You are the owner of your business. How many people do you manage? How many people should you manage?
Harvard Business Review estimates the ideal range for an experienced manager is between five and nine direct reports. Inc. puts the sweet spot at seven.
The ratio of managers to direct reports matters because it explains why some small companies grow and others plateau. Every business is different, but you can loosely think of a company’s evolution as a series of stages with an invisible gate holding most owners from progressing to the next stage:
Stage 1: Surrounded by Doers, you manage your people (up to 9 employees)
You direct a handful of doers. Many owners get stuck in stage 1 because they fear delegation. Owners don’t trust employees enough to do the work without their direct oversight. You’ve experienced the constant parade of staff coming to you to ask for decisions or instructions.
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. But they can be hard to find and take time and the right attitude to develop.
A great way to reduce those constant interruptions is to have Standard Operating Procedures – nothing too fancy. An Excel spreadsheet with a tab for each of your main business areas. Then add detail whenever any colleague has a query.
However, those owners courageous enough to hire some managers will graduate to stage 2.
Stage 2: Having Managers manage people(10–40 employees)
In a Stage 2 company, you start to appoint or promote people to be managers. They are likely to start as working supervisors but as the business grows, they take on a more managerial role. Suddenly you don’t have to manage all your people! Gradually one or two more managers well be needed to look after specific functions. The emphasis is on managing against the plan the owner gives them. Good managers understand the process they are being asked to manage. They are detail-oriented and stick to the plan.
You may have the beginning of a management team, very focused on the day-to-day detail and fixing operational problems.
While managers may contribute to the plan, they are not usually responsible for creating it. Managers typically need their leader(s) to supply their plan, which is why many companies stall out at stage 2.
Stage 3: Not just you as the Leader (40 + employees)
For our purposes here, let’s define a leader as a person who can lead a team through more than one layer of management.
Let’s imagine you have a sales leader who oversees two sales managers, each of whom has five salespeople reporting to them. The leader’s job is to set direction and to provide a vision and plan for their managers to execute. They are leading a team of twelve (two managers plus ten salespeople) while simultaneously managing two direct reports.
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 2, you have two options: either you need to hire leaders to join your business, which risks alienating your managers, or train managers to become leaders. Both strategies are hard and time-consuming, which is why many companies get stuck at stage 2.
A real life example
Matt Driver owns Mint Support, a specialist provider of IT services to schools and colleges. The business has progressed from stage 1 to 2. There is now a management team with 5 managers managing all the functional parts of the business.
Regular weekly meetings keep the team focussed on operations, sales and customer service. Matt now finds he has time to work on the strategic developments for the business. Plus, he can take time off without getting those annoying work phone calls to ask him questions!
For more of Matt’s story and how he got to Stage 2 click here.