How to Get Your Span of Control Right in Banking

Organizational Leadership

While it is all the rage to flatten your organization and take away management layers to improve efficiencies, there is a dark side to that tactic. Having too many reports spreads bankers too thin leaving little time for “white space” or the ability to be creative and look forward. A “span of control” is how many direct and indirect employees a leader has reporting to him or her.  In this article, we take a look at the current status of the span of control in banking, look at a new idea in organizational leadership and see how to ensure your bank can optimize its structure.   


What is the Standard Span of Control?


A long-held rule of thumb in the military and hence many law enforcement and fire agencies throughout the U.S. is that your direct span of control should be between five and eight people.  This, however, is not the complete story. A leader also has a variety of indirect reports which are also characterized within banking as a “sphere of influence.” This sphere is all the informal connections a leader uses to include other employees, not within the direct chain of command, plus outside parties such as regulators, lawyers, vendors, and others. Managing this sphere takes time and resources away from the leader. At present, in banking, the average leader has about seven direct reports. However, when it comes to the CEO, that number is above ten, and when combined with indirect or “dotted line” sphere of influence reports, that number often totals over 17.


The good news is that a recent survey finds this not to be an issue as 80% of the respondents said their current organization is working well. However, many of these leaders don’t know what they don’t know and have not realized the fact that if they reduced their span of control, they would be more effective. In addition, 20% report that the current span of control of having over ten direct reports is creating problems. 


Number of direct reports - span of control


After experimenting with various spans of control in various positions over the past 20 years, we can tell you first hand that the rule of thumb is about right. Fewer than five reports at the executive level and your hierarchical structure is likely too deep, and decisions slowed. More than eight, and the executive is likely at too high a level to help provide insight into critical decisions.


However, that is just a rule of thumb.


What Matters In A Bank Leader


The real test of a great bank leader is their ability to generate new ideas and solutions and their ability to execute on those ideas and solutions. It doesn’t matter how many reports a person has but how these reports are used. Every bank has examples of all types of leaders with various styles and various levels of effectiveness.


The real question is not what a span of control should be but what is the least number of reports needed to accomplish the leader’s responsibilities efficiently?

The best bank leaders can create a formal or informal team that can execute. If you want to know who your greater leaders are at the bank then simply look at the teams they have built. Great leaders will attract, value, support, train and retain great employees both directly and within their spheres of influence. The quality of the team and that team’s effectiveness will tell you everything you need to know about that leader.


Those leaders that are effective maybe able to handle more reports provided they have enough white space including time to nurture their own professional growth.  


We love when we see on these banking surveys where attracting, training and retaining talent is in the top three priorities of a bank. Conversely, it kills us to hear bank executives complain about their ability to attract and retain quality talent. Over time, bank leaders and organizations attract and retain the quality of talent they are capable of handling.


The Dynamic Span of Control – The Fire Department and a Flexible Bank


It is up to every bank leader to actively manage their span of control to optimize productivity. It is not the number of direct or indirect reports that matters, but the effectiveness of those reports. If a bank leader is working on a bank integration from a merger or rolling out a new loan platform, they may need to expand their span of control to ten reports to coordinate various disciplines, or they may need to reduce their reporting structure to just three in order to focus.


The ability to create a dynamic span of control is now more important than ever given the ease at which banks can add temporary part-time human capital and remote workers. Any time a bank leader claims they cannot attract the talent they need, we say they are not creative enough or flexible enough to attract the talent they need.


The ability to expand or contract an organizational structure is now a separate discipline. If you ever want to see the best example of this, go talk to any fire department and ask them about their “ICS system.” The “Incident Command Structure” is a formal construct in almost every fire agency (as well as at most hospitals and other public safety entities) that allows an organizational structure to instantly be built and demobilized depending on the size of the incident. A battalion chief that arrives on the scene to a fire may be the incident commander overseeing the entire operation or might be assigned to be a section chief just handling one aspect of the incident such as providing medical support or ventilation. 


The ICS System


In a fire, a hierarchical structure is instantly created (above) and dismantled all without ego and all in response to the objective. It is the perfect model for how a bank should operate.


Putting This Into Action


Take a look at your organization and first see where your bank’s span of control could be modified to make the leadership more effective. Then think about reviewing this quarterly in conjunction with your strategic initiatives and your operational cadence. Between now and the end of the year, see if you can temporarily change the span of control for different leaders to adapt to their goals and then change them again early next year when goals change.


Do this enough, and you will train your bank to be more flexible in how it reacts to the marketplace and to the goals of the organization. Leaders must have the ability to both focus on their commitments for which they are held accountable and have the ability to dream how to make the bank better. Getting this balance right is different for every leader and every task set, but it merits an organizational conversation.


Managing direct reports is just one aspect of resource management. Operating within a rigid and narrowly defined organization imparts that rigidity on each of its leaders narrowing their effectiveness. A fixed span of control affords leaders, and the organization, little room to change and right size the resources for the fire that is before it. Implement a dynamic span of control, and you will find that you will have a more dynamic bank to tackle the future.