It is primarily the CEO's responsibility to understand the founding principles of organization design, the science behind it and the real effects it can have on personnel and output in order to make knowledgeable decisions to restructure the organization for optimal effectiveness.
While too many layers in an organization is a typical result of organic growth, too few strata tends to be a less frequently seen - but still detrimental - issue. Most organizations have a combination of the two problems and tend to have pockets of the organization that are missing strata. Having too few levels is particularly true of rapidly growing companies, such as ones in the IT sector, or businesses that have undergone massive overhauls where the levels of complexity of the work have increased significantly. Organizations also see too few strata in situations where there are vacancies, cut-backs and lay-offs.
Human capability is different from person to person and effective organization design seeks to align the person with the right capabilities in the stratum where they can best accomplish their work. A typical mid-size organization may have front line workers, Managers, perhaps some Senior Managers, Directors, Vice Presidents, some with Assistants, and the CEO.
Let's say this hypothetical organization needs to cut back on its budget and downsizes -- i.e. "de-layering" so that the company no longer employs any Directors. The logic may be "a middle man between the managers and the VPs is unnecessary".
Besides, flatter organizations are better, right? Not right.
The organization will suffer because it is suddenly missing the capabilities of those Director-level managers, who can receive delegation from the VPs, understand and perform the work, and delegate with authority and context, in right-sized chunks, to those with suitable capabilities the next level down. Ironically, in those parts of the organization where there was an extra layer created by an Assistant Vice President or a Senior Manager, things may improve. But in most of the organization there will be a loss of capability that is required for successful execution.
The Directors' absences automatically add to the VPs' workloads, as the Managers cannot successfully perform the higher-level tasks carried out by the Directors. And yet, the VPs are so far removed from the actual work of the Manager that delegating in a sensible manner becomes difficult. A VP that doesn't understand the day-to-day deliverables cannot provide the context to set the Managers up for success. It would be almost a super human feat to truly understand where these others are coming from, when one is so far removed from their tasks, and has tasks of one's own to deliver on.
To further complicate matters, the lower-level work that the Vice Presidents must take on in the Directors' absence often doesn't interest them because it doesn't fully engage their capability. Moreover, it distracts them from their truly value-added work. The Managers tend to feel abandoned and unsupported, and unequipped with enough resources and problem solving capabilities to successfully complete the work. In turn, the VPs may feel the Managers aren't taking direction, or showing enough initiative. In all cases, too few layers negatively impacts productivity and job satisfaction for everyone.
There's a final serious consequence to too few layers: quality control issues. The VPs can't focus on the QA because they're essentially handling the workload of two levels of complexity, and may be too far removed, or isolated, from the work where the quality issues may occur. The entire organization can suffer from dissatisfied customers or poor employee retention. A lack of QA can be one of the most damaging challenges a business can face - and it can potentially be avoided by maintaining the optimal number of strata throughout an organization so that each worker is properly equipped and positioned to perform the specific accountabilities required in their level of work.
While one of the biggest consequences of too many strata is that of wasted resources and finances, too few strata can also be dangerous for an organization in that quality assurance can suffer greatly. Too few strata occurs primarily when there are layoffs or vacancies in an organization and a higher level stratum must take on the work of the missing personnel. Though an issue seen less frequently than too many layers, getting the right number of layers for an organization may require adding a layer in some parts of the organization.
