Part 24 – 3 Management Ratios Every Startup Needs To Consider For Success

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How many mangers does your startup need?  At some point in your MVS (Minimally Viable Startup) you’ll need management help  to oversee the employees you hire. As you grow you’ll need even more managers to manage your growing cadre of workers. Or do you? The following three ratios may be obvious or heretical, but you should consider them when deciding whether you really want a manager.

1 – The ratio of managers to the employees they manage should never be greater than 1.

You don’t want to have more managers than you have employees. The more subtle implication is that no single group of employees should ever have more than a single manager.  Yes, this happens.  Breaking this ratio leads to all sorts of potential issues.  The individuals with multiple managers can be confused as to where their loyalties lie.  The individuals may start playing one manager off the other via “He said/she said” games.  Conflicting orders will cause frustration and anger.

You also need to consider the more insidious problem of the dotted-line to manager scenario.  This situation may be tenable in the early phases of a company where everyone is expected to wear multiple hats, but in larger companies it typically leads to lack of communication between the managers involved.

In both of these situations, a conflict of interest may arise at the individual level.  An employee may prefer one task by one manager over the other.  The ideal situation is a single person managing a group of individuals.  This leads to a well-focused team with clear direction and responsibilities.

2 – The ratio of the length of the longest management chain to the number of functional groups should be as close to 0 as possible and never greater than 1.

I’m defining the phrase “management chain” as the number of managers, in a direct line, between the top and bottom.  If you have 3 functional groups, say web design, coding, and marketing, if you have 4 or more managers in the chain, you have a cross-link issue somewhere or an extraneous manager managing another manager if you don’t have multiple managers managing the same group.

The closer to 0 this ratio gets, the flatter the organizational structure. A flatter structure tends to increase employee involvement since they feel closer to the top and tend to have higher visibility.

What happens if your company is so large and flat you can’t manage everyone alone? You need more managers.  As a general rule, the longer the chain (the larger the pyramid) the more issues you as the principal will miss. There is a fine balance between delegation, and handing off responsibility.  Too often a CEO hands-off the responsibility of management. The deeper the organizational structure, the more disconnected the individual workers feel.  The deeper the structure the more chance the overall message gets diluted, subverted, or lost down the chain.  The deeper the structure, the higher the likelihood of turf wars and internal politics. The deeper the structure, the more you are spending on management salaries. Individual manager salaries will go up as you climb higher in the chain.

3 – The ratio of managers to employees who know what they are doing should be exactly 0.

If you have a team of driven, self-starting employees they don’t need a manager.  They just need a direction and a goal.  They should be under your personal wing.  As far as I know, there is no business rule that says a CEO can’t manage a group of individuals who aren’t managers.  This group of individuals should be allowed to do what they do best and not treated as a “filre team” to help solve issues in the rest of the company.  Yes, I have seen this done.  Doing this will destroy the team and lose the benefits it originally had.

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