🔺Unmasking Management Layers in Tech

Are there too many managers in Tech companies?

Hello,

Welcome back to Trendline!

This newsletter was on an extended break for the past few months.

I went through an exercise to think through the future of this newsletter and how I can continue to write content that is useful to you. I’m pleased to be back and excited to share new charts and insights with you going forward.

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Now then, Lets dive in to today’s topic!


Chart of the week

Made using Vizzlo

Many tech companies went through major layoffs in the last 12-18 months. Questions were raised if these companies had too many employees, especially at the manager layer who are employees who don’t directly make or sell stuff but manage those who do.

I attempt to answer this question in today’s post, using the data reported by companies in what is called EEO-1 Report (Equal Employment Opportunity Report)

First, lets try and understand this data.

In United States, companies with 100 or more employees on their payroll are legally required to file EEO-1 report annually (there are some exceptions). In this report, companies are required to report employee count breakdown by categories like age, race, gender, job position and ethnicity.

Its a fairly straightforward report, with a lot of useful data on employee demographics of a company. For example, here is Amazon’s 2021 report (LINK). Unfortunately, companies are not very timely in reporting this information, and latest data for most companies is from 2021.

Companies report employee breakdown across 10 job categories. The first 2 categories are of interest to us:

  1. Executive or Senior Level Officials and Managers: This category refers to senior members within an organization who plan, strategize and create policies. These would be your C-suite roles (CEO, CFO etc.) and roles who are very high up in the organization (like Senior Vice Presidents, Vice Presidents etc.)
  2. First/Mid Level Officials and Managers: These roles fall under the group, regional or divisional level of the organization. They implement plans and strategies devised by the Executives / Senior Level Officials. Example of these roles would be your typical middle management roles Branch Managers, Operations Managers, Product Managers etc.

There are 8 other categories of roles like Professionals (e.g. Engineers, Technicians) all they way to Laborers/Helpers/Service workers. For a detailed description of these roles with examples, check out this very helpful link (LINK)

Coming back to our chart, I compared the proportion of Executives and Middle Managers (The first 2 categories described above) within the total employee base of the 10 largest S&P 500 companies.

The key takeaway is that Big Tech companies don’t have a particularly higher proportion of Executives/Middle Managers compared to non-tech companies.

ExxonMobil has the highest proportion (22%) of employees in Executive/Middle Management positions. While Nvidia and Meta are a close 2nd (at 20% each), Alphabet and Apple are further down the list, alongside United Health.

Few other interesting implications emerge from the chart:

  • The leadership and management structure is quite diverse across companies (tech and non-tech). Nvidia and Meta have much higher proportion of people in leadership roles (Executives / Senior Official)#
  • Amazon and Tesla are outliers, mainly because they have a huge base of employees working in factories and warehouses. So the proportion of Executives and Middle Managers become quite small

Overall, in actual count, in 2020-21, across these companies, ~12.1K people worked as Executive/Senior Level Officials and ~189.4K people worked as Middle Managers.

Here is the more complete data broken down by individual companies:

While the overall base of Executives and Mangers is quite significant, Big Tech companies like Meta, Microsoft, Apple don’t emerge as outliers compared to non-tech ones – at least in the largest 10 S&P500 companies. More analysis is needed to see if this is true for Tech companies beyond the top 10 list also.

Note: #Its up to individual companies to interpret the definition of these job categories. So its possible two roles are interpreted as different – Senior Management by one company and middle management by another company

That’s all for this week. Thanks for reading! 👋

Trendline

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