Why Middle Managers Will Outlast Us All
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Companies are supposed to be as efficient a possible in the name of maximizing profit.
So then why are so many bloated with middle management? And why are they likely to outlast everyone else with a simple hack of job security? If you listen to every activist investor or business manager trying to turn a company around, you won’t have to wait long for them to talk about cutting out middle management as one of the steps in their plan to return a company to profitability. Hierarchical corporate structures where senior executives are separated from front line staff by multiple levels of vice presidents, managers and team leaders are falling out of fashion.
Overly complex management structures are frequently satirized as a relic of outdated corporate America. For its first six seasons the Scranton branch of Dunder Miflin reported to David the CFO of the company. A Chief Financial Officer has no business getting involved in the day-to-day operations of a sales branch, that should be handled by an operations manager, like a Chief Operating Officer or one of their reports. I don’t know if this was an intentional addition by the show runners but it’s hilarious because of how common it is for people in companies with complex corporate structures to end up with misaligned roles like this.
No real business wants to be Dunder Mifflin, they want to be like the tech companies that pioneered flat management structures and are now worth trillions. A survey conducted by researchers at the Wharton School of Business on three hundred [300] major American companies found that corporate hierarchies were indeed getting flatter with fewer positions between the CEO and entry level staff.
You might think that’s a bad sign for the career prospects of the middle manager, but you would be wrong. Middle managers aren’t going anywhere, and they actually have more job security than you do for three big reasons.
The first reason is that middle management IS actually important. Management hierarchies were adapted from military command and militaries throughout the ages have used them… because they work. According to an article published by The Wharton School of Business in collaboration with the University of Pennsylvania, flat organizational structures led to underperforming business performance in start-up companies which were the organizations most likely to adopt this style.
The research found that structures without middle management were actually LESS agile than companies that kept a typical corporate hierarchy.
When teams get too large, they are prone to spending too much time on meaningless collaboration instead of achieving objectives and management is spread too thin to give support to their team or provide adequate oversight. Managers that oversaw six or more direct reports and answered to a senior manager that also had six or more direct reports both had less capacity and less pressure put on them to closely monitor issues in their team meaning that underperformance, malpractice, and fraud was more likely to occur and go unnoticed with companies that did away with middle management.
Theranos, FTX and WeWork all made a very big deal about their flat management structure.
Interactions with a superior are usually not negative, smaller more organised teams also make getting feedback, permissions or simple facetime with a boss easier instead of promoting a culture where staff in large teams need to fight amongst one another for the attention of their boss. The author of the article also pointed out that thanks to the power of compounding most companies don’t even need that many levels of management. If you were a manager with six employees you could place them all directly under you in a flat management structure, or you could have two middle managers each with two analysts of their own.
Now sometimes this does go too far and corporate structures can easily get too hierarchical, but this is just the first reason.
So it’s time to learn How Money Works to find out why middle managers aren’t going anywhere no matter how much people make fun of them.
