Controlling Head Count July 21, 2007Posted by Tariq Ahmed in Managing Employees.
Ruling the galaxy isn’t easy; unfortunately we too are victims of organizational growth spurring head count beyond necessity. Management theory holds that all organizations, as they get larger suffer from employee efficiencies and other causes, which lead to an exponential headcount.
Why do large organizations grow out of control?
When sales, growth and profits are high, the euphoria spreads and so does headcount. To be fair, each department may have more to do, and in most cases do require more staff. As a department grows, each manager can only effectively manage 10 or so direct reports. Mathematics dictates the rest and for every 10 or employees, another manager/supervisor is needed. Departments will also take on a life of their own, where managers vie for bigger budgets and more head count, not just for their own power, but also to be able to reward their friends and supervisors will more perks and fancier titles.
As with all organizations, standard management theory applies to how and why they become more inefficient.
How to control head count?
Most organizations reach a critical point and then do mass layoffs to correct the head count that was created over years, or even decades. While effective, it’s reactionary vs. pro-active. As a leader, you must have vigilance to continuously control head count.
One method is monitoring the volume of work a department does and set a head count budget based on that. For example, for every planet we control, we need 100 000 storm troopers to manage it. By setting the budget, managers will know they can’t hire beyond that ratio. In most large organizations, you can see how revenues, or “workload” grew at 10%, but head count grew at a much higher rate. As the workload grew, it took more and more employees to handle it in an inverse relationship. If we control 10 planets, and have 1 million storm troopers, when we control 20 planets, we should have 2 million troopers, maintaining the ratio of 100 000 troopers for every 1 planet. Examine this ratio with revenue or workload and see how off track your departments are. Set goals, and allow modest growth for supervisor/managerial count only.
Another method is to measure ROI for all projects that improve efficiency. If a project will result in X efficiency, hold the department manager responsible by a headcount goal. This doesn’t mean that a department should be afraid of promoting efficiency because it will cause layoffs. The department should be rewarded for efficiency gains by allowing them reach the head count goal by attrition. Do not allow a department to squander technological efficiency gains by the manager claiming the department will take over other duties. The efficiency gains will be lost through a snow ball effect as 1 dept takes over workload for another, but then that 2nd department claims the same thing for other duties, and the net efficiency is lost, never to be realized.
Controlling head count is a never-ending issue and will be discussed in the future.