In a recent Business Insider post featuring his interview with Stanford’s Graduate School of Business, Jensen Huang, co-founder and CEO of Nvidia, was quoted as having over 50 direct reports. According to Huang, “those who report to the CEO (theoretically) require the least amount of oversight, so CEOs have more bandwidth than other managers.” He went on to say that “taking on more direct reports could even help CEOs level the organizational playing field... the more individuals with whom a CEO directly communicates, the less likely an employee’s stance at the company will be determined by their access (or lack of access) to critical information."
Running concurrently on LinkedIn, Bob Sutton, the well-known Stanford organizational psychologist, recently shared his countervailing thoughts around organizational hierarchy and control, and the healthy friction that hierarchy creates inside companies of varying sizes. Sutton posited that many individuals seek and crave a healthy system of organizational hierarchy, a perspective which, in its essence, runs counter to those who endorse flat leadership structures as optimal.
So… in the end… who’s right?
For many CEOs with oversight of growth-stage companies, the dilemma of too much or too little hierarchy is a uniquely acute challenge. I regularly coach and advise growth-stage company CEOs of all sizes, and far smaller than Nvidia. Over the past two years, each of these CEOs has led their respective organization through strategic business and cultural shifts. These shifts have coincided with personal shifts – from start-up leadership tendencies to more established leadership approaches, including best practice approaches to forming their senior executive teams. Unwaveringly, each CEO learned – mostly through trial and error – the importance of leadership team role clarity and size, as well as the art and science of leadership span of control, as they worked to achieve sustained organizational growth.
Finding The Sweet Spot
Growth-stage CEOs comprise and organize their leadership teams quite differently. Some prefer a streamlined design focused on bringing together a few key leaders and the commensurate expertise that matters most to meeting the needs of the current or next stage of growth (more in line with Sutton). Others opt for a flatter and larger team (8+) to help ensure two-way direct access to key players overseeing critical company functions (more akin to Huang).
While there are numerous best practices for leadership team span of control in midsized companies, four to seven direct reports is generally considered optimal in the context of business model, strategy, and present operating conditions. Growth-stage CEOs referencing those benchmarks sometimes require a little bit of convincing to accept an alternative approach, coupled with a general willingness to bend or flex in their assumptions.
Consider the latest Edge Growth Index which surveyed a cross section of high-growth companies that represent wide range of size, complexity, industry, and leadership sophistication:
A key performance metric critical to determining executive leadership size and team span of control looks one level down. Regardless of the reporting company size, stage, and complexity, the average leadership team generally fell within the overall 4-7 team size metric, with an average span of control one level down at approximately 1:5 (i.e. +/- five people reporting into each single member of the executive team).
These growth-stage company CEOs ultimately came to similar outcomes for a few important reasons:
Making it Happen
Large cap tech companies often have 10 or more CEO direct reports and wider spans of control to support their complex global markets and customers. Lower to mid-market growth company CEOs, however, should not necessarily see this as a best practice, but instead ask themselves several important span of control questions as they navigate their own stage-centric growth:
Most importantly, growth-stage CEOs should approach the assessment and adjustment of senior leadership team size and span of control with an informed and holistic perspective. As part of this process, it is critical to amass and assimilate quantitative and qualitative data, a comprehensive understanding of the current state of leadership effectiveness, work design across the business, decision-making processes and bottlenecks, and the impact of both hybrid and remote distributed workplace models on the organization.
In making it happen, here are a few additional areas worth considering:
Regardless of what approach a growth-stage CEO chooses, determining leadership team size and span of control will have a direct and defining impact on talent attraction and retention, cultural dynamics, and company operating performance.