How to Review Your Organizational Structure and Headcount: A Practical Reference

I have reviewed structures and headcount in hundreds of organizations over the past 25 years. The same patterns keep appearing. This piece sets out the rules I apply, the evidence behind them, and the steps you can take to fix what you find. Use it as a working reference when you review your own organization.

Start every structural review with one assumption: your organization is overstaffed. Then look for evidence to disprove it. In most cases, you will not find that evidence. Organizations drift into overstaffing in good times, one defensible hire at a time, and the cost shows up later when revenue tightens.

Rule 1: Count the layers from the chief executive to the front line. The number should not exceed five or six.

Pick any function in your organization. Count the boxes from the chief executive down to the most junior employee in that function. If you count more than six, you have layers that can be removed.

A panel study of more than 300 large United States firms found that the number of layers between division heads and the chief executive fell by about 25 percent over the period studied, and the firms that flattened performed better on speed of decisions and customer responsiveness. Bain & Company's review of hundreds of company structures found that best-in-class firms operate with no more than 7 layers between the top and the front line.

How to fix it. List every layer in the function under review. For each layer, write a single sentence describing what work happens there that does not happen at the layer above or below. If you cannot write that sentence, the layer is not adding value. Remove it.

Rule 2: A manager with fewer than five direct reports is probably not needed.

Count how many direct reports each manager has in your organization. The number for most managers should sit between 5 and 15. Below 5, the role needs to justify itself on other grounds.

Bain's data shows that average firms have spans of 6 to 7 direct reports per manager, while best-in-class firms have spans of 10 to 15. For routine work such as call centers, shop floors, and standard transactional roles, the same data supports spans of 15 to 20 without performance loss. Gallup's analysis of 92,252 teams across 104 organizations in 46 countries found that small teams are not inherently better. Medium and large teams under capable managers consistently outperformed small teams under weaker managers.

The exception is the specialist supervisor. A senior actuary leading three other actuaries, or a chief surgeon overseeing two junior surgeons, can justify a narrow span because the work itself is technical and requires close oversight. These exceptions should be named, written down, and limited.

How to fix it. Pull the organogram. List every manager with fewer than 5 direct reports. For each one, ask: is this person a working manager doing technical work themselves, or are they purely a supervisor? If purely a supervisor with 2 or 3 reports, that role is a candidate for elimination. The subordinates can be absorbed by the layer above. Where the supervisor is doing genuine technical work alongside their team, convert the role into a working manager position with a wider span.

Rule 3: Eliminate managers who only manage other managers.

Find every manager in your organization whose direct reports are all themselves managers. These are pure coordination roles. They produce meetings, reports, and reviews. They rarely produce direct value.

The test is simple. If you removed this role tomorrow, what work would stop? In most cases, the honest answer is that some meetings would shrink, some reports would consolidate, and some decisions would arrive faster. That is a gain.

How to fix it. Identify these roles. Move their managerial reports up one layer. Reassign the coordination work to the higher manager, who now has a wider span but a flatter structure. Where the coordination work is genuinely full-time, that is usually a sign the structure below is wrong and needs to be redesigned, not that another coordination layer is needed.

Rule 4: The chief executive needs advisors, not subordinates.

The old model placed three or four executives between the chief executive and the rest of the business. The evidence has moved against that model for years.

Research using detailed data on more than 300 large firms shows that the average number of direct reports to the chief executive rose from about 4 in 1986 to about 7 in the late 1990s, and has continued to rise. Modern chief executives have direct lines into every major function of the business.

All key areas of the business should report directly to the chief executive. That includes finance, operations, human resources, sales, technology, risk, and any other function critical to delivery. A chief executive needs full visibility to advise the board properly. A chief executive who sees only what three deputies decide to tell them is poorly informed.

Stop the fight over titles at the top. The people who report to the chief executive do not need to hold the same title or sit at the same grade. They are advisors, not peers. What matters is the advisory value they bring, not whether their title says Director, Executive, or Chief. Energy spent fighting over titles is energy wasted.

How to fix it. List the key business areas. Confirm each one has a direct reporting line to the chief executive. Where two or three areas have been collapsed under one deputy, separate them and bring each head into direct contact with the chief executive. Where titles have been used to settle political fights, retitle the roles to reflect what they actually do.

Rule 5: Stop inflating titles. Pay for value instead.

Inflated titles cost the organization more. They distort pay relativities and raise remuneration expectations.

A National Bureau of Economic Research paper by Lauren Cohen and colleagues found firms in the United States avoid roughly $4 billion a year in overtime payments by giving managerial titles to non-managerial work, with cases such as Director of First Impression for what was, in practice, a front desk clerk. The same study estimated that firms save about 13.5 percent in overtime expenses for each strategic manager hired. Separate industry analysis found that 25 percent of technology jobs considered junior-level in 2019 carried senior titles by 2023.

Apply these rules to your titles:

There is one Chief in any organization, and that is the Chief Executive. Stop giving the title Chief to people who are not chiefs of anything. Most Chief Marketing Officers, Chief People Officers, and Chief Strategy Officers are heads of department who could be called Head of Marketing, Head of People, and Head of Strategy without any loss of clarity.

The title Director should be reserved for people who actually direct something. A Director should have decision authority over a function, a budget, and a team. If they have none of these, they are not a director. Call the role Manager, Lead, or Specialist.

Stop using Assistant, Senior, and Junior as cheap upgrades. These prefixes raise expectations without raising value, and they cause problems when the person leaves, and you try to fill the role at the inflated title.

How to fix it. List every title in the organization. For each title, write a single sentence describing what that role actually does. If the title and the sentence do not match, change the title. Pay people properly for the value they create. If you are using inflated titles because you cannot match the market on pay, address the pay problem directly.

Rule 6: Never trust a structure designed by the head of the function being reviewed.

When you ask a department head to propose a structure for their own department, the proposal will almost always be biased toward more headcount, more layers, and more positions. This is not a moral failing. It is what the incentives reward.

The economics literature has documented this for decades. Researchers describe empire-building behavior as the tendency for managers to expand their units beyond what creates value, because larger units bring higher pay, more political weight, and personal protection against being displaced. More recent work on talent hoarding, using personnel records from a manufacturing firm with over 200,000 employees, found that managers actively discourage their best people from internal moves because losing them is personally costly. The data is consistent across studies and across decades.

How to fix it. Every structural proposal must be reviewed by someone outside the function before it is finalized. The reviewer must have no career stake in the outcome. Internal human resources departments often struggle with this because they sit inside the same political system. Where the stakes are high, bring in an external reviewer.

The reviewer should ask, for every role in the proposal: why does this role exist, what value does it create, what would stop if it did not exist, and what work justifies the cost? Roles that cannot answer these questions clearly should be removed.

Rule 7: Run a full structural review every three years. Run a headcount review every year.

Most boards I work with have never asked for a full structural review. They wait for a crisis, and by then the structure has been wrong for years. The cost of asking the structural question early is some uncomfortable conversations. The cost of asking it late is people losing their jobs because the structure became unaffordable.

Every three years, the board should receive a full structural review covering layers, spans, manager-to-employee ratios, titles, and staff cost as a proportion of operating cost. Every year, each department head should produce a headcount review with workload data and a justification for current staffing levels.

How to fix it. Add structural review to the board calendar at three-year intervals. Add an annual headcount review to the executive performance cycle. Make the key ratios visible at every board meeting, so small drift gets caught before it becomes large drift.