How many direct reports?

This article by Strategy&’s Gary Neilson and Harvard Business School Associate Professor Julie Wulf, published in the April 2012 issue of the Harvard Business Review, looks at the logical evolution of a CEO’s span of control and offers advice for managers as they progress in their careers.

Show transcript


APRIL 2012 reprint R1204H

How Many Direct Reports?
Senior leaders, always pressed for time, are nonetheless broadening their span of control. by Gary L. Neilson and Julie Wulf

With compliments of...

Part of the PwC Network
This article is made available to you with compliments of PwC. Further posting, copying, or distribution is copyright infringement.

How Man Direct Re
2  Harvard Business Review April 2012 This article is made available to you with compliments of PwC. Further posting, copying, or distribution is copyright infringement.

ny eports?
Gary L. Neilson is a senior vice president in the Chicago office of Booz & Company and a coauthor of “The Secrets to Successful Strategy Execution” (HBR June 2008).

For article reprints call 800-988-0886 or 617-783-7500, or visit

Julie Wulf is an associate professor at Harvard Business School and has conducted extensive research on the internal governance of senior management in large U.S. firms.

Senior leaders, always pressed for time, are nonetheless broadening their span of control. by Gary L. Neilson and Julie Wulf


f senior executives are feeling ever-increasing pressure on their time—and few would suggest that’s not the case—why would they add more to their plates? It seems counterintuitive, but according to our research into C-level roles over the past two decades, the CEO’s average span of control, measured by the number of direct reports, has doubled, rising from about five in the mid-1980s to almost 10 in the mid-2000s. The leap in the chief executive’s purview is all the more remarkable when you consider that companies today are vastly more complex, globally dispersed, and strictly scrutinized than those of previous generations. Let’s look at Sara Mathew, who became the chairman and CEO of Dun & Bradstreet in January 2010. On top of the six people who had reported to her predecessor, she tacked on the 10 who had made up her team when she was COO. In addition, she chose not to replace herself in the COO role, because she didn’t want to burden her staff with additional change, and—more to the point— she wanted to stay on top of what was happening across the organization, so that she could quickly adjust direction if need be.
April 2012 Harvard Business Review 3

Photography: Stephen Webster

This article is made available to you with compliments of PwC. Further posting, copying, or distribution is copyright infringement.

How Many Direct Reports?

Mathew exemplifies two trends we’ve uncovered in our research into C-level roles over the past 20 years. First, new CEOs in particular are taking on a broader array of responsibilities as they seek a comprehensive understanding of the business and as new technologies allow them to reach more people more directly. But over time—once they attain a steady state—they gradually reduce their span of control until the number of reports approaches the old norm. Second, new CEOs are increasingly choosing to go without a deputy. Across industries, the COO position has faded. In 1986 some 55% of Fortune 500 companies had a chief operating officer. By 1999 the number was down to 45%, and it has continued to decline over the past decade. The dual shifts are compatible. The COO has traditionally served as a “span breaker”—someone

CEOs’ Span of Control Has Doubled Over the Past Two Decades
Data from a sample of Fortune 500 companies show a dramatic increase in the number of positions that answer directly to the CEO. Most of the rise is due to the growing presence of functional specialists at the top table.

General managers 1991–1995

Functional specialists


Number of positions reporting directly to CEO

5.3 6.5




Source Raghuram G. Rajan and Julie Wulf,“The Flattening Firm” (The Review of Economics and statistics, November 2006); Maria Guadalupe, Hongyi Li, and Julie Wulf, “Who Lives in the C-Suite?” (Harvard Business School Working Paper, 2011)

