4 easy-to-spot tell-tale signs you can save on headquarter costs (1)

I’ll begin with a warning. This post (and the next three follow-up posts) is only for the brave. If, as a manager, you have a strong tendency to overcontrol, micro-manage or have a deep need to know everything that is going on, this won’t be useful for you.

One of the biggest organizational wastes is to have an oversized headquarters. This black hole vacuums away valuable resources, scarce cash-flow and lots of energy. Unfortunately, most big international organizations seem to default to eternally growing headquarters. Top management likes the feeling of having a whole army at their disposal, an army they need close by.

But realize: this army, and the false sense of security they provide you, costs an arm and a leg. Not just in direct costs. The indirect costs of the inefficiency created by corporate is huge! As your army likes their comfortable seat, they will completely take over your interaction with the local offices. And there starts the problem, as you will not be made aware on the immense efforts needed to sustain the insatiable appetite of your army. Even worse, paradoxically, your corporate army (who you designed to be able to control the executive parts better) ensures you are out of touch with that crucial execution part of your organization. But how to know what you can cut, and what not?

It’s actually not that difficult! Consult your local managers and local HR. They can point to the waste in the organization in fine detail. Unfortunately, these good people are kept away from you by your army.

In this and the next three posts, you’ll find tips where to cut overhead. Discuss directly with your local management whether they experience these. If they do, you know where to improve your organizational efficiency.

The first topic is complexity in the hierarchy of the organization. You know you have considerable waste in your organization when:

employees in your organization have more than 2 official reporting lines.

Yes, there can be very good reasons for people to have two reporting lines (instead of the usual one). For example when a content specialist works in a business unit. Like HR. A local HR manager often reports to both the local business manager, as well as a regional (or corporate) HR manager. The local HR manager needs to support the business, while at the same time s/he needs to follow the strategy the organization has for HR needs. Fine.

But three, or even more, official reporting lines? I have never seen a situation where this makes sense. Coming back to the example of HR: sure, an HR manager can serve several business managers. But they shouldn’t all be official reporting lines. Make the reporting line to either a business manager higher up in the organization, or just to the HR manager. The same in a matrix organization. A local manager can support several business line owners, but again, that’s not the same as an official reporting line.

What’s the problem, you might ask, with more than two reporting lines? Well, managers responsible for different area’s in an organization, consequently have different priorities. Sometimes, inevitably, even conflicting priorities. Now, with several reporting lines, in reality, where lies the responsibility of juggling these conflicting priorities?

Right, with the employee who has these different bosses to serve.

But that responsibility does not belong there. Primarily, the managers who encounter a conflicting priority should resolve it themselves. If absolutely needed, they need to escalate to their bosses. But NEVER should they pass the buck to someone who is not in the position to resolve these conflicts. Someone who neither has the responsibilities, nor the means to do so. That employee will waste at least a third of her time on resolving the priority conflicts, apart from the time her line managers waste in turf wars.

Solution

Check your organization for employees with more than two reporting lines. If you find these, simplify the organizational structure. Employees can go back to the work they were actually hired for. And you can probably cut a few management positions, saving even more money.

For other savings, keep your eyes peeled for the next three posts!