Corporate Culture When the Middle Is Squeezed

Compliance officers love to talk about corporate culture and leadership, so today let’s look at a fascinating story in the Wall Street Journal about the dwindling number of middle managers in corporations. What would be the implications for corporate culture from this idea that supposedly encourages agility and innovation, but might leave lots of workers feeling alone and overlooked? 

The article, published over the Labor Day weekend, says that thinning the ranks of middle managers is all the rage these days. Google has done it; Microsoft has done it. Estee Lauder, Bank of America, Bayer, United Parcel Service, Axon Enterprises — the article offers a long list of companies that have shed middle managers in recent years, in either small trims or large cuts. 

The theory behind these cutbacks is that middle managers create bureaucracy and slow down decision-making, so if you get rid of middle managers everyone else will be able to make decisions and act more quickly. That, in turn, makes organizations more “nimble.” They can embrace innovation and respond to changing market conditions more quickly, and outmaneuver competitors to success. 

(Of course, what’s not said about this theory is that it’s also a great way to cut costs quickly. That, in turn, leads to more profits in the short term, which gooses up the company’s share price, which is how most senior executives pushing these cuts get their zillions of dollars in wealth. Then said senior executives can depart after a few years, much better off, leaving any strategic or operational messes for the next guy to clean up.)

The practical consequence of this theory is that middle managers who still have a job end up with far more employees to manage. For example, research firm Gartner estimates that in 2017, each manager had roughly five employees to oversee. By 2023 that number had tripled to one manager for every 15 employees, and all evidence suggests the figure is even higher today.

That means less time for managers to act as coaches and mentors for employees, offering them guidance on what to do, how to succeed, or how to navigate difficult situations. Instead, the managers only have time to push work that needs to be done through the pipeline, while feeling frazzled, overworked, and paranoid about losing their own jobs in the next round of cuts.

So how do ethics and compliance officers handle a mood in the middle like that? 

Assessing Risks of a Meager Middle

To assess the corporate culture risks from this new approach to the org chart, let’s consider things from the middle manager’s point of view. Our hypothetical manager has survived the purge, and has gone from managing five people to managing fifteen. So what happens next? 

The WSJ article summed up the situation in one sentence: “Harried managers need new strategies to run ever-larger teams and keep up with an ever-expanding list of duties.”

Those strategies will probably involve streamlined approval processes for at least some transactions (possibly many of them), and more reliance on technology to monitor employees’ performance. They’ll also probably involve delegating more authority and judgment to employees, so managers won’t be mired in endless approval processes for their larger teams.

The WSJ article even cites some examples of all that in practice. One manager at Bayer now uses artificial intelligence to review and approve most expense reports; another pared back one-on-one meetings with his direct reports from weekly to every other week or even monthly. 

Those strategies all might help the manager do his or functional job — that is, getting a certain amount of work output accomplished; but compliance officers need to ask a different question. What gets squeezed out of the manager’s role under this scenario? 

Most likely, what gets squeezed out will be guidance, coaching, mentoring, team-building, leadership by example, and so much else that supports a strong culture of ethics and compliance. 

Even if those things don’t vanish entirely, their mere diminishment could have profound implications for the speakup culture you want to cultivate, the training and messaging you deliver, and even the compliance risks that will occupy your time. 

For example, time and again we’ve seen evidence that most employees first try to report suspicions of misconduct to their managers. Well, how easy will that be when you’re one of 18 or 20 employees asking for some of the manager’s time? 

We talk constantly about the importance of managers listening to employees, and employees feeling heard, as the foundation for a strong speakup culture. How will take work if the manager is swamped with other demands? How will the compliance function anticipate that frazzled and strained middle management, so you can offer them better support? 

And how will you, the compliance function, even do that when yours is probably another business function with fewer middle managers too? 

Is This Even Going to Work?

Honestly, there are so many internal contradictions within this fire-the-managers philosophy that I’m not sure it will endure. For example, if there are fewer managers providing less guidance to more employees — wouldn’t that mean that you need more structure and process to guide those employees through their tasks? But that stifles the innovation and agility that supposedly gains from all this. 

On the other hand, if you cut middle managers and give employees more power to act and exercise judgment, how do they learn to exercise good judgment when you’ve sacked all the role models and mentors showing them what good judgment looks like? 

One theory is that (you guessed it)  AI will ride to the rescue, in the form of interactive policy manuals and customized, on-the-spot training all rolled into one AI chatbot; that chatbot will then provide employees the guidance they need. 

I’m not sure I buy that. AI might help them in their work tasks, but I’m skeptical AI can be a substitute for the strong corporate culture that managers traditionally supported. If anything, AI might lead to an even more atomized culture, especially if your business uses remote teams scattered across large geographies. Good luck building a sense of “We’re all in this together and the company cares about me” camaraderie in that environment.

Another school of thought is that maybe all this won’t work; that it’s only an experiment, and perhaps in the fullness of time we’ll find that it failed. Josh Isner, president of Axon Enterprises (maker of tasers), even says as much in the WSJ article: “The worst thing that happens is we hire a few more managers, but the best thing that happens is we pick up a ton of speed and give people a lot of autonomy.”

With all due respect to Isner, a lot worse can happen than that. Isolated and uncertain employees, led by frazzled and overworked managers, can be a recipe for disaster. The weakened bonds of corporate culture, and the more individualized sense of employee ethics, will challenge corporate compliance programs no matter how much innovation and agility the company might gain. The most severe outcomes of fraud, security breaches, or harassment could easily dwarf any of those gains, assuming the gains happen at all.