who managed multiple aspects of the business and translated them for the CEO. Lose the COO, and the CEO takes on the responsibility herself. Accordingly, functional specialists like the chief information officer and the chief marketing officer are more frequently reporting directly to the top, bringing relevant strategic capabilities to bear on direction setting and execution. At the same time, they’re increasingly taking on elements of general management. This is in keeping with another trend we’ve observed, whereby executive talent is developed and broadened more rapidly and creatively than traditional three- to five-year job rotations allow. Some CEOs are “double hatting” key executives, giving them significant responsibilities outside of their official jobs. A functional executive might take on operational initiatives, while general managers might be tasked with projects meant to expand their functional skills. Ian Read, the chairman and CEO of Pfizer, shifts responsibilities among his leaders to foster individual and team development. “I try to look for ways to help top individuals bond as a team, so if I’ve got somebody running a business unit, I might also charge him with running a crossfunctional team looking at sustainable costreduction ideas,” he told us. “Or I’ll ask a functional leader, like our general counsel, to take the lead on a business issue such as our strategy in India, working closely with our head of emerging markets and his team. I recently moved oversight for the nutritionals business from one executive, asked that leader to oversee our corporate strategy, and asked a functional head to lead nutritionals.” Let’s return to Mathew. Not only is her team bigger than teams in the past; it also includes a much broader mix of roles. This gives her a direct view into aspects of the business that her predecessors were content to delegate. As a consequence, the spans of control at levels right below her are also broader than in the past—and this, too, reflects a larger trend. More people at the table means a broader perspective. It also means that greater detail is visible all the way up the chain of command, so functional leaders had better know what they’re talking about. We identified these shifts, along with several related trends, through academic research by Julie Wulf (conducted in partnership with Maria Guadalupe of Columbia Business School and Raghuram Rajan of the University of Chicago’s Booth School of Business) that drew on an extensive database of detailed managerial job descriptions in a large sample

4  Harvard Business Review April 2012 This article is made available to you with compliments of PwC. Further posting, copying, or distribution is copyright infringement.

For article reprints call 800-988-0886 or 617-783-7500, or visit

Idea in Brief

Not so lonely at the top

CEOs have doubled their span of control over the past two decades: Increased geographical and market complexities demand new points of view in the top team. CEOs are increasingly engaged in the business, and more are playing the spanbreaking COO role themselves.

CEOs are changing the leadership mix: Functional leaders account for 80% of the increase in positions reporting to the CEO. And the COO position is fading. By 1999 just 45% of Fortune 500 companies had a COO, and the figure continues to drop.

Executive development vehicles have expanded: New development options offer ways for leaders to collaborate across the organization. More functional leaders are taking on elements of general manager roles.

of Fortune 500 companies and explored how those jobs have evolved in the past 20 years. Our discussion also integrates insights from more than 30 years of Gary Neilson’s work on organizational change, undertaken with colleagues at Booz & Company and involving CEOs and other executives in more than 250 companies. Finally, we conducted interviews with five CEOs, whose experience provides an in-depth look at how the trends have played out in a variety of situations. Our goal was to help answer a perennial question asked by CEOs and other senior executives: How much should they take on? It’s a tough question, because so much depends on circumstance as well as on how each CEO allocates and manages time. Nonetheless, we uncovered patterns that suggest several guidelines. In this article we’ll look at how the span of control logically evolves and offer advice for managers as they progress in their careers. We’ll suggest five important areas to consider and explore the implications of each. Although much of our discussion is addressed specifically to CEOs, the points will help executives at least two levels down from the top spot build the right teams for themselves and their organizations.

Timing wields a significant influence when it comes to designing the structure at the top. The length of your tenure matters. You might think that as you gain experience, you should broaden your purview—that the more experience you have, the more you should directly control. In fact, the opposite is true. (See the diagnostic tool “What Is Your Target Span of Control?”) For any senior executive, the first year on the job is a time for learning and assessing. New CEOs are likely to expand their span of control as they

Evaluate Where You Are in the Senior-Executive Life Cycle

set their strategic agenda, evaluate existing talent, get up to speed on all aspects of running the business, and, oftentimes, undertake transformational programs. The span of control is typically highest at the start, a finding exemplified by Sara Mathew and many other executives we have worked with. “When I got in here, I spent the first 90 to 180 days in what I would describe as a look, listen, and learn period,” Don Knauss, the chairman and CEO of Clorox, told us. “The first nine months I was getting the strategy right, and then we did the structural work.” Until the CEO distills crucial information and identifies the company’s star performers, he or she is better off keeping the span of control broad. As they gain experience and enter the steady state of running the organization, CEOs begin to reduce the number of direct reports and adjust the mix. At this stage they take a relatively hands-off approach to many aspects of the business. As Mathew fixed on a strategic direction for Dun & Bradstreet, she made changes to her top team, giving up direct responsibility for roles and functions that were fairly mature or self-sustaining and elevating new strategic priorities, especially marketing and innovation, to grow the company. She recognized the importance of honing execution in three key markets—Europe, Asia Pacific, and North America—so she brought the operating executives of those regions into her directreport span. Today Mathew has seven direct reports,

New CEOs increasingly choose to go without a deputy and take on the COO role of “span breaker” themselves.
April 2012 Harvard Business Review 5

This article is made available to you with compliments of PwC. Further posting, copying, or distribution is copyright infringement.

