How many people are actually delivering value?

I did some work for a client once. They had a delivery problem.

Don’t most companies?
 
Things just weren’t moving. Work was not getting done. Value was not being shipped to the customer.
 
And the leaders couldn’t work out why.
 
There are many reasons why this happens, so I figured I'd work to a simple management economics model - one which may be helpful for your work.
 
I suggested to this client that they do a short audit of the roles in their team, and who was actually delivering direct customer value.
 
Their department, or better to call it their span of control, was significant. Many hundreds of people employed to deliver value. Or were they?
 
I asked the leaders to instruct their managers to classify people’s roles (not people, but their role) into one of four categories:

1. Those directly building the product or service (i.e. - the actual value being sold)
2. Those supporting the product or service (i.e. - the actual value of the customer care being sold)
3. Those organising the people or work
4. Those supporting by doing administration

It’s a simple breakdown that doesn’t tell the whole story, but it can indicate whether the balance of delivery versus admin is out of sync.
 
In small companies you likely find more people doing roles 1 and 2, and fewer doing 3 and 4.
 
In large organisations you see those numbers flip. Sadly.

Companies are addicted to trying to control work and people, so they bloat their companies out with people who do roles 3 and 4 - organising other people and the admin that comes with that.
 
I’m not saying you don’t need them, but you don’t need as many as many leaders think.
 
In this organisation the numbers looked like this:

1. 20% of roles were building the product or service being sold
2. 10% of roles were supporting the product or service when live, or pre-sales.
3. 60% of roles were organising people and work...
4. 10% of roles were performing admin such as financial reporting etc

Their data wasn’t scientific, so these numbers will vary a little for this client, but it tells me (and the leaders) an important thing.
 
They have more roles designed around organising people and work, than those actually doing the work, or supporting the customer. 

Numbers and financials need adding to this picture at some point, but it's fair to assume that a large part of this company's salary expenses are also going on organising people and work - not necessarily delivering it. And typically, the largest cost of a company (and project) is on the people.
 
It’s common to see numbers like these in large organisations.

In fact, in some organisations it’s really hard to actually find the people who do the work.
 
It should be an alarm bell to managers who understand basic management economics. But to some, this is just a natural state of a business. I personally don't think this is natural.
 
Some managers and leaders feel the need to control other people and work - but they can't be everywhere, so they hire other people to do it.

They need people to control the work. They need people to control the projects, the tasks, the risks, the issues, the growth, the change, the Target Operating Model, the reporting, the governance board meeting notes…..
 
They are trying to control when, ironically, the best way to gain control, is to give control away to those doing the work – and employ more people to do the work.
 
It doesn’t make any sense at all to have more people controlling the work, than people doing it. You do need governance, oversight, project management, but you also need plenty of people doing the actual delivery of value too.
 
I do this little exercise of working out what percentage of people are building and supporting, versus controlling and organising, everywhere I go – and it’s powerful.

1. It shows you where the major problems are.
   1. It show where the lack of visibility, coordination, cooperation and communication is
2. It shows you where salary is being spent – and as a manager, you’ll likely know that salary is one of your major expenses. Spend it wisely.
   1. Every person you hire should add value to the customer – does having 60% of a team organising and controlling other people, add much value to your customers? Maybe?
3. It shows you what the leadership value.
   1. They value insight, control and oversight over delivery of value. They likely don’t really, but it’s just become this way because they’re solving the wrong problems.
4. It gives you hope.
   1. You know the leaders are willing to spend money – you just need to work out what the real problems are – solve them, and redirect money to those actually doing the work.
5. It gives you bargaining power as a manager or leader.
   1. Every executive I’ve ever met responds well to financial levers.
   2. In a simple way, they either want you to bring in more money, or save them money – and this simple audit can be a powerful lever to pull.
6. But most importantly, it gives you a good starting place to go forth and study what the real problems are.

Bloated teams are everywhere. They are a result of poor management. More people organising others and controlling the work and doing admin might be the right solution - but when the majority of the team/department or even company are doing this - I suspect there's a problem somewhere.
 
Rather than addressing a company’s real problems (typically around clarity, alignment and action), managers throw people at the problems. Sometimes you need people, most of the time though, you just need to solve the problems correctly.
 
As teams grow it is tempting to start adding layers of control. Pretty soon you have 60% of your team organising the 20% of the people doing the work. Madness.
 
Instead, delegate work well, train people, give them power to make decisions, teach people how to communicate effectively, solve problems, give people a bright purpose and mission, hire well….yada yada yada – I say the same thing every week :)
 
Management is hard. But keep yourself honest by keeping an eye on the structure and economics of your team.
 
My advice is to always ensure you have more people delivering value to your customers, than you do people organising work and people.
 
This may seem overly simplistic to work out the ratio (and costs) like this, and it is, but it’s a good starting point for deeper analysis.