Subjects such as lean organization and horizontal structuring have recently come onto companies’ agendas. The main reason for this is the desire to adapt quickly to increasing competition. But change necessitates reviewing organizational structures again. Some companies have initiated change. But in others the increase in the number of managers represents a significant obstacle to change.
When the legendary leader Jack Welch took over as CEO of General Electric what surprised him the most was the number of managers. Welch found that the company of which he was CEO had 25,000 managers. Welch was disturbed by this and reduced the positions in the hierarchy between the regional managers and the CEO and tried to reduce the 130 vice presidents to the minimum number possible. The number of echelons in the hierarchy became fixed at 4-6. Today, many other companies are afflicted with the same problem that occurred at GE. A proliferation of executives and titles is throwing organizational structures into confusion. While research shows that it becomes an obstacle for companies when they try to implement lean organizations and and horizontal organizations.
We conducted a study of 29 companies which are amongst the largest in Turkey and play a leading role in their sectors in order to determine how many members of staff there were for each manager. Variations according to sector, department and corporate culture, meant that in some companies the number of staff per manager rose to 30, while in others it was as low as 10.
Why The Proliferation?
Before analyzing the proliferation of manager in Turkey one should first look at the average general age of companies. More than 90 percent of companies were founded in the last 20 years and 53.2 percent of the largest 500 are 40 years old or younger. This fact has an impact on companies’ strategic and organizational structures.
Another factor affecting the elements in an organization is rapid growth. Many Turkish companies have grown incredibly quickly in the last 10 years. Garanti Bankası, Akbank, Tofaş, Turkcell and Petrol Ofisi have grown out of all proportion to their size ten years ago. As a result, the companies’ organizational structures have diversified and expanded rapidly in parallel to this growth. This has resulted in more complex structures.
Another factor is crises. The increase in the number of managers has been exacerbated by the tendency for crises to promote staff during crises without also giving them the traditional rise in salary.
Saide Küzeyli, who is one of the founding partners of Unida, believes that the process has been affected by the tendency in the private sector to use of titles as an instrument for motivation and reward and to create opportunities.
Company Structures The Determining Factor
The proliferation in the number of managers is also a reflection of the composition of the organizational structure. In fact, it is possible to speak of two types. Ali Midillili of Msearch Danışmalık divides corporate structures into two types: the pyramid and the matrix. Each of the two structures has its own special characteristics. Ali Midillili defines these structures as follows: “The pyramid structure is based on a chain of command and results in more personnel working for a single manager. The matrix structure is more independent and customer and product focused, which means there is less management of personnel.”
The degree to which the company has been professionalized and institutionalized also has an impact on the density of managerial staff. The field in which the company operates is another factor. Ali Midillili says that sales organizations in companies which are heavily sales oriented and which sell products to consumers mean that they have a higher number of personnel per manager. The best examples of this are banks and retail companies.
The Lean Trend Has Begun
An increase in the number of executives creates a number of problems for companies. The most important is that, in an era when speed is vitally important, a lot of managers makes the decision-making processes more difficult.
In the last few years, companies which understood this fact have begun to trim their organizations. Profil International Managing Partner Ayşe Öztuna confirms this. Öztuna says: “Compared with ten years ago we are now seeing much leaner organizations”.