How Many Direct Reports?

What Is Your Target Span of Control?
The tool below can help CEOs and other senior executives approximate the right number of direct reports. Estimate where you fall on the continuum for each item and, using the numbers at the bottom, average your responses to find your target range. Omit the fourth item if you are not a CEO.
Consider your stage in learning the business, assessing executive talent, developing the team, changing the management style, and developing the strategy.


Your position in the life cycle
Stage 3
Succession preparation (final 12–18 months)

Stage 2

Steady State

Stage 1
New (First 12 Months)

Think about factors such as whether your company’s businesses are highly related, the importance of collaboration to strategy execution, whether your business is undergoing a transformation, and how collaborative your organization is.

Cross-organization collaboration required
(more than 25% of time)



(less than 15%)

Do you manage by walking around—meeting with customers or regulators and spending time in the field—or do you delegate more and focus your time in headquarters? Does your allocation of time align with the strategic priorities of the business?

Activities beyond your direct span
(more than 20%)



(less than 10%)

Do you have a chairman, or do you perform both functions? Check the appropriate box.

For CEOs only: Are you playing dual roles?
CEO & Chairman Combined CEO & Chairman Separate









Estimated Number of direct reports

a number she describes as “comfortable,” although looking ahead, she expects to have nine. Finally, as they start to think about their departure and move into the succession-planning phase of their tenure, CEOs continue to trim the team, aware that even with their increased experience, they can manage only so many direct reports. At this stage, they’re apt to reserve berths for strategically invaluable executives and true up-and-comers. We’ve found that they typically consolidate direct reports to six or so and focus their time and attention on grooming one successor (traditionally the presumed successor was the COO, but the field has widened with the decline of that role) or preparing a few significant executives who’ve had experience running large segments of the P&L.
6  Harvard Business Review April 2012

Assess the Degree of CrossOrganization Collaboration Required

How much time do you spend in cross-organization committees and meetings? How much time should you be spending in them? If the answer to either question is “a lot,” your span of control should be relatively small. Staying on top of integration challenges uses up management capacity. At the same time, evaluate your cross-organization activities carefully, with an eye toward whether your direct involvement is always warranted. Sara Mathew found herself overly enmeshed in tackling integration challenges head on. “I thought hub-and-spoke worked pretty well earlier in my executive career, when I was in a smaller hub. Our team talked several times a day and made all the de-

This article is made available to you with compliments of PwC. Further posting, copying, or distribution is copyright infringement.

For article reprints call 800-988-0886 or 617-783-7500, or visit

About the Research
Data set Approximately 300 Fortune 500 companies

cisions,” she says. “Then I became CEO and found a CLT member to ensure that administrative matters I was often in the middle unnecessarily. If the two and accountabilities are aligned and appropriately of you need to work together, and you both work handled. Members of the Corporate Center, along for me, you can either talk to each other or bring with some business unit leaders and next-level it to me. I found myself in the center of several is- functional leaders, populate 12 committees, includsues that really didn’t need my direct participation, ing the corporate food risk committee, the technoland that was something I had to work on. I had to ogy committee, the strategy and capital committee, step out while ensuring that whoever was going the people team, the business conduct committee, to be integrating on my behalf had the readiness and and the Cargill brand reputation committee; these capability to do it well.” set company policy and direction. Many of the funcThe degree of integration required and, in turn, tions and business units mimic this model, handling the importance of having strategic functional spe- daily operations with leadership teams that share cialists in the corporate center’s top team are often best practices and tackle key issues collectively. a function of how related a company’s businesses “By keeping the CLT too small to conduct the dayare. The more highly related the business activities, to-day affairs of the company, it forces that accountthe more time a leader is likely to spend on integra- ability and ownership down the line,” Page says. tion issues, working with colleagues at the next level “With it comes a lot of engagement and shared, or coldown in committees or one-on-one. Companies fall lective, leadership. There’s an expression a colleague along a spectrum: At one end are diversified hold- coined: ‘The role of the CLT is to put our noses in and ing companies, in which senior management typi- keep our fingers out.’ That’s the right way to run a cally takes a fairly hands-off approach to day-to-day company this size.” operations and concentrates on overall portfolio management instead. At the other end are single- Consider How Much Time You industry companies, in which an actively involved Spend on Activities Outside corporate center oversees highly related operations. Your Direct Span of Control When such collaboration is needed, key factors are Once you’ve emerged from your initial year or so, the team’s experience working as a group and its fa- ask yourself: Are you spending enough time on the miliarity with others’ operations. strategic capabilities that will make a difference to As a leader tries to allocate her capacity and de- the business? Are you working with regulators or termine her span, she must also take into account meeting customers to learn firsthand what they whether the business is undergoing a transforma- think, not just what others tell you they think? Or tion. If it is, what proportion of her time needs to are you staying too close to the functional areas or be spent managing the transition, and what propor- business unit you used to lead? This is partly a matter tion should go toward running the current business? of style: Some executives manage by walking around One CEO we spoke with, who was closely involved or spending a day a week in the field, while others in running his current business while also attempt- delegate outside activities and concentrate their ing to transform it, started our meeting by declaring, time in headquarters. It’s natural to follow your own “I don’t have time to think.” style, but that doesn’t always lead to the best use of Greg Page is the chairman and CEO of Cargill, a your time. First, be aware of how you’re spending $100-billion-plus company with more than 70 busi- your days and how that meshes with the needs of ness units. He keeps his top team small: The com- the business; awareness is the starting point of any pany’s senior governing body, the Cargill Leadership adjustment that may help you in the longer run. Team, contains just six people. The CLT’s role is to alDon Knauss of Clorox makes interacting with cuslocate human and financial capital and set the broad tomers a priority, because it supports his sales teams’ strategy, messaging, and tone, but it is committed to efforts. “I see about 20 customers a year. I want to shared leadership, with several layers of responsibil- continue to do that. If I had a broader span of conity. The next layer is the Corporate Center, which in- trol, I don’t know that I could,” he says. “I probably cludes CLT members and about 25 others who serve spend more time with customers than anybody in as functional and platform leaders (the latter oversee the company. As CEO, I need to bring that external the business units). The non-CLT Corporate Center perspective to the company. Everybody else has members are “tagged,” to use Cargill terminology, to their head down and they’re much more internally

