2.2 Improving organisational structures

The Australian Public Service (APS) is one of the largest employers in Australia with more than 167,000 employees across 111 agencies.

Of the 111 APS agencies, the 18 largest agencies account for around 80 per cent of employees (see Chart 2.1 and Table 2.1).

This chart shows  that of the 111 APS agencies, the 18 largest agencies account for around 80 per cent of employees.

Source:  National Commission of Audit.

The APS workforce has fluctuated greatly between 1990 and 2010 before a period of growth. The proportion of employees in executive positions has increased over this period. Chart 2.2 shows the changes in ongoing employee classifications between 2000 and 2013 demonstrating the growth in middle management over this period. In addition, there has been a corresponding decrease in the number of employees in the lower level positions.

There is a range of reasons for this growth in middle-management levels including:

  • changes to APS recruitment practices to employ more highly qualified and skilled staff;
  • limited flexibility for remuneration, resulting in promotion being used as a means of attracting and retaining the right staff;
  • the gradual loss of lower level APS positions as activities have been replaced with technological solutions or outsourced; and
  • the rationalisation of organisational functions following the introduction of systems that enabled the devolution of low level tasks to individual staff members.

The net result of this shift in the composition of the APS workforce is that mid level managers now have comparatively few people reporting directly to them – this is known as having a narrow span of control.

Table 2.1 – The 18 largest APS agencies by staff numbers
Agency

Estimated
staff

Department of Human Services 30,707
Australian Taxation Office 22,022
Department of Defence 15,547
Department of Immigration and Border Protection 8,369
Department of Foreign Affairs and Trade 5,976
Defence Materiel Organisation 5,670
Australian Customs and Border Protection Service 5,000
Department of Social Services 4,434
Department of Agriculture 4,258
Department of Health 3,260
Department of Industry 3,078
Australian Bureau of Statistics 2,685
Department of the Environment 2,439
Department of the Prime Minister and Cabinet 2,387
Department of Education 2,160
Department of Veterans' Affairs 1,924
Australian Securities and Investments Commission 1,834
Department of Employment 1,819

Source: Department of Finance

Chart 2.2: Ongoing employees by base classification group, June 2000 to June 2013.

Chart 2.2 shows the changes in ongoing employee classifications between 2000 and 2013 demonstrating the growth in middle management over this period.

Source: Australian Public Service Commission, 2013a.

Spans of control within Commonwealth government agencies

The span of control of an organisation plays an important role in how decisions are made. Fewer layers and broader spans of control can reduce duplication and improve operations which can ultimately drive improvements in organisational performance.

Spans of control that are too narrow can result in insufficiently engaged staff, leading to dissatisfaction and reduced morale as well as ineffective communication between different layers of organisations, unclear accountabilities and higher staff costs.

The private sector has focussed on removing excessive management layers and broadening spans of control for many years to simplify decision making and enhance customer responsiveness and unleash innovation (Buchanan et al, 2003). This approach is now being applied in the public sector.

Australian government organisations across jurisdictions have considered spans of control as part of recent organisational restructures. A number of agencies have actively pursued polices to devolve work to more appropriate levels in organisations as part of these strategies.

Box 2.1: The New South Wales (NSW) Government review of spans of control:

As a result of the NSW Commission of Audit, reforms are being implemented to deliver improved services in the State. One area of focus has been the organisational structures within departments and spans of control.

A review found that in the NSW public service only 85 per cent of executives directly managed staff and the median span of control was five staff, with approximately 30 per cent of those managers overseeing teams of no more than three people.

Reforms have now resulted in fewer reporting layers and broader spans of control to streamline decision-making and identify clearer lines of responsibility.

Source: NSW Government, 2013.

A number of Commonwealth Government agencies reported on initiatives to broaden spans of control. In some cases this was in response to the Australian Public Service Commission Senior Executive Service staffing caps in 2011, while in others it was part of broader organisational restructures.

The Department of Social Services (DSS), for example, has established executive to APS staff ratio targets to guide organisational design. Targets vary across the functional areas of policy, programme, delivery, corporate strategy and corporate delivery. For example, the DSS span of control target ratio of Executive Level 2 (EL2) to APS staff in policy areas is 1:5. For delivery areas, the target ratio of EL2s to APS staff is between 1:20 and 1:25.

The Department of Health has also been working towards improving the ratio of APS to EL staff (Australian Public Service Commission, 2013b).

In addition, a number of submissions to the Commission referred to the size of government, recommending a move to flatter organisational structures as a means of achieving greater government efficiencies and accountability.

