Many companies suffer from growing pains. An issue that often arises is – how many people can one person successfully manage? Harvard Business Review estimates the ideal range for an experienced manager is between five and nine direct reports. The sweet spot is seven.
The ratio of managers to direct reports matters because it explains why some companies grow and others plateau. Every business is different, but you can loosely think of a company’s evolution as a series of stages. In each stage there are barriers that can stop owners from progressing to the next level:
Stage 1: Doers (up to 9 employees)
In stage 1, you direct a handful of doers. You need people who can follow your standard operating procedures and execute them. Your best employees will often be generalists who can do a lot of things reasonably well. They thrive on variety and like the feeling of getting things done.
Many owners get stuck in stage 1 because they fear delegation. They don’t trust their employees enough to do the work without their direct oversight. However, those owners courageous enough to hire some managers will graduate to stage 2.
Stage 2: Managers (10–40 employees)
In a stage 2 company, the owner hires a small number of managers (usually less than five), who are paid to ensure their direct reports are executed. The emphasis is on managing against the strategy the owner gives them. Good managers understand the process they are being asked to manage. They are detail-oriented and stick to the plan.
While managers may contribute to the plan, they are not usually responsible for creating it. Managers typically need their leader to supply their plan, which is why many companies stall at stage 2.
Stage 3: Leaders (40 + employees)
The bigger you get the bigger the problems you can face.
While most leaders can manage, the opposite is not necessarily true. Leadership requires managers to learn a new set of skills. Leaders need to be able to communicate clearly, delegate effectively, and create strategy. If you’re stuck at stage two you have two options: either you need to hire leaders to parachute into your organization, which risks alienating your managers, or train managers to become leaders. Both strategies are hard and time consuming, which is why many companies often get stuck at stage 2.
Half Your People, Half Your Processes.
For an example of a company that successfully managed the transition to stage 3, take a look at Acceleration Partners, an agency specializing in partner marketing. Acceleration Partners is a people-centric business that helps brands reach and manage their influencer relationships.
In the beginning, the owner Robert Glazer began hiring people to help him manage clients and their projects. Acceleration Partners’ needs evolved as the company expanded: “Every time your company doubles in size, you outgrow half your people and half your processes.”
Glazer grew Acceleration Partners for 14 years, and by the time he sold it in 2021, he had an entire team of leaders overseeing a group of managers who were managing the people doing the work.
If you’re stuck it’s worth asking if you have the right people in place to take your business to the next stage. In the beginning, you will need managers you can trust. To graduate to stage 3 you’ll need people who can both manage and lead. Some managers may need training, while other areas of your business may need an entirely new leader to make the transition successful.
The skill sets you have at one stage, may not work for the next. To grow value in your business you need the right people, at the right time.