Middle Management Is Tough Enough As It Is.... If You're Going to Streamline Your Organization, Do It Right And Give Them "Space to Lead".

As companies worldwide reassess their organizational structures, Middle Management has become a focus of transformation efforts.

Recent headlines paint a stark picture: Amazon targeting a 15% increase in individual contributor-to-manager ratios by Q1 2025, Citigroup cutting from 13 to 8 management layers, UPS eliminating 12,000 management positions, and Bayer implementing a "Dynamic Shared Ownership" model to reduce hierarchies. 

You just have to google it - the news stream is louder than ever.

The Statistics are Telling

The role of middle managers – long debated in organizational theory – is now under intense scrutiny.

Middle managers accounted for 31.5% of corporate layoffs in 2023, up significantly from 19.7% in 2018, according to Live Data Technologies. This shift reflects a growing consensus that traditional management layers may impede the agility and efficiency demanded by today's business environment. 

Org Metrics: Blunt Instrument of Choice for "The Flattening"

More Than Just Structure: The Case for Holistic Change

The mixed results from management-focused transformations highlight a crucial lesson: sustainable improvement requires more than just structural change.

Companies that successfully transform their management structures typically:

• Take a measured, strategic approach rather than pursuing pure cost reduction
• Re-invest in remaining managers' capabilities
• Maintain clear career paths to ensure progression routes to nurture potential
• Use technology to augment rather than replace critical management capabilities
• Focus on sustainable organizational health practices for the long run, versus “one and done”.

Evidence supports this comprehensive approach.

McKinsey research shows that companies in the top quartile of organizational health deliver three times the returns to shareholders compared to their peers. Similarly, Gartner finds that organizations taking an integrated approach to transformation are 3.5 times more likely to achieve their objectives.

Creating a healthy and effective organization requires a more integrated approach than just hitting org design metrics. As the organization celebrates its lower cost of human capital, it's important to reinvest some of those savings.

Leverage the Upside and Mitigate the Downside...

... To Safeguard the Value of "Fewer Better Managers"

Organizational Health in Practice: "Space to Lead"

During a key period of transformation in my career, my team and I led an impactful program focused on optimizing organizational health - "Space to Lead".

We experienced the usual symptoms and opportunities that many large global complex organizations face: too many layers between the CEO and frontline, too many leaders of small teams, opportunities to improve spans of control. But importantly, managers often expressed significant administrative burden, limiting their ability to focus on strategic priorities. Additionally leaders and employees at all levels felt that decision-making was slowed down by unclear decision rights and perceived overlapping accountability.

They felt less than fully empowered.

At an enterprise level, the case for change was both empirically and instinctively clear.

Employees felt they could be better given "Space to Lead", and we recognized this was a key part of accelerating the company's strategy strategy.

To increase the odds of success, we anchored our approach around core principles:

Foundational Program Pillars, with a Phased Timeline

We built the program around three intentional complementary pillars:

This was complemented by an objective and data-informed approach that allowed for alignment around key principles, testing and learning, and creating evidence to support change adoption. The program followed a systematic but flexible approach:

Assessment & Design

This phase assessed the current organization through several analyses – focused on (for example) org design health, cultural and engagement measures, manager capability assessments.

Given quantitative and non-subjective nature of organizational structures, coupled with mature research in this space, a principal focus of the assessment involved deep benchmarking on where we were following or straying from organizational design best practices.

This level of objectivity allowed us to hold up a mirror to the organization, mostly remove personality and emotion

Key Lessons Learned:

💡 Debate on the Validity of Organizational Data: even when working with current organizational data, when data and insights become personal to a leader, expect some avoidance such as “Well, Workday hasn’t been updated yet…” or “well, we’re different to our peers”.

• Be transparent on data sources, and external benchmarking or internal comparisons (generally all teams/functions within a company are subject to the same data integrity)
• Push for a mindset of “even if the data isn’t perfect, is it good enough to identify an opportunity?”

💡 Build in Customization to Account for Organizational Differences: not all organizations do the same type of work.

• Large homogeneous organizations, with similar roles, doing similar and often high-volume transactional work (e.g. parts of Sales, Manufacturing, Operations) may suit larger spans of control where less manager/leader collaboration is required.
• Organizations focused on complex and deep knowledge-based work (e.g. Legal), or smaller but highly geographically dispersed organizations may be better suited to smaller spans of control.
• Best practice organizational design concepts are great, but always within context of reality.

💡 Be obsessively clear on what your Organization Design principles are:

• Are they guidelines, rules? Are they advised or mandatory?
• Who is accountable for progress? What is HR/Finance’s role - to enforce, advise, verify?
• What is the source of truth, and how will progress be shared, and with whom?
• Are there support mechanisms or consequences, where standards are not embraced?

Ultimately, we define "Golden Rules" for organizational health:

Pilot Implementation

The adage is that with most transformations, you have three groups – the eager adopters, the resistors, the ambivalent who are waiting to be swayed either way. A third, a third, a third.

It was imperative to choose the right pilot organizations that would maximize our learning and the chances of successful adoption.

We identified key success factors to intentionally target the most appropriate areas to pilot our new approach. The pilot organizations should:

✅ Be material enough in size and scale to have meaningful results

✅ Have supportive and engaged leadership sponsors

✅ Be complementary in nature e.g. a function and a business unit

✅ Be reflective of the social processes applicable to our broader organization.

With the support of two large business units, their leaders and key stakeholders, we successfully executed two pilots: one within a manufacturing environment and the other within a discrete multi-billion Euro revenue business unit.

From the pilot we demonstrated:

🚀 Span of control increased (progress toward 6.25 target)

🚀 Layer reduction on track

🚀 Improved employee engagement scores

🚀 Faster decision-making reported by the vast majority of leaders

This not only supported that the concept worked, but the pilot leaders were essential in convincing other leaders that the framework had numerous measurable benefits for employees, managers and the business. Win-win.

Scaling Across the Enterprise

With a proven concept, the “Space to Lead” approach was then adopted Enterprise-Wide.

To move an organization towards new "Golden Rules" targets, you generally need structural change.

Typically, there are only two main ways this happens in organizations - transformational step change (a "reorg" or RIF), or organic natural employee movement over time. Each requires differences in the approach to implementing "Space to Lead" and providing key stakeholders with the necessary support.

Step Change: Don't Waste a Good Transformation

Transformations are hard for everyone. Embedding Org Health principles is an imperative in any transformation, otherwise it’s a wasted opportunity. 

The Golden Rules should provide core principles for any organization design, whereas “Space to Lead” more broadly should also be adopted in all aspects of the Operating Model and the Change Journey – culture, decision-making, performance, job design, onboarding, upskilling of new leaders and managers. 

The transformation team (e.g. strategy, transformation office, OD/OE team) should be fully onboarded to the “Space to Lead” strategy, principles and implementation approach, and full advocates and change agents for its adoption.

At a previous employer, I led a significant transformation that was triggered by the unprecedented impact of the pandemic on their industry (negative oil prices!). This required significant cost saving measures (several billion dollars), and the acceleration towards a more future-proofed operating model.

By not wasting a good crisis, this downside event gave the opportunity to realize:

🌟 Fewer but Better Leaders (-22% executive roles, unblocking incumbents to accelerate high potential career plans and improve diversity)

💪🏼 Spans of Control (from 6.2 to 7)

⬇️ Reduced same Job Grade reporting by 50%

✅ Reduced layers from 9 to 8

💫 A leaner, more efficient and effective operating model (with better agility, decision-making and speed)

LEVERAGING NATURAL ORGANIZATIONAL EVOLUTION: THE ORGANIC PLAY

When an organization is not faced with the disruption of transformation, employee movement still provides incremental opportunities to optimize the organization. After all, a vacancy is easier and less emotive to eliminate that a person in role.

Imagine this simple scenario:

• I am a Senior Director, with several direct reports; two of whom each manage small teams of three.
• One of these two accepted a new role, elsewhere in the company.
• Knowing about the planned move, before allowing a job requisition to be created, the HR system flags an opportunity to optimize the leader’s organizational design health. HR is there if needed to support.
• The Senior Director can choose to combine the two teams of three under the remaining manager, adopting healthier spans of control. They could elect to repurpose the headcount towards a seventh team member if needed, or eliminate it if those resources weren’t needed, or better deployed elsewhere.

There are an emerging number of digital tools that allow managers (and HR), to assess opportunities in their organization where they can improve organizational best practices.

If an employee on average moves once every three years, you could in theory optimize the full organization via clear Golden Rules, just by enabling “augmented leaders” with smart organizational decision-intelligence.

Sustaining Organizational Health: The Critical Last Mile

Many transformation initiatives don’t stick, because little thought is given to “After Care”, with people focused on moving on to the next initiative. 