The Commission has collected information on spans of control from all departments and agencies across the APS with more than 20 employees, and which operate under the Public Service Act 1999. Data was collected for the EL2 and Executive Level 1 (EL1) classification levels. Responses were received from 91 APS agencies out of 111, noting that two agencies – the Department of Education and the Department of Employment – provided a single response relating to the former Department of Education, Employment and Workplace Relations.

The standard agency classifications used by the Australian Public Service Commission were used to group agencies into four categories: Policy and Research; Service Delivery (Operations); Regulation and Compliance; and Other Support (including specialist and legal). Data collected from agencies is summarised at Attachment 2.1.

Agencies provided information on the average number of staff reporting directly to EL2 and EL1 officers. Managers employed at these levels who did not have staff reporting directly to them at the time of the survey (such as technical experts and specialist staff) were also identified.

The average span of control for EL2s (excluding managers who do not have staff reporting directly to them) ranges from around one staff member to over 10 staff members in some service delivery and specialist agencies. For EL1s, the average spans of control tended to be narrower.

Table 2.2 shows the median spans of control for each category of agency for EL2s and EL1s.

Table 2.2 Median spans of control by agency type
Agency Type/Function Median span of control for managers
Executive Level 2 Executive Level 1
Policy & Research 3.9 2.0
Service Delivery 4.8 3.2
Regulation and Compliance 3.8 2.8
Other (specialist) 3.5 2.3

Source: National Commission of Audit survey, 2014

Agencies identified a number of limitations and qualifications around the span of control figures provided. In general terms, the majority of organisations were aware of the need to consider spans of control as part of their organisational structures and, as noted above, some have recently initiated processes to narrow their spans of control.

Other agencies justified narrow spans of control as a necessary part of their organisation particularly in areas of high-level policy, strategy and technical work (for example, scientific, legal or information technology roles).

Some organisations indicated that accurate information about spans of control was not possible due to human resource system limitations that did not capture this level of data. This suggests that some agencies have little if any awareness of the spans of control across their organisations.

Best practice spans of control

Appropriate spans of control should take into account the size and scope of an organisation and the nature of different functions and roles. For example, spans of control can be broader for functions that are repeatable and require less direction from management. Spans of control may need to be narrower where work is more complex, less repeatable and requires more senior involvement.

The Boston Consulting Group has developed best practice span of control target ranges for different public sector functions. These ranges are based on organisational de‑layering analysis and projects conducted with various public sector organisations around the world, including a number of Australian government departments and agencies at both the Commonwealth and State levels.

Best practice spans of control target ranges are set out below for different public sector functions:

  • 5-8 staff for policy and research functions;
  • 8-10 staff for service delivery functions;
  • 7-9 staff for regulation and compliance functions; and
  • 6-12 staff for specialist functions.

Charts 2.3 and 2.4 show the distribution of agencies’ average spans of control for EL2s and EL1s respectively by agency type compared to the functional best practice targets. They show how each agency’s average span of control (excluding people with no management responsibilities) compares to the best practice targets. For instance:

  • Policy and research agencies – 10 of 14 agencies have an average span of control for EL2s that is below the best practice benchmark range. Eleven of 14 agencies have an average span of control for EL1s that is below best practice.
  • Service delivery and operational agencies – 21 of 23 agencies have average spans of control for EL2s and EL1s that are below the best practice benchmark range.
  • Regulation and compliance – all 15 agencies have average spans of control for EL2s and EL1s that are below the best practice benchmark range.
  • Other specialist agencies – of the 38 specialist agencies, 32 have an average span of control for EL2s that is below the best practice range and 36 have an average span of control for EL1s below best practice.

Any changes in spans of control would need to be accompanied by commensurate changes in management practices, such as greater devolution of authority, and a greater focus on core business outcomes.

Chart 2.3: Spans of control – Executive Level 2

Chart 2.3 shows the distribution of agencies' average spans of control for EL2s by agency type compared to the functional best practice targets. They show how each agency's average span of control (excluding people with no management responsibilities) compares to the best practice targets.

Source: National Commission of Audit Survey, 2014.

Chart 2.4: Spans of control – Executive Level 1

Chart 2.4 shows the distribution of agencies' average spans of control for EL1s respectively by agency type compared to the functional best practice targets. They show how each agency's average span of control (excluding people with no management responsibilities) compares to the best practice targets.

Source: National Commission of Audit Survey, 2014.