The number of subordinates that a manager or supervisor can directly control. This number varies with the type of work: complex, variable work reduces it to six, whereas routine, fixed work increases it to twenty or more.
The concept of "span of control," also known as management ratio, refers to the number of subordinates controlled directly by a superior. It is a particularly important concept for small business owners to understand because small businesses often get into trouble when the founder ends up with too wide a span of control. Span of control is a topic taught in management schools and widely employed in large organizations like the military, government agencies, and educational institutions. "Yet few entrepreneurs know the term or are willing to admit any limit to the number of people they directly oversee," explained Mark Hendricks in an article for Entrepreneur magazine. When a small business owner's span of control becomes too large, it can limit the growth of his or her company. Even the best managers tend to lose their effectiveness when they spend all their time managing people and their issues and are unable to focus on long-term plans and competitive positioning for the business as a whole.

The concept of span of control was developed in the United Kingdom in 1922 by Sir Ian Hamilton. It arose from the assumption that managers have finite amounts of time, energy, and attention to devote to their jobs. In studies of British military leaders, Hamilton found that they could not effectively control more than three to six people directly. These figures have been generally accepted as the "rule of thumb" for span of control ever since. More than a decade later, A.V. Graicumas illustrated the concept of span of control mathematically. His research showed that the number of interactions between managers and their subordinates—and thus the amount of time managers spent on supervision—increased geometrically as the managers' span of control became larger.

It is important to note that all managers experience a decrease in effectiveness as their span of control exceeds the optimal level. In other words, the limitations implied by span of control are not shortcomings of certain individual managers but rather of managers in general. In addition, it is important to understand that span of control refers only to direct reports, rather than to an entire corporate hierarchy. Even though a CEO may technically control hundreds of employees, his or her span of control would only include the department heads or functional managers who reported to the CEO directly. "When given enough levels of hierarchy, any manager can control any number of people—albeit indirectly," Hendricks noted. "But when it comes to direct reports, the theory [of span of control] suggests entrepreneurs must respect managers' inborn limits."

Entrepreneurs and small business owners are particularly susceptible to overextending their span of control. After all, many of these people have started a business from the ground up and are wary of losing control over its operations. They thus choose to manage lots of people directly, rather than delegating tasks to middle managers, in an effort to continue being involved in key decisions as the business grows. But this strategy can backfire, as Hendricks explained: "Extending span of control beyond the recommended limits engenders poor morale, hinders effective decision making, and may cause loss of the agility and flexibility that give many entrepreneurial firms their edge."