As humans, if we’re really focused, we can keep seven (7) things in our heads at one time. When you add an eighth, something has to get dropped. So, in practice, a really good manager can handle her workload AND six (6) direct reports. If that manager gets a seventh direct report, something is going to fall through the cracks.So, a company that has a founder and three-six employees, is probably fine. However, as they grow, they HAVE to insert a layer of management or our human limitations will bring the organization down. The courage I mentioned above comes from the founder who has to admit that he needs to insert that layer. I’ve seen several companies get to that size and then get stuck. They can’t figure out why, every time they add a new person, something goes awry. Each time it’s because the founder has neglected to add the management layer. He’s uncomfortable handing over control. They might grow to eight people, then drop right back down to six. It’s worse at the next level, though. Simple math tells us that the next organizational block comes at about 40 employees. From a practical perspective, it’s more like 30. Not every manager can handle six (6) direct reports. When the organization starts to unravel at 30-40 employees, it’s a much bigger deal. A founder has to be willing to let go and add management layers if he’s going to continue to grow the organization.
I do a lot of work with small companies. These are the ones that have 8-20 employees. In many cases, they can’t advance their overall strategy because they’ve come up against organizational barriers. Barriers that can be reduced or eliminated, but the companies need the courage to do it. There has been research done about organizational sizes that I find fascinating. Since I can’t recall when I read about it, I’ll give you my summary: