Is your company’s org chart top heavy or bottom heavy? Similarly, are your managers spread too thin, or could they take on more direct reports?
Let’s look at the aggregated benchmarks across all company stages in Pave’s dataset and then break down the findings by company stage. Note that part-time, hourly, and S-level employees are excluded from this study.
What is span of control?
Span of control refers to the number of employees a manager is responsible for. In other words, how many direct reports a manager has.
Common factors affecting span of control include the complexity of your organizational structure, the skill level across your workforce, geographical dispersion of your teams, company culture, and aligning with the business strategy.
How Job Levels Impact Span of Control
For the typical tech company in Pave’s dataset, the most common job level is P3 – 29% of employees are P3s. Note that as companies get larger, the proportional share of P5s and P6s among all ICs increases.
The typical company has 77% of its employees as ICs and 23% of its employees in management (M3–M6 and E7–E9). Note that as companies get larger, the proportional share of managers (M3 through E9) decreases.
Lastly, the typical company has 13% of its employees in director-and-above levels of seniority. Note that as companies get larger, the proportional share of directors-and-above decreases. Perhaps this is due to more scrutinous leveling standards, as well as a holistic “loading” of the management layer that exists less at earlier stages of company maturity.
What is the ideal span of control ratio?
The ideal span of control is influenced by many factors, so each company will have to determine what the ideal span of control is for their particular organization. Here are two concrete concluding questions to ask yourself:
What percentage of your employees are directors or above? If greater than 13%, you might be considered top-heavy, though it varies by stage.
What percentage of your employees are managers/directors/VPs? If greater than 23%, you also might be considered top-heavy and your managers may be able to take on more direct reports, though it varies by stage.
Is your company overloaded with Directors, VPs, and CXOs?
If your company has too many Directors/VPs/CXOs compared to the attached benchmarks, I can share two key possible reasons why:
1. Your Levels are Inflated
In tech, a Director supposedly “manages at least two or more teams or sub-teams via other managers.”
However, I see cases every day of Directors (M5) who do not actually have true Director-level scope, particularly at earlier stage tech companies.
Is it worth inflating titles to attract talent, or will this lead to both compensation and cultural debt in the long-term?
2. Your Org Chart is Too Hierarchical
Mark Zuckerberg, Founder and CEO of Meta, led the way with his “Flatter is Faster” memo written March 14, 2023.
According to Zuck, “it’s well-understood that every layer of a hierarchy adds latency and risk aversion in information flow and decision-making. In our Year of Efficiency, we will make our organization flatter by removing multiple layers of management. As part of this, we will ask many managers to become individual contributors.”
Seems like it is going pretty well for Meta. Their closing stock price on March 14, 2023 when the memo was written was $193.44. Today, it is $594.02. That is a ~208% return in about 1.5 years.
In addition to the percentage of your org chart that is director-and-above, I would also recommend comparing your average span of control to the attached market benchmarks. For instance, companies with 1,000 or more employees in Pave’s dataset have an average of 5.89 reports per manager.
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