SaaStr.ai has published new research shedding light on the optimal number of direct reports for CEOs, indicating that leaders at companies with fewer than 100 employees typically manage around five direct reports. The findings, derived from a comprehensive analysis of real-time compensation data, challenge traditional management wisdom and provide data-backed insights into organizational structures. This new information aims to guide founders and executives in structuring their leadership teams effectively.
The analysis, based on data from Pave’s real-time compensation database, encompassed 6,586 companies ranging from startups to large enterprises. This extensive dataset allowed SaaStr.ai to identify patterns in CEO direct reports across various company sizes. The research highlights that the number of direct reports generally increases with company size, reflecting growing organizational complexity and functional granularity.
For companies with 1 to 100 employees, the data indicates that the 25th to 75th percentile range for CEO direct reports is between three and seven. This specific insight was prominently featured in a recent social media announcement by SaaStr.ai, stating, "New!! How Many Direct Reports Do Most CEOs Have? 5 If You’re < 100 Employees. The Data and More." This suggests a practical benchmark for early-stage and small businesses.
While traditional management theories often suggest an optimal span of control around 7±2 direct reports, the SaaStr.ai data reveals significant variations. Notable outliers include NVIDIA's Jensen Huang, reportedly managing over 60 direct reports, and Mark Zuckerberg, who at one point had 35. These examples underscore that a "one-size-to-all" approach to direct reports is often not applicable.
Experts in organizational design emphasize that the ideal span of control is not a fixed number but depends on various factors, including task complexity, employee capability, leadership style, and company culture. A wider span can lead to flatter organizational structures, fostering agility and employee autonomy, but also risks manager overload. Conversely, a narrower span allows for closer supervision but can create more hierarchical layers.