Corporate dysfunction doesn't magically appear from thin air.

Take a look at the tech news from the last 12-months. Companies conducting layoffs because they over hired. Bloated projects or projects which should never have been funded are now being cancelled.

The inevitable finger pointing misses a critical point. You'll see, they'll often blame the leaders of the company for the over hiring.

"Why did they fund that dumb project to begin with? Are they idiots?"

If you talk to those leaders, you'll quickly realize that they're not idiots. Oh, we all love a simple narrative. It's much easier and simpler to assume that you'd do a much better job than that SVP or CEO. Because you knew that project would never work out.

But you didn't look at the projected market share. The competitive research. The long-term plans, which did actually have a path to profitability. The believable arguments that only two or three small things had to become true, and this project could succeed.

Hopefully, you'll realize that those SVPs and CEOs didn't write the analysis of that business themselves. Instead, they had a team of highly experienced leaders investigating the business opportunities. They did financial calculations and came to the conclusion that it was a great bet to invest in the Fire Phone, or Dash buttons, or a variety of other interesting ideas which didn't work out eventually.

What those SVPs and CEOs often saw was an overly aggressive and optimistic analysis of the opportunity, and what those organizations could build. And when everyone started doing layoffs, it felt like a good time to clean up those underperforming groups.

Now I'm pointing the fingers at those highly experienced leaders who write project proposals, request funding, and insist that the opportunities in front of them are huge and worth the investment.

Why would they make those mistakes? Because they're following the incentives.

What do I mean by incentives?

At a fast-growing company like Amazon (or Facebook, or Google, etc.) has been for 20+ years, managers are rewarded with promotions if their organization grows. If you're a level 6 manager, and you end up with 25 reports, you're almost guaranteed to become level 7 soon. It's by far the easiest way to get yourself promoted. This is collectively true at almost all leadership levels.

As a side note, at a slower growing company (or in a slower growing group), you're unable to grow your team through project proposals. Therefore, you grow your career by taking over a more important role, or absorbing another team. The political atmosphere at many corporations is the result of the incentives involved.

If you assume that many / most people are influenced and driven to pull the levers (incentives) which give them more money / promotions, you should assume that an incentive to grow your team would certainly incentivize you to… grow your team.

How growth incentives play out at companies like Amazon.

You'd love to believe that manager promotions at companies like Amazon look like this:

  • Extreme competence leads to significant projects being allocated to a manager.
  • That manager receives headcount for that project.
  • With that headcount, a manager delivers on important projects.
  • Successfully completing that project, and future projects, the manager is promoted.

Instead, for many promotions, this is how it was executed.

  • Competence leads to important projects being allocated to a manager.
  • That manager receives headcount for that project.
  • With that headcount, a manager delivers on important projects.
  • With enough headcount, managers are promoted.

First, why do I believe it was the second model, rather than the first?

  1. I've repeatedly seen level 7 and Directors try to promote a level 6 manager to level 7 with a small team. They severely struggled, even if the level 6 was incredibly competent. Delivery and success wasn't enough.
  2. As I was going up for promotion to Director, I was repeatedly told the minimum headcount necessary to be considered for promotion. It was the first (and almost only) measurable criteria on the list.
  3. If you had a non-failing level 6 manager with a team of 25, it would be incredibly easy to promote them. I'm absolutely confident that anyone could throw together a very basic narrative, and it would be approved.
  4. The main data (non-narrative) submitted for manager promotions (through the Director level) was team size. It was right at the top of the promotion document.

Second, why does that key difference matter? Both models expect competence, and delivery. So, why would it matter that team size plays such a critical role?

In the previous model, managers would know that promotions are the result of repeated demonstrated competence. Managers would be incentivized to focus on repeatedly demonstrating that they were hitting their projects out of the park. They would figure out ways to beat their date or delivery goals. They would try to deliver more than anyone else, with their current team.

In the second model, managers know that their promotions are the result of having a large team size. Which means that managers are incentivized to get headcount. Yes, that does often mean demonstrating competence, but it's competence for headcount justification, instead of delivery or customer results. Obviously, competence (and keeping your peers / leadership happy) is important for your career as well, but it does mean that your primary career driver is not to be the best at delivery. It's to be the best at growing your team.

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