What is the most important factor in organization design?
A. Without a doubt, it is the manager – direct report relationship. We have found that of all the hundreds of organization design factors, it is that one factor by itself that can be related to outcome measures, like financial performance, employee satisfaction and customer satisfaction. The key is that every employee should have a manager who is exactly one layer above, both in terms of the work that the manager does and their capability to work at this layer. It is surprising how often that isn’t the case. In about 38% of cases, we find the manager operating in the same layer as the direct report. We call this compression, and it results in the manager micromanaging the direct report. The result is that the direct report is completely shadowed by the manager and is not able to use his or her full capability. Not surprisingly, the direct report becomes frustrated. It is also a huge waste of money. The other problem occurs when a manager and direct report are more than one layer apart.
