Bloomberg’s Jenny Surane reports that
Citigroup Inc. Chief Executive Officer Jane Fraser plans to get rid of five layers of management as part of her sweeping reorganization of the bank… [cutting] back to eight layers from 13 as part of the restructuring…. Already, the adjustments made by Fraser have allowed the company to eliminate roughly 60 management committees.Citigroup’s Fraser Plans to Remove Five Management Layers in Reorganization (Oct. 2023)
If they needed 13 layers to get their old results, how in heaven can they just ditch these layers?
Because they didn’t need them.
You NEVER need more than seven layers – not unless you’re a political organization at the top. (Think companies that are just extensions of a government, or, as in some countries, just are the government.)
Bain & Company, in a 2010 article, reported that of the 125 major corporations in their database:
Best-in-class companies in the database have average spans ranging between 10 and 15 direct reports and no more than seven layers.Streamlining spans and layers | Bain & Company (2010) [emphasis added]
That’s because you never, never, never need more than seven layers in your corporation. And only the truly international ones need that many; most firms, even massive ones, can be competently run with fewer layers.
It’s been interesting to see how many firms in my industry (international financial services) have adopted seven as the magic number for their spans and layers projects. They know that this is the fewest that they can have and still deliver results.
But why, you ask, do we need any layers at all? Hierachies are a function of the [insert your bogeyman here] that keeps us down?
Hierarchies, whether explicitly stated in “Boss – Subordinate” org charts or implicit in the power weilded by important people, happen because they are a natural part of human work social networks. When humans get together to accomplish a very large task, one that requires more than a year, they will start self-organizing into layers.
W.L. Gore & Associates, makers of GORE-TEX fabrics, is famous for having no bosses, but when you read the case studies, they still self-organize with some persons being able to make personnel decisions and determine pay of others. They self-organize into a single three-layer organization, which they can do because they keep everything at single facilities, and each one seems to have this three-layer emergent model. They never get more, because the layers are emergent. There was a layer above all of it, the Founder and CEO; not sure how it all works today.
(WLG’s emergent hierarchy is completely ruthless. It’s probably not the world that you would normally want to live in.)
This natural hierarchy occur because each successive layer provides more context for the work of the one below. At WLG&A, this emergent “boss” layer is there because the people who put themselves under that person believe that the “boss” adds value to the work. You have a leader because they add value to your work.
Not for control. Not for command. To add value.
When Citi decided to remove five (!) layers of non-value adding management, they were using some good science. Their move to eight, rather than seven, is likely because their consultants are using Elliott Jaques’s later – and, in my opnion, wrong – addition of an eighth level over the necessary seven, which would only be needed where organizations are also political groups. They likely believe that because they are so massive, with footprint in multiple nations across the globe, they are more like these latter groups than a normal, international organization. Given how interwoven they are in various nation’s govenments, they may even be right.
If your employer has more than 7 levels, many of them can never add value no matter how hard they work. Citi needs to lean up, so they decided to get rid of these very expensive wastes.