Positions studied CEOs and general managers of business units

Other C-suite positions, including COO, CFO, CMO, general counsel, and chief of R&D
Academic papers Studies by Julie Wulf and coauthors, including:

“The Flattening Firm” (The Review of Economics and Statistics, November 2006) “Who Lives in the C-Suite?” (HBS Working Paper, 2011) “The Flattened Firm— Not as Advertised” (HBS Working Paper, 2011)
Other Detailed review of compensation data

Extensive interviews with senior executives

April 2012 Harvard Business Review 7 This article is made available to you with compliments of PwC. Further posting, copying, or distribution is copyright infringement.

How Many Direct Reports?

Typical Mistakes
seem to have read somewhere that “seven is the right number of direct reports,” or they use a successful colleague’s span as a benchmark—overlooking differences in strategies, styles, and executive-development agendas.
Working toward a “magic number” Many executives

look decisive often trumps the value of taking the necessary time—12 months or so—to assess the business, evaluate people, and adjust strategies before setting up the organization for the longer term.

Rushing to the “end state” model An executive’s desire to

should adapt their approach to suit their new office and the business’s needs and strategy. Traditional hub-and-spoke leaders, for example, sometimes hold on to their old decision-making model even though a more horizontal and collaborative capabilitybuilding approach is called for.

Sticking with an out-of-date management style Leaders

oriented. Let’s get the numbers. I’m the one who’s got to keep pushing them: ‘Well, I saw this customer, I saw that customer, and they’re telling me we’re way off on this.’” That’s the sort of thinking—What is the best use of my time?—needed to make good span-ofcontrol choices.

Even as many new CEOs are taking on the role of COO as well, fewer are assuming the chairman’s job. If you are acting as both CEO and chairman, your ability to manage a large number of direct reports will be somewhat constrained. Dividing the roles may allow you to take on more functional responsibility. When Greg Wasson was promoted from COO to CEO of Walgreens, in February 2009, he was the company’s first CEO not to hold the chairman position. In response to shifting demographic and industry trends, Walgreens was transitioning from a traditional drugstore business toward community health care. The business was becoming less about filling prescriptions and more about meeting broader health needs, ranging from one-stop shopping for an aging customer base to flu shots and personal service. The company was expanding rapidly—at one point, it was opening a new store every 16 hours—and it seemed important that Wasson be closely involved with the execution. So

Consider the Scope of Your Role

the board opted to have a different person serve as chairman. At the same time, if you decide not to appoint a COO, you’ll have more on your hands and no middle layer to serve as a deputy. Wasson decided not to replace himself as COO. Early in his tenure as CEO he had 14 direct reports (his predecessor had had seven). Having direct access to the business and freedom from orchestrating board business allowed him to fully restructure the organization. He ripped apart some areas that had been consolidated, separating merchandising from marketing, for example. He hired a new chief marketing officer from outside the company, choosing someone with experience marketing services, not just products. He tapped an expert in customer experience and loyalty from the airline industry, which has been working the loyalty agenda for 30 years.

