How Merck KGaA Found the Ideal Span of Control Using People Analytics
People analytics is critical for business because, at the end of the day, insights into our data enable us to drive better outcomes for my organization, Merck KGaA, Darmstadt, Germany. Using analytics, we’re able to shape the people dimension of our business strategy by hiring the talent, retaining critical roles, and creating the best organization structure to maximize productivity.
For years, organizations and human resources experts have worked to determine an ideal span of control, which is defined by McKinsey as “the magic number of employees a manager could oversee to achieve optimal effectiveness and efficiency.” However, our people analytics showed us that there is, in fact, no magic number.
Every leader is different and the number of direct reports a leader should have to operate in close to optimal conditions varies. Some leaders will succeed with more than 20 reports, while others will need to have less than five.
In looking at one particular project in one of our US sales departments, we worked with our sales team to find out the most effective team size that delivers the highest commercial performance.
There have been many studies on the ideal span of control, most of the time stating that the global benchmark is 8-10 reports per manager. However, through our people analytics insights, we learned that our sales teams perform higher having a smaller team size than the global benchmark.
“Every leader is different and the number of direct reports a leader should have to operate in close to optimal conditions varies.”
How we actioned on workforce insights
Once we knew what the ideal span of control was for this function, we had several discussions with our leaders on the right solutions to implement based on this insight. We asked questions such as: Should we build more agile sales “networked” teams compared to traditional team structures? Do we need to promote more salespeople internally to become managers? And, especially, what would be the impact of having a higher manager ratio on personnel costs? This was done so that in the end people leaders can make a fact-based decision and decide if they want to adapt their organization and how.
In every one of these discussions, we always feed in our real-world people analytics insights.
Our strong data and technology foundations enable us to run very quick and specific advanced people analytics and scenarios in real-time. Visier, the people analytics solution we use, is a very important element in this approach. This changes our HR operating model and supports that our people strategy is acting in lockstep with the business strategy.
Setting up a culture for data-driven decisions
We first used people analytics to become data-driven consultants to the business, and our latest success with our span of control analysis demonstrates what’s possible when you do the work to create a data-driven culture at your organization.
Two years ago, the People Analytics and Organization Development team that I’m part of only had three people staffing it. Since then, we have almost tripled the size of the team and still plan to grow more, adding awesome team members globally, who bring a complete mix of Data Science, HR expertise, business acumen, consulting, and networking skills.
“In every one of [our] discussions, we always feed in our real-world people analytics insights.”
Before we started our journey to mature our people analytics practice, our HR function was stuck being report generators–we merely provided data, but weren’t being brought regularly to the table to interpret the data for insights. Now we have over 3500 managers using Visier for people analytics, which lessens the burden on our team to merely be information providers.
But more importantly: people analytics is one of top components of our Global HR strategic objectives to shape the people dimension of our business strategy.
Ignore people analytics at your peril
Kai Beckmann, a member of our executive board, has said: “Once the framework is in place and big data meaningfully deployed in HR work, nothing will stop people analytics from breaking into the new world of work. It will develop into its own business discipline and become so much more significant than a mere HR application. We at Merck KGaA, Darmstadt, Germany are pressing boldly ahead in pursuit of this trend.”
Our findings on span of control are just a small example, we are now working on several other advanced people analytics applications to support People and HR Strategies’ execution. It shows that people analytics is no longer just a trend. Our HR teams are now at the table with decision-makers.
“…people analytics is one of top components of our Global HR strategic objectives to shape the people dimension of our business strategy. “
And for me personally? I was more of a “techy” HR person, but in the past two or three years, I’ve been included in strategic projects and I’m now talking with global managers. I’ve become a better communicator. I know the business. I’m now seen as a valuable strategic advisor.
My final advice for HR people? Don’t be shy/deterred/scared. Get into people analytics!
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