Span of Control and Control Loss - Essay Example

?“Span of control” and “control loss Modern age is an age of competition in all walks of life. There is more awareness, more facilities and opportunities, exposure to knowledge and chances, and better standards of living. Today’s markets are packed with competing companies. Every company tends to offer the customers more advantage in any way that the other does not so as to gain competitive advantage over the contemporaries in the market. This has toughened the work for businessmen. On the other hand, customers find themselves in a rich market. There are frequent opportunities, so they tend to make the best selection. This has caused the people to raise their expectations manifolds. Today, companies have to be very skillful and knowledgeable in order to make the same benefits that they did in the past with much lesser skill and technical knowledge. In the contemporary market scenario, a businessman can not afford to be uneducated on such technical aspects of business as “span of control” and “control loss”. This paper explains the concept of the two terms; span of control and control loss and analyzes their usability in the design of organizations. The concept of span of control was first introduced by by Sir Ian Hamilton in 1922 in the UK (“Reference for Business”, 2011). Hamilton developed the concept after having studied the British military leaders’ capacity to control a maximum of 3 to 6 people. Since then, this number has been recognized as the standard average number of people to be managed by one individual. According to Col. Urwick, an optimal span of control should not exceed 6 (Hattrup, 1993). Hamilton believed in the fact that managers come with limited time and energy to devote to their work. Hence, there has to be a maximum limit on the number of people one individual can effectively manage on the average. Span of control is also called as the span of management. It is essentially a term pertaining to human resources management (HRM). It tells the exact number of workers that a supervisor may adequately manage. Fig: Span of control example (tutor2u, n.d.). The term is of huge significance particularly to the small business runners. Span of control is largely taught in business and management institutions all over the world in the contemporary age. The concept is frequently employed in such large institutions as military, schools and many agencies of the government. However, not many business entrepreneurs are yet familiar with the concept and usually have no technical means to judge what maximum number of workers should be given in the charge of one supervisor. As a result of lack of knowledge, many businessmen tend to increase the span of control. This, in turn, limits a company’s capacity to grow. What to talk of inexperienced lot, even the most experienced and competent managers have a hard time solving issues of too many people. This saps their ability to concentrate on long term plans, and they are not able to competitively position their business in the market scenario. A business is susceptible to be affected by a lot of risks in its lifetime. Losses may occur due to a variety of reasons. Whenever a business suffers from a loss, it is not just the owners that are affected. Indeed, the whole business is affected. The loss results not only into direct cost, but also the indirect expenses associated with it often exceed the direct costs. Let’s assume a case where the a construction site owner did not provide the workers with sufficient safety equipment on the site. One of the plastermen fell from the scaffolding because there was no bracing to support him. He fell on the ground and received several scars and wounds all over his body. He bled heavily. The whole crew left the work and attended the injured. He was taken to the nearby hospital for treatment after the first aid was given on the site. Many workers took it as an opportunity to indulge in lengthy discussions and gossip with one another, discussing how the accident happened, to what extent the plasterman was injured, and so on. In this whole process, the owner actually incurred costs far more than what he paid for the treatment of the injured plasterman. All of the workers, that left their work temporarily or spent the rest of the day discussing the accident lowered their productivity. All this while, the owner had to pay for the machinery and workers that were hired on daily wages. Similarly, there are several other factors that added to the indirect cost of the accident. In addition to the load of direct and indirect costs, the business suffers from, poor quality of work and declined morale of the workforce that leads to more accidents and unfavorable circumstances. Risk in a business is any event that may decrease its profitability (Tatum, 2010). Risks a business is exposed to come from various factors such as social, cultural, political and ethnic. Control loss is the concept that states that the potential for losses can be identified in terms of risk prior to the time that it actually occurs. Risks can be identified and measures can be taken in time to help avoid them. Even if some risks can not be avoided altogether, measures can be taken to reduce their impact on the business. With proper planning, some risks can even be converted into opportunities. Risks can also be shared by purchasing insurance for specific things, works, facilities or tasks on the site. The owner has to pay a premium in this case, but the total cost of premiums is far less than what he may incur without planning for risks (Tatum, 2010). The concepts of span of control and control loss are indeed, two of the most fundamental and important concepts that are used in the design of organizations. There is evidence from past researches to support their usability in practical design of organizations. Usability of span of control was determined by Hattrup and Kleiner (cited in “Reference for Business”, 2011) who found that adding one worker to 4 and 7 under a single supervisor increases the number of his interactions from 44 to 100 and 490 to 1080 respectively. Further addition of workers under one supervisor creates even more complications for the supervisor. Many businessmen adopt a certain business without gaining sufficient prior information about it or equipping themselves with appropriate business skills prior to stepping in the field. Because of their lack of knowledge about such technical aspects, they tend to give more and more people under the supervision of one individual. They do not hire many supervisors or managers in an attempt to minimize expenses and maximize their benefits. There can also be other reasons for not hiring sufficient number of managers. The owner might want to make the key decisions themselves and hence, supervise the subordinates directly. However, their tendency to save money this way actually incurs them far more than what they would have incurred the other way round. The dramatic increase in the number of interactions lowers the productivity of the crew significantly and it consumes far more time to complete the same task with the increase in span of control. Naturally, the overhead expenses and indirect costs keep adding up with the course of time and ultimately, they sum up to make the system very unprofitable for the owner. Similarly, not many entrepreneurs are aware of the importance of planning for risks. Businessmen should realize the significance of control loss for a profitable business. In the modern age, businesses have been exposed to newer challenges. There has been a general increase in the number of competitors, market conditions have toughened considerably, there is lack of cash flow owing to the global financial crisis and upsets in the political scenario. On the other hand, the demands and expectations of customers have increased manifolds. Having gained an exposure to more and more opportunities, and variety of services in the market, people have raised their standards and expect to get the maximum quality in such a diverse environment. Their unusually high expectations have exposed the business entrepreneurs to more challenges. As a result, it has become increasingly difficult to manage a business in the modern age. A businessman goes through a very tough time if he is not equipped with the knowledge of technical aspects of business, and hence, incurs more cost in an attempt to maximize benefits. In such a tough scenario, it is extremely essential for a modern day businessman to be aware of such concepts as span of control and control loss so that he may adequately manage the business and get the work flowing smoothly and with minimum interruptions and inconveniences. Particularly young businessmen can gain a lot of advantage by employing such concepts into their business experience. Having used them since the start of their career, they can find themselves in a better position with the passage of time. As a result of enhance profitability, more people would invest into the business. This would result into a gradual improvement in the global market scenario. References: Hattrup, GP 1993, How to establish the proper span of control for managers, viewed 5 January, 2011, . Reference for Business 2010, Span of Control, viewed 5 January, 2011, . Tatum, M 2010, What is a Business Risk? viewed 5 January, 2011, . Tatum, M 2010, What Is a Consequential Loss? viewed 5 January, 2011, . Tutor2u n.d., Span of Control and Hierarchies, viewed 5 January, 2011, . Read More