As noted, it’s not just the number of people on a top team that’s been in flux in recent years; the mix has been changing as well. As the span of control broadens, more and more functional specialists (chief information officers, chief marketing officers, and so on) are elevated to the senior team. On average, four out of five positions added to a Fortune

Consider Your Team’s Composition

Many leaders populate their teams with the usual suspects, adding others only if there’s room. Turn this logic on its head: Start with the capabilities that will drive your strategy forward.
8  Harvard Business Review April 2012 This article is made available to you with compliments of PwC. Further posting, copying, or distribution is copyright infringement.

For article reprints call 800-988-0886 or 617-783-7500, or visit

Executives often rely on measures such as budget or the number of people in a unit (“it’s so large it has to report to me”) to decide on their direct reports, instead of letting strategy guide where they spend their time.

Using irrelevant metrics

Appointing a Chief Operating Officer too soon CEOs

who name a COO too early may limit their own ability to drive the strategy forward. They also risk losing promising people who view the succession plan as fixed.

executives linger in their comfort zone, doing their old jobs instead of tackling new challenges, as if they don’t trust that their former responsibilities are in capable hands.

Second-guessing your replacements Some new

500 CEO’s span of control in the past 20 years have been functional specialists rather than the more traditional pick—the major business-unit head. This is good news for functional managers anxious for a seat at the table. If CEOs aren’t taking on the chairman role, they have more time to devote to business strategy—and our research and experience shows that they’re finding more opportunities to include new points of view in their strategic planning. What are the few strategic capabilities needed to drive success for the company, or for the portion you lead? What voices do you want at the table (signaling to the rest of the organization what is important)? Some of the capabilities you need may be new to the company. Recall that Greg Wasson made key outside hires to acquire the deep functional expertise he needed to deliver on his strategy for Walgreens. Also consider the degree of relatedness of your businesses. Firms with a single business or with closely related businesses typically have corporate centers that coordinate activities across business units in order to exploit synergies. (These sorts of companies, rather than the holding-company model, are increasingly the norm.) The research shows that the more closely related a company’s businesses are, the greater the number of functional specialists in the top team, suggesting that the corporate core becomes more involved in running those businesses. Because the various businesses within such a company draw on the same functional expertise (marketing, R&D, and so forth), and because that expertise is strategically important in differentiating the company from its competitors, it needs to be represented at the highest level of decision making, where it can be most effectively leveraged on a global basis. Here’s how Don Knauss sums up the rationale for putting functional specialists on Clorox’s top team: “First, I did it to get real-time feedback on strategy and operations and on the leaders from those func-

tions who control most of the spending and people. Second, I wanted to force a more global view of the business. You’re not just responsible for the U.S.— you’re responsible for the company in total, and for driving capabilities, marketing, sales, R&D, and product supply globally. Third, it was to support their personal development. I think it forces people to be on their game a little more, too.” Take a look at the more mature areas of your business and consider consolidating some of the activities under a few strong leaders. Ask yourself if you are spending sufficient time and attention helping the organization execute a forward-looking strategy. Too many leaders populate their team with the usual suspects—the same roles that have always reported to the position—and include different roles only if there is some room. Our advice is to turn this logic on its head: Start with the capabilities and roles needed to push your strategy forward. The changing structure at the top is, in many respects, a response to changes in the environment in which firms operate. It reflects and enables expanded leadership capacity on the part of chief executives. But there are downsides to increased spans of control (see the exhibit “Typical Mistakes”). In amassing direct reports, some CEOs succumb to the temptation to micromanage or to consolidate power for themselves. Others, instead of using their increased capacity to focus on key constituencies (such as customers, the government, and the broader community), retreat to what they know best—running a P&L and supervising day-to-day operations. They become the problem-solver-in-chief, exercising capabilities that may have helped them land the corner office in the first place but are not adequate for leading the entire enterprise. The best leaders stay mindful of the everevolving demands of the job and continually tweak their teams as they go.   HBR Reprint R1204H
April 2012 Harvard Business Review 9

This article is made available to you with compliments of PwC. Further posting, copying, or distribution is copyright infringement.