow managers to be effective with the number of direct reports they have, and to consider individual responsibilities, departmental planning and training.