Amazon is planning to cut approximately 14,000 manager positions by early 2025, potentially saving the company up to $3 billion annually, according to a Morgan Stanley analysis. This move is part of CEO Andy Jassy’s strategy to enhance operational efficiency by increasing the ratio of individual contributors to managers by at least 15% by the end of Q1 2025.Jassy emphasizes a need for a culture of urgency, ownership, fast decision-making, scrappiness, frugality, and collaboration, aiming to have Amazon operate like the world’s largest startup.
Morgan Stanley estimates that this reduction could lower Amazon’s management workforce from around 105,770 to approximately 91,936 globally, resulting in annual savings between $2.1 billion and $3.6 billion, which would represent 3% to 5% of Amazon’s projected operating profit for 2025. Although Amazon has acknowledged recent growth in its management ranks and stated that a review of team structures is necessary, the company has not committed to specific job cuts. The restructuring aims to streamline operations and reduce bureaucratic hurdles, with the potential for achieving the ratio change through reassignment rather than outright cuts.
Reportee-to-manager ratio: What’s the ideal number?
So, now comes the question, ‘What is the ideal number of reportee-to-manager ratio?’ Well, the ideal number of employees that a manager can oversee varies based on several factors. These involve factors like the complexity of the tasks, how experienced the team is, and what is the organization’s structure. Research indicates that a common recommendation for a reportee-to-manager ratio is between 5 to 9. This allows for balanced attention to each employee, without the manager getting overwhelmed plus it also allows the growth of communication and development opportunities for both ends.
For example, former Intel CEO Andy Grove suggests managers dedicate about one hour per week per report, which typically caps the number of direct reports at around nine to ensure sufficient interaction and feedback time. This is especially true when individual employees require significant guidance from their manager.
However, if we talk about a more standardized work environment, where the employees are experienced and require minimal oversight, the number of employees can be increased, sometimes reaching 15 to 20 subordinates per manager. However, if the employees need hands-on support from the manager then the situation can become overwhelming for the manager.
Therefore, the key is to find the right balance that will depend on the organization’s size, culture, and the complexity of roles being managed. For example, a manager overseeing a highly skilled or autonomous team can handle more direct reports than one managing less experienced employees.
Important factors to keep in mind when deciding on the right mix
While deciding the right ratio of reportee-to-manager, many organizations grapple to find the right balance that optimizes performance, efficiency, and employee satisfaction. One of the crucial aspects to keep in mind is the ‘Span of Control (the number of direct reports a manager supervises)’. This plays a vital role in determining the effectiveness of both the manager and their team. As per the information, the ideal span varies based on various factors, including the complexity of the work, how skilled the employees are, and what is the culture of the organization.
Here are five key factors to consider when deciding on the right manager-to-individual contributor ratio:
Complexity of Work: A crucial factor influencing the optimal manager-to-individual contributor (IC) ratio is task complexity. In roles that are intricate or require specialized skills, a narrower span of control is beneficial, allowing managers to provide daily guidance. In technical fields like software engineering or research and development, employees need frequent input, which can overwhelm managers with excessive direct reports.
In contrast, when tasks are routine or standardized, a manager can effectively oversee a larger team. In roles like customer service or production, where tasks are repetitive and require minimal oversight, a wider span of control is feasible. Research indicates that managers can effectively supervise 15 to 20 employees in these settings without losing efficiency.
Managerial Experience and Skill Level: The experience level of a manager significantly influences the number of direct reports they can effectively handle. Seasoned managers, with refined leadership and decision-making skills, can manage a broader span of control. Their ability to quickly resolve issues, delegate tasks, and make strategic decisions enables them to oversee larger teams with greater ease.
In contrast, less experienced managers often find it challenging to effectively manage a large team. They are still developing skills in balancing responsibilities, fostering team growth, and supporting individual contributors. Consequently, a narrower span of control, typically 5 to 6 employees, is more suitable for newer managers.
Employee Autonomy and Skill Level: The skill level and independence of team members significantly influence the ideal manager-to-IC ratio. Highly skilled and experienced employees who can work autonomously require less supervision, allowing managers to oversee more direct reports without compromising performance or support.
In contrast, teams with less experienced employees or those needing frequent guidance require a smaller span of control. This enables managers to focus on coaching, training, and providing feedback. Therefore, as team independence and skill levels increase, managers can effectively oversee a larger number of direct reports.
Communication Needs: The level and frequency of communication between managers and employees also affect the optimal ratio. In teams requiring constant interaction—such as those reliant on collaboration, feedback, or quick decision-making—a smaller span of control is crucial. This ensures managers have enough time for meaningful, regular engagement with each team member.
In contrast, if the team’s work is more independent and doesn’t require daily oversight, a manager can manage a larger span of control. In such environments, managers focus on high-level decision-making and problem-solving, enabling them to supervise more individuals while maintaining effective oversight.
Organizational Structure and Culture:The overall structure and culture of an organization play a crucial role in defining the span of control. In hierarchical organizations with rigid reporting lines, managers typically oversee fewer employees, allowing for closer supervision and clearer career advancement paths. However, this structure can lead to increased costs due to the higher number of managers needed.
In contrast, flatter organizations that emphasize flexibility and empowerment often adopt a wider span of control. In these settings, employees have greater autonomy, with decision-making distributed among the team rather than centralized with the manager. This approach fosters innovation and adaptability but necessitates a managerial style rooted in trust, allowing employees to self-manage effectively.