One personal policy that Spansion employees have complained about is our “8x6” span-of-control policy that is a widely used best practice almost everywhere. We learned from the McKinsey Consulting Group in 2009 that Cypress’s organization was narrow, deep and ineffective. We have worked over the last three years on a high-level project to drive down the number of extra managers in the corporation from 284 to 45. What I’ve learned is that the goal of zero extra managers (every manager has a span of control of at least eight) is unachievable, and you have to stay after the organization continuously to bring the number down and hold it there. Replacing those 239 extra managers at an average cost of $175,000 per year with workers averaging $90,000 per year saved us $20.3 million per year! The Spansion organization, which has been thinned out by bankruptcy-mandated layoffs, presents a huge opportunity to simultaneously save money and create a better organization.
The right time to create a wide, flat organization is obviously now, when we are reorganizing the company anyway. In addition to financial benefit, there is a significant organizational benefit, especially for high-tech companies. Eric Schmitt, who was brought in to become the CEO of Google when John Doerr famously said that Google needed “adult supervision,” said the following of flat organizations:
“First, keep it flat. In most companies, there is a basic underlying tension: People claim that they want a flat organization so they can be closer to the top, but in fact they usually long for hierarchy. Smart creatives are different: They prefer a flat organization, less because they want to be closer to the top and more because they want to get things done and need direct access to decision-makers. Larry and Sergey once tried to accommodate this need by abolishing managers altogether; they called it a “dis-org.” At one point the head of engineering, Wayne Rosing, had 130 direct reports. But smart creatives aren’t that different; like any other employee, they still need a formal organization structure. The no-manager experiment ended and Wayne got to see his family again.
“The solution we finally hit upon was slightly less draconian but just as simple. We call it the rule of seven. We’ve worked at other companies with a rule of seven, but in all those cases the rule meant that managers were allowed a maximum of seven direct reports. The Google version suggests that managers have a minimum of seven direct reports (Jonathan usually had fifteen to twenty when he ran the Google product team). We still have formal organization charts, but the rule (which is really more of a guideline, since there are exceptions) forces flatter charts with less managerial oversight and more employee freedom. With that many direct reports—most managers have a lot more than seven—there simply isn’t time to micromanage.”
I hope this letter puts more perspective on the issues that have arisen over the 8x6 policy.
One personal policy that Spansion employees have complained about is our “8x6” span-of-control policy that is a widely used best practice almost everywhere. We learned from the McKinsey Consulting Group in 2009 that Cypress’s organization was narrow, deep and ineffective. We have worked over the last three years on a high-level project to drive down the number of extra managers in the corporation from 284 to 45. What I’ve learned is that the goal of zero extra managers (every manager has a span of control of at least eight) is unachievable, and you have to stay after the organization continuously to bring the number down and hold it there. Replacing those 239 extra managers at an average cost of $175,000 per year with workers averaging $90,000 per year saved us $20.3 million per year! The Spansion organization, which has been thinned out by bankruptcy-mandated layoffs, presents a huge opportunity to simultaneously save money and create a better organization.
The right time to create a wide, flat organization is obviously now, when we are reorganizing the company anyway. In addition to financial benefit, there is a significant organizational benefit, especially for high-tech companies. Eric Schmitt, who was brought in to become the CEO of Google when John Doerr famously said that Google needed “adult supervision,” said the following of flat organizations:
“First, keep it flat. In most companies, there is a basic underlying tension: People claim that they want a flat organization so they can be closer to the top, but in fact they usually long for hierarchy. Smart creatives are different: They prefer a flat organization, less because they want to be closer to the top and more because they want to get things done and need direct access to decision-makers. Larry and Sergey once tried to accommodate this need by abolishing managers altogether; they called it a “dis-org.” At one point the head of engineering, Wayne Rosing, had 130 direct reports. But smart creatives aren’t that different; like any other employee, they still need a formal organization structure. The no-manager experiment ended and Wayne got to see his family again.
“The solution we finally hit upon was slightly less draconian but just as simple. We call it the rule of seven. We’ve worked at other companies with a rule of seven, but in all those cases the rule meant that managers were allowed a maximum of seven direct reports. The Google version suggests that managers have a minimum of seven direct reports (Jonathan usually had fifteen to twenty when he ran the Google product team). We still have formal organization charts, but the rule (which is really more of a guideline, since there are exceptions) forces flatter charts with less managerial oversight and more employee freedom. With that many direct reports—most managers have a lot more than seven—there simply isn’t time to micromanage.”
I hope this letter puts more perspective on the issues that have arisen over the 8x6 policy.
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