When large organizations embark on a cost cutting exercise, the axe often falls fastest and hardest on layers of middle management. It’s an easy, obvious and, at first glance, plausible strategy. In theory, removing middle managers saves money, removes “dead wood”, and streamlines decision-making. In my experience however, there are some major problems with this approach:
The “dead wood” is often just as prevalent at board level, if not more so, so little to no operational benefit is achieved.
The people who avoid the chop are expected to take up the slack with no increase in compensation. At best they end up overworked and unhappy. At worst, they leave for greener pastures in short order, leaving the organization understaffed and overstretched.
In organizations where leaders prefer to pontificate and “strategize” rather than get their hands dirty (and there are a LOT of those), middle managers are the people who actually get things done. Getting rid of them leads to a drop in overall business performance, not an improvement.
And in case you’re thinking a better alternative can be found in the “flat” (i.e. non-existent) management structure of your average start-up? Show me a company with a flat management structure, and I’ll show you one in total chaos with an often fatal disconnect between what needs to get done, and who needs to be doing it.
Optimizing organizational structures is more complex today than it has ever been, especially now that regular presence at a central office is a thing of the past for many people. But there are ways to:
Establish effective management structures without increasing bureaucracy or creating siloes – by, for example, automating and integrating approval processes.
Optimize personnel costs without overburdening individual employees – by, for example, basing compensation on value contributed, not hours worked.
Give individuals the freedom to take responsibility and make decisions, without sacrificing accountability – by, for example, designing risk/reward thresholds within which employees are allowed to operate freely without fear of failure.
If you want some ideas about how to get all this right, we should talk.
Copyright Hamish Mackenzie, 2021. All rights reserved.