ALM #044: The Rise of Flat Tech Leadership

Navigating the Flattening Tech Leadership Trend

Hey there 👋🏼

In today’s email:

• The Flatening: Be prepared for a brand-new layout.

• SVB: Panic at the disco.

• Post of the week: 5-star on social media.

---

THE FLATTENING

Let me paint you a picture of the current status of the tech market.

On January 23, I wrote that 55970 tech workers were already announced that they would be laid off. A mere 50 days later, that number grew to 128202 tech workers with announced layoffs. And note that we still have news that Meta plans to add a few more thousands to these numbers.

As the market keeps contracting, companies are adapting to become leaner and reduce the size and bureaucracy created by the massive scale-up of the past five years.

A big part of reducing the size of a company starts with reducing the layers of management. You can see clear examples of this, for example, with Meta’s plan to reduce the number of Engineering Managers and above.

Gergely Orosz @GergelyOrosz

With news of Meta aiming to flatten their management chain, I talked with engineers and managers at the company on their thoughts. An engineer shared how it feels reporting chains in some orgs are out of hand. The ones below are actual chains for some outlier IC positions:

I believe it’s inevitable to have a restructure of leadership at these companies doing layoffs and trying to become more economically viable.

First, let me suggest that you look around. Try to understand where your company stands in this tech economic crisis and how it’s structured.

Has your company been through layoffs? Are you going through layoffs right now? Does it have a significant leadership per individual contributor ratio?

We will see small teams merge to create larger teams with a bigger scope. Managers increase the number of their direct reports. And while I don’t think every middle manager will disappear, many of them will. Having such a heavy leadership layer in smaller and more effective companies is unsustainable.

Similar to what happens with individual contributors, only the top managers will remain. There are two possible routes for the remainder: going back to individual contributors or finding a new challenge. The higher the seniority of the manager (ex: director, head, senior manager, etc.), the harder it is to move to the equivalent individual contributor role.

Now, while it’s fairly easy to see the positives of increased efficiency at all company levels, this has to be done responsibly, with the risk of paying a heavy penalty.

In general, flat structures rely on constant communication, decentralized decision-making and the self-motivation of employees. As a result, flat structures are associated with innovation, creativity, speed, resilience and improved employee morale. - FORTUNE

The number of reports of managers will increase significantly, as well as the number of scopes. The work towards a healthy work culture and mental health that has been done in the past twenty years might be at risk.

Important to highlight that when I mention culture here, I’m not talking about the variety of cereals that companies have in their kitchen.

We’re still at the beginning of this trend, and we’re yet to see the exact result and consequences.

As a manager, the best you can do is keep your network strong and not lose your technical side, as the future might require you to return to the individual contributor path.

---

SILICON VALLEY BANK

So layoffs are a reality, hiring is almost frozen, and, as I mentioned above, companies are flattening their ranks. If these don’t look bleak, here enters the Silicon Valley Bank fiasco from this past week.

The Silicon Valley Bank (SVB) is a top 20 bank in the US, specialising in tech startups. According to Milk Road, ~50% of all US venture-backed tech and life sciences used SVB