This puts at risk all the efforts and pain of executing the change. Key Actions can be taken to prevent regression to the past state:

1. Communicate and celebrate success:

📐 Measure the benefits and communicate the benefits for all. For example, increased employee engagement, financial results, reduced attrition, or “friction” that harms decision-making, accountability, empowerment, ability to innovate.

🏅 Celebrate adopters through storytelling and recognition. Provide employees with stories about what “good looks like” – for example, the leader who eliminated a leader vacancy for the good of the team; or a leader who bravely took accountability for a decision and moved the strategy/team forwards.

2. Provide leaders and managers with the education, rewards and AI-enabled decision-intelligence to keep improving the health of their organization:

📉 Define the metrics that demonstrate organizational health – team feedback, manager90 scores, attrition data, engagement surveys – and provide them with the cockpit data to fly their plane well.

🤖 Use AI to coach them through real-time organic opportunities to optimize their organization structure, as employees move into/from their organization. You can’t expect people to spend their days focused on org health – give them the support when the most need it.

3. Trust but verify that Leaders and Managers are complying with the Golden Rules:

🔎 Track and macro-organizational health across a wide range of metrics, focusing on what your organization and leadership believe is most important. Democratize these insights.

🙌 Celebrate the pioneers; Aid those who need help, assuming good intent. 

🚫 Finally, take corrective action where counter-productive behaviours are exhibited – for example, hoarding talent or headcount “power plays” or title inflation for personal gain.

Making it Work in Practic: Key Success Factors

My experiences at Sanofi, Shell and Nike highlight several critical elements for success in organizational health transformation:

1. Leadership Alignment and Sponsorship: 

• Active executive engagement is key – advocacy and accountability for outcomes and active role modelling

2. It’s not just about the org or numbers:

• “Fewer, better leaders” need more intentional talent bets
• “Fewer, better leaders” require more feedback loops and leadership development
• Culture and ways of working are the lubricant for the optimized organization – make sure there is adequate time spend on their definition, alignment and adoption

3. Balanced Implementation Approach:

• Ensure the approach is strategic rather than purely cost-focused
• Test your design to ensure it benefits all stakeholders
• Balance transformational step change, with organic incremental improvement
• Have a plan for sustainability – don’t let the memory foam come back…

4. Strong Change Management

• Stress the benefits of “Space to Lead” to all stakeholders and show progress with data
• Take the emotion out of it – it’s not personal: let democratized insights show “why?”
• Celebrate pioneers and help the undecided/hesitant move in to the “I’m in!” camp
• Focus on the moments of truth, and walk the talk (for example, when a newly empowered leader embraces their accountability and takes a thoughtful risk, but the results aren’t great – make it a learning lesson not to repeat, not a reprimand).

OK... some last thoughts on AI - It wouldn't be 2024 without considering the impact of AI on management and organizational health 😎

While there have been many evolutions in the workforce, from the establishment of the 

5-day week, to collective labor agreements, to offshoring trends, the impact of AI on the workforce must be one of the most rapid, disruptive and hotly discussed topics ever. 

Humans have generally adapted through all these advancements (work didn’t decrease with the steam engine, electricity or computing), and most argue that we will continue to for the foreseeable future.

In the short-term, quickly evolving Digital & AI tools are giving the “Augmented Manager” more support than ever: Decision Intelligence (predictive analytics, scenario modeling, performance tracking), Manager Enablement (task automation, collaboration), Change Management (comms platforms, engagement tracking, progress monitoring) … and more.

An immediate and unsettled debate is whether we are facing a future of manager augmentation or replacement, depending on how bullish you are about AI and AGI. 

While I don’t think we are necessarily yet close to an answer, what is clear is that managers need to more quickly adapt considering these technologies. 

When GenAI was first unveiled, a popular quote attributed to Economist Richard Baldwin at the 2023 WEF Growth Summit said:

Rasmus Hougaard and Jacqueline Carter argue the same in an insightful article in the Harvard Business Review. They propose that the AI-Augmented Leader leverages AI in a Both/And manner in three key areas – compassion, wisdom and awareness – elevating the humanness of what it means to be a leader.

So, to Conclude

The nature of leadership will continue to evolve, whether it is through technology, or evolving leadership/organization models such as hybrid, dynamic, agile structures.

However, without the “Space to Lead” – many of these advancements will be hampered by the perennial problems of organizational complexity, with overlapping, redundant or overstretched leadership roles. 

So, it’s important get the foundation right, investing in “fewer but better leaders and managers” and creating the right culture and ways of working for the benefit of all.

Andrew Kilshaw

Founding Partner, TalentOptima

www.talentoptima.co

andrew@talentoptima.co