Monday, April 20, 2015

Bigger isn't better: optimum organisation size

On the optimum size of an organisation

     I believe that for any enterprise there is a rather narrow range of effective size. Too small, and there are too few resources to accomplish the mission. Too large, and too many resources are used simply to keep the organisation functioning. Worse, as the organisation grows beyond its optimum size, the incentive for its members shifts from fulfilling the mission to creating and maintaining a secure position within the system.
     VLOs (Very Large Organisations), such as the mega-hospitals in Toronto, are too large to function effectively.      An organisation is a network. As any moderately numerate person should know, the possible paths through a network increase exponentially with the number of nodes in the network. Moving information around is the essence of management. For that reason, as an organisation grows, at some it begins to spend more resources on managing itself than it does on fulfilling its mission.
     It's no wonder that VLOs ossify, become plagued with internal politics, and find it almost impossible to shift from their course, even when everybody is aware that there's an iceberg looming ahead. It’s no wonder that people desperate to make them work propose "disruptive governance" and similar cures. Such cures merely perpetuate the disease, since they treat the symptoms, not the cause. The organisation is still too large, so it’s still spending far too much on itself, and too little on its mission. People know this, and attempt to reduce management costs. But the apparently common-sense approach of combining smaller units into larger ones in order to save on management costs assumes that management costs are concentrated at the top. In fact, management costs permeate the organisation, at every level. When two cleaners decide how to divvy up their work, they are managing their work. When unit managers construct a timetable for cleaners, they are managing. Which method costs less?
     I think that the best cure is to break up a VLO into small, effective (and therefore efficient) units. My experience as a teacher federation representative for our local bargaining unit gave me many opportunities to observe how our own small board differed from the huge ones (in the GTA, for example). I've come to the conclusion that the optimum size for a school is around 800 people, students and staff. A school board should govern one or two secondary schools and their feeders. I don't know of much research about organisation size and effectiveness in different industries, but I suspect that the optimum size for any organisation is about that of a healthy village: around 1,000 people. If more people are needed for some megaproject, bring several smaller organisations together, and parcel out the work among them.
     The notion that small units should be combined into larger ones in order to save management costs is mere superstition. Experience shows the exact opposite. E.g., the first thing that happened when Ontario elementary and secondary school boards were amalgamated in 1970 was an increase in the number of managers at the board level. In the case I lived through, we added a "supervisor of plant" and his clerical help to the board's staff complement. The board also "needed" superintendents of elementary and secondary schools. So the total board level staff increased by six or seven people, without any off-setting "efficiencies" in actual operating costs.
     We need to change how we organise our work. But unless we get rid of the superstition that bigger means better, we aren’t likely to get the results we want.

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