Big Tech is winning the battle of the bulge

Companies are shedding bloated layers of management in an attempt to reduce bureaucracy. Some employees are applauding the move, known as flattening the middle, in the hopes of getting faster and boosting efficiency.

Microsoft said Tuesday it’s slashing around 6,000 employees. While the days since have made it clear many of those cut were individual contributor-level engineers, executives previously told BI one motivation behind the recent cuts was to increase managers’ “span of control,” or the number of reports per manager.

Intel announced a great flattening last month, emphasizing more time in the office, less admin, and leaner teams.

“The best leaders get the most done with the fewest people,” said the chip giant’s new CEO, Lip-Bu Tan, in a memo to staff.

Amazon has also increased the ratio of individual contributors to managers. They call it a “builder ratio.” Google CEO Sundar Pichai told staff late last year that the company cut vice president and manager roles by 10% as part of an efficiency push. Meta has been at it for years, with CEO Mark Zuckerberg writing in a 2023 memo, “flatter is faster.”

The risk is that these companies cut too many managers, leaving the remaining folks with too many direct reports.

But for now, it appears to be a risk companies are willing to take.

Agility and expertise

The logic of cutting from the middle to speed up is sound, management experts say.

“You can’t go faster and be more connected to a larger ecosystem if you’re having to go up and down a hierarchy for every decision,” Deborah Ancona, a professor of management at Massachusetts Institute of Technology, told Business Insider.

While some companies have been trying for decades to zap management layers, there’s a new urgency to do so. Businesses exist in “an exponentially changing world,” Ancona said.

Dell executives explained this to employees earlier this month, when they began reorganizing managers to have more direct reports. The company, whose head count has dropped by 25,000 in two years, also pointed to the influx of artificial intelligence as a reason it needed to move faster.

Ideally, companies would remove layers and spread decision-making throughout the organization so that those closest to customers or technology, for example, could generate ideas and make decisions, Ancona said.

“You’re kind of flipping the organization,” she said. “Rather than all the ideas coming from on high, you have entrepreneurial leaders who are lower down in the organization coming up with new ideas.”

Bayer CEO Bill Anderson is leery of having to run everything up the chain. After taking over the German biotech company in 2023, he began implementing what he calls a “dynamic shared ownership” setup that has cut thousands of managers. Staffers come together in “mini networks” for 90-day stretches to work on projects.

“We hire highly educated, trained people, and then we put them in these environments with rules and procedures and eight layers of hierarchy,” Anderson previously told BI. “Then we wonder why big companies are so lame most of the time.”

Fewer managers, more reporting, more meetings?

When middle managers are cut and layers condensed, inevitably, more workers report to fewer managers. The logistics of that vary, and the success in terms of morale has a lot to do with the starting point.

Amazon started flattening last year. In September, CEO Andy Jassy ordered a 15% increase in the ratio of individual contributors to managers by March. BI reported that senior Amazon Web Services managers received a memo in January instructing them to restrict high-level hiring and increase their number of direct reports.

An Amazon spokesperson told BI at the time that the memo may have been intended for one team, but does not apply to the company at large. The Amazon spokesperson also referenced a September memo from Jassy on the importance of reducing management layers.

An AWS manager told BI this month that the flatter structure has since put more burden on employees on her team to report on what they’re doing day-to-day, in addition to their actual work, since managers have less time to inspect individuals’ work.

Plus, this manager said they are spending more time in meetings as they took on a more diverse group of direct reports. The Amazon spokesperson also emphasized that the individual employee’s anecdote does not represent the company as a whole.

Yvonne Lee-Hawkins was assigned 21 direct reports when she worked for Amazon’s human resources. She told BI that she had to quickly learn new skills to handle the load, like asynchronous work strategies, but her teams’ performance suffered as her number of reports grew from 11 to 21 employees.

Weekly one-on-ones — the subject of much debate among tech titans — became impossible, and she had to cut them in half.

At Microsoft, a half-dozen employees who spoke to BI about the manager flattening trend generally regarded it as a positive step to eliminate inefficient and unnecessary levels of managers. Some managers have as few as one or two reports.

Microsoft ended up with many management layers, the people said, because it often tried to reward good engineers by promoting them to become managers. Often, those engineers-turned-managers still spent most of their time in the codebase and weren’t very effective as managers.

Meanwhile, larger groups of direct reports often work better for senior employees, who need less one-on-one time and can do more things in a group setting.

A Microsoft spokesperson did not comment when asked about these factors.

Gary Hamel, a visiting professor at London Business School who lives in Silicon Valley, told BI that pushing managers to take on more direct reports can reduce micromanaging, a common bane of corporate existence.

When managers have a lot of people to oversee, it pushes them to hire people they trust, mentor rather than manage, and give up a “pretty big dose” of their authority.

“Those are all hugely positive things,” he said, even if they require “a fairly dramatic change” in how managers see their role.

How many direct reports is too many?

Nvidia CEO Jensen Huang famously has 60 direct reports. Managers at Dell have been told they should have 15 to 20. An AWS document viewed by BI in January mandated no fewer than eight per manager, up from six. An Amazon spokesperson told BI there are no such requirements companywide.

Gallup research indicates that the quality of a manager matters more than the number of direct reports in terms of how well teams perform. That’s because more engaged managers tend to lead to more engaged teams. And small teams — those with fewer than 10 people — show both the highest and lowest levels of engagement because managers can have an outsize effect, for better or worse.

That may explain why some companies seem to thrive with dozens of direct reports per manager and others fail.

The nature of the work matters, too. When work is more complex, it can be harder for managers to oversee too many people.

Managing dozens of people gets harder when “life intersects with work,” Ravin Jesuthasan, the global leader for transformation services at the consulting firm Mercer, told BI.

When employees have an issue, they often need someone to talk to about it.

“As a manager, you are the first port of call,” he said.

That’s one reason, Jesuthasan said, that having something like 20 direct reports would likely be “really hard.” For most managers, the couple of dozen direct reports that many tech companies are aiming for is probably the limit, he said.

Strong managers can powerfully boost a company’s ability to develop talent and its bottom line. A 2023 analysis from McKinsey & Company, for example, found that organizations with “top-performing” managers led to significantly better total shareholder returns over five years compared with those entities that had only average or subpar managers.

While flattening schemes may be successful at reducing bulk in the middle and speeding up decision-making, they can hinder future growth if they’re not well-managed.

Jane Edison Stevenson, global vice chair for board and CEO services at the organizational consulting firm Korn Ferry, told BI that removing layers from a management pyramid can help elevate those high performers. But flatter companies may fail to develop leaders who can pull together the disparate parts of an organization.

At some point, she said, “You’ve got to start to make a bet on the leaders that are going to have a chance to build muscle across, not just vertically.”

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