Is Your Organization Too Flat?

As entrepreneurs who run growing companies, it’s tempting to operate your organization as lean and mean as you can. That’s why when it comes to hiring people, you tend to think in mainly terms of two categories: executives and individual contributors. We know we need executives but it’s easy to hire contributors that create revenue and deliver to customers. But, based on how rapidly your company is growing, you might be missing an integral third category your business is going to need to keep growing: middle managers. Let me explain.

Executives

Hiring the right executives to your team, a topic I’ve written about half a dozen times or so, is critically important for any company. The people you bring into your C Suite are entrusted with power, authority, and responsibility. You count on them for your success since they report directly to you and, they, in turn, manage a team of people beneath then.

Individual Contributors

Hiring all-star contributors is also something that every good business needs. These are the people who make thigs happen-;from product development to landing sales. If you run a consulting company, for instance, you want to hire lots of contributors you can because you know that every hour they work is earning the company money. Your thought process is probably that you want to hire as many of these skilled contributors as you can to help scale up the business.

But that’s where the catch is. In a prior article, I wrote about something called the “span of control,” where the magic number for productive managers is seven people under them.  That means that when your company is running lean and is still growing-;where maybe you have between 50 and 100 employees-;you can manage to stay flat by relying on your team of executives to manage your individual contributors. The math means seven leaders with seven people each, or 56 people.

But as soon as your business begins to scale beyond that 100-employee mark, it’s time to consider adding a new layer to your organization: middle management. Once mocked for being just a layer of bureaucracy, it’s worth taking another look at the value that adding this new layer of management can have on your organization.

Middle Managers

The first signs you’ll see that you’re in need of middle managers is when your executives begin to make costly errors because they’ve overwhelmed. This usually means they are way beyond seven direct reports.  They’re trying to manage too many people and opportunities-;and they begin to drop the ball. That’s when middle managers can begin to fill those valuable gaps and allow your business to begin to expand again.

Granted, depending on how your organization is structured, you might be able to grow beyond the 100-employee mark before adding middle managers. The online retailer Zappos, for instance, is well known for its flat organization. But that’s because most of Zappos employees do similar tasks in a similar way-;which makes it easier for a manager to increase their span of control.

There’s also the financial constraints that can come with hiring middle managers who may not generate any revenue directly on their own. Your business has to be making sufficient margins and profits in order to add in this new layer of management.

That said, your business might not be able to afford not hiring these folks if the pace of growth is outstripping the limits of your executives-;especially as you cross the 200- and 300-employee marks. You could find that your business is spiraling out of control and shooting itself in the foot instead of chasing all the opportunities available.