Layers upon layers of managers managing other managers...

I came across a blog post in Becker's CEO Report (see "Big companies shrink manager, executive ranks: Bold or bad idea?") that highlighted what could be an interesting trend.  U.S. companies are decreasing the ranks of their middle managers in order to cut costs and improve efficiency.  According to Vanessa Fuhrmans, writing for The Wall Street Journal ("Where have all the managers gone?"), "Corporate America is on a mission to thin its management ranks in pursuit of greater efficiency."  Employment-data provider Live Data Technologies analyzed a database containing over 20 million white-collar workers and found that U.S. companies have decreased the number of middle managers by 6% since the end of 2021.  Every sector has been impacted, including health care.  Notably, Becker's reported that four health systems were eliminating and/or combining C-suite roles on December 31, 2024.  

Jack Kelly, a senior contributor at Forbes magazine ("Why corporate managers are being shoved out the door") writes that "Middle management roles have been steadily shrinking in recent years, with significant impacts on organizational structure and employee workload."  He cites a Gartner research study that found that managers today supervise, on average, three times as many employees as they did in 2017.  The buzz word today is "agile", and many business leaders feel that leaner, flatter hierarchies with fewer layers can facilitate easier communication and faster decision-making, streamline operations, and ultimately decrease the costs of doing business.

Tech companies are certainly leading the way.  Amazon Chief Executive Andy Jassy announced a goal to increase the ratio of workers to managers.  Google CEO Sundar Pichai told his staff that he wanted to cut managerial roles by 10% in order to cut costs.  Meta CEO Mark Zuckerberg called 2023 Meta's "Year of Efficiency" and expressed concerns about his team's multi-tiered organizational structure, where managers oversee other managers who oversee even more managers.  Zuckerberg told his employees that "flatter is faster" and "leaner is better."  He went on to say, "I don't think you want a management structure that's just managers managing managers, managing managers, managing managers, managing the people who are doing the work."

The Gartner study also found that more organizations are using generative artificial intelligence (AI) to replace middle managers.  They predict that within the next two years, one in five companies will use AI to flatten their organizational structures.  Whether this comes to fruition remains to be seen, but suffice it to say that, at least for now, multi-tiered, multi-layered organizational structures are out of and flatter hierarchies are in vogue.  I have stated my support for flatter hierarchies in a number of previous posts (see most recently, "Better, stronger, faster, and flatter?" and "Networks of competence"), but I also recognize that there are some legitimate downsides to this type of organizational structure.  

First and perhaps most importantly, at a time when employee engagement seems to be at an all-time low across the board, do we really want to do something that could decrease the amount of time that employees spend with their direct supervisor?  Decreasing the number of management layers will necessarily force managers to oversee even more employees.  A LinkedIn Workforce Confidence survey suggested that at least 30% of employees feel that their bosses are too overwhelmed to provide them with adequate support.  Providing mentorship, giving feedback, and helping employees grow and develop professionally takes time.  If a manager has to supervise even more employees, she or he will have to spend less time doing these important things (which, in my opinion, may be one of the most important jobs a leader does).  

Fewer management positions also means that there won't be as many promotional opportunities within an organization.  One of the drivers of low engagement that I frequently hear about is the lack of professional growth and development opportunities.  As promotions slow, highly motivated and talented employees may start to feel that they are stuck in their current role, thereby seeking opportunities to grow and develop elsewhere.  The competition for limited managerial positions can create tension and change the culture within an organization.  

The experience at multinational pharmaceutical and biotechnology company Bayer is noteworthy (see "Cutting middle management: Bayer's costly experiment one year later" which appeared in Forbes magazine last week).  In order to cut costs by $540 million, Bayer CEO Bill Anderson cut most of the company's management roles last year and implemented a management model that he called "Dynamic Shared Ownership".  Last March, Bayer eliminated half of its executive level leadership positions and 5,500 management positions, organizing the workforce into self-managed teams (also known as self-organizing teams).  Unfortunately, Bayer's market cap has fallen by more than 44% and its stock price hit an all-time low in November.  Forbes contributor Chris Westfall writes, "Getting rid of management is a strategic move but, with a company that has over 95,000 employees and operates all over the world, many factors contribute to the company’s fortunes — or misfortunes, as the case may be. Anderson needs time to prove out his approach."  

It's not likely that the experience at Bayer will discourage other companies from flattening their hierarchies by removing management layers, at least not yet.  These kinds of organizational structures are likely to become even more common in the future - perhaps even becoming the dominant form of organizational structure.  As the saying goes, "Once is a coincidence, twice is a trend."  McKinsey's Scott Keller and Mary Meaney said it best (see their article "Reorganizing to capture maximum value quickly"), "The history of organizations is the history of humankind.  Each generation seeks better ways to organize itself - from tribes ruled by all-powerful leaders to hierarchical corporations with clear divisions of labor to matrixed, cross-functional structures promoting complex forms of work and value creation.  We might now be on the verge of another major advance, toward self-organizing, decentralized, and adaptive organizations."  

While the jury is still out, I remain convinced that "flatter can be better", even if companies don't necessarily fully adopt the concept of self-managed teams.  Given the number of articles and blog posts on this subject, I believe that the coming years will bring more clarity to this question, as more organizations test these types of organizational structures and their variations with the goal of greater efficiency and better communication and decision-making.  Time tends to tell all and answer all...