September 2015

To flatten or not to flatten?

Organisations often develop too many layers over time. Companies need to move fast in terms of decision making and often encounter further headcount savings. Delayering is the process of identifying and delivering the optimum number of layers in an organisation that will optimise accountability, decision making and efficiency.

The bottom line on De-Layering

Delayering delivers benefits, but the impact of it needs to be carefully considered against the context of other drivers in the organisation. The best programmes are blended with other initiatives such as centralisation or Robotic Process Automation (RPA).

Delayering programmes can deliver the following benefits:

  • Headcount savings – organisations which have historically grown with too many layers of management and senior management can often achieve 10%+ reduction in headcount cost, without impacting frontline operations
  • Decision making and agility – organisations which have too many layers can be slowed down by decision hierarchies
  • Accountability – fewer layers can result in a smaller number of clear Manager and Leadership definitions
  • Simplification – delayering often results in function pooling and sharing leading to further economies of scale

A typical delayering programme may have the following characteristics

  • Analysis by a specialist company of the existing layers using organisational data
  • A reduction in layers (from CEO to shop floor operative) from 15+ down to 5-7
  • A business case primarily driven by headcount reduction, with a  strong secondary benefit of creating a faster, empowered organisation
  • Definition of the 5-7 roles, with perhaps a variation allowed for Professional vs Operating businesses
  • A central programme team with Organisational Design, Talent, Reward, L&D, Communication, Finance and HR represented
  • Board level sponsorship, with strong representation from the business directors

How can I move forward with this new world?

Our approach to considering de-layering is based on:

  • Understanding the true reasons for the outcomes that the organisation wants to achieve
  • Conducting a high level analysis to understand the role that de-layering could play
  • Working at board level to establish a blended approach, where delayering is to be considered
  • Supporting detailed analysis and interviews, working with experts to understand the existing number of layers, the impact of this, and the optimum number of layers
  • Establishing governance, including sponsors and business implementation managers, a clear business case, and a programme team
  • Working with the businesses to redesign the organisation based on the new layer and role principles, to understand the impacts, and then to implement the changes based on our implementation frameworks
  • Driving a central programme team to provide the activity required in terms of Organisational Design, Talent, Reward, L&D, Communication, Finance and HR actions using visual management to monitor the many activities required

 

Article written by: Paul Taplin