Director's cut: Amazon and Google getting rid of middle managers at the expense of future productivity
Director's cut: Amazon and Google getting rid of middle managers at the expense of future productivity
After huge recruitments during the pandemic, the technology companies are adopting a more economical organizational structure. Even if efficiency is expected to improve in the short term, the move may cause significant cumulative damage
This occurrence is familiar to too many workers. The direct manager goes on vacation and suddenly everything flows. There are no long and unnecessary meetings, no conflicting instructions while working on a project that only confuses and makes things more complicated for everyone, and no unnecessary criticism either. Everyone just does their job quickly and efficiently and produces much more. Everything just works as it should. So much so, that the employees begin to wonder - do we even need this manager?
The exact same question has been asked in recent weeks and months not only among employees, but also among the heads of technology giants such as Meta, Amazon, Google and Microsoft, who are forced to make huge cuts against the background of the ongoing economic crisis. And it seems that they more or less came to the same conclusion: we don't need all these managers. In fact, we don't need most of the middle management layer in the organization, and if we get rid of this layer we will be much more efficient. At the same time, although such a move can lead to a significant improvement in efficiency in the short term, experts warn that in the longer term it may have severe effects on the organizational culture, morale and employee performance.
The hot trend among the technology giants these days when it comes to cuts is the flattening of the organizational structure. Instead of a thick layer of middle managers, they make a transition to a more efficient and leaner organizational structure, where an employee's contribution to the final product is more tangible. Middle managers are fired or transferred to the positions of "individual contributors". The founder and CEO of Meta, Mark Zuckerberg, who led some of the deepest cutbacks, defined it as "fewer managers who manage managers", and placed the flattening of the company's organizational structure as one of the goals of his "year of efficiency". Twitter's CEO Elon Musk said close to his takeover of the company that it seems to have 10 managers for every employee who writes code. Amazon, Salesforce and Spotify are also among the companies that have explicitly stated their intention to reduce middle management.
Some of the layoffs were really intended to cut the unnecessary fat as during the height of the pandemic, the companies hired more workers than they were able to accommodate, in some cases while creating hidden unemployment. But, part is intended to reduce the layer of middle management, either through layoffs or through changing the organizational structure and transferring managers to executive positions.
The consequences in the short term are expected to be positive. "Companies are looking at efficiencies and they're seeing that not only the layers, but also these kinds of inefficient, subjective performance structures are no longer needed," Professor Anna Tavis, head of the Department of Human Capital Management at NYU and one of the world's leading researchers in the field of labor relations and human resources, told Business Insider. She also noted that less hierarchy also means products can reach customers faster, because it requires reduced levels of review.
However, Tavis warns that in the long term, removing the layer of middle managers can lead to a number of negative trends that could cause significant cumulative damage to the organization. One of them concerns the occupational horizon of junior employees. According to her, for many of these employees success in a career is measured by the ability to advance to management positions, to the point of reaching a senior management position in the organization. Removing the middle management layer also removes this immediate promotion horizon for employees without managerial experience. "I think it's going to affect the longevity of the younger, up and coming professionals who are gonna be saying 'when am I gonna manage people?'" she explained.
Middle managers also have a substantial influence on the shaping of the organizational culture and the sense of satisfaction of employees. A survey by the Gallup Institute, which examined 50,000 teams or work groups in various organizations, identified clear differences in the sense of satisfaction, even between teams in the same organization. According to the findings, direct managers were responsible for 76% of the gaps in the staff's sense of satisfaction, while senior management was responsible for only 11%.
In addition, the reduction of the management layer imposes a greater workload on the other managers, which may impair their ability to guide subordinates and supervise their work. According to Gallup, an employee is able to effectively manage up to ten subordinates.
All of this is especially critical at this time, when tech giants are trying to reshape their corporate culture around different models of hybrid work.
The elimination of the middle class, to some extent, is a mirror image of the huge recruitments from the Coronavirus period. The money flowed, the demand for the companies' services increased, and they responded with a massive hiring reflex. This, without stopping to wonder if it is possible that the new trend is temporary and the growth will slow down or even reverse, and if there is even work to give to all the workers they recruit. Now, when the trend has reversed, they again react out of a reflex and rush to cut in places where the immediate impact on the organizational output will be the smallest. Again, without thinking about the long term consequences. Instead of operating with a vision of five years ahead, or even two years, they operate from quarter to quarter, trying to find the formula that will give them the best bottom line in the upcoming report. And when this is the method of operation, the chance that everything will blow up in their face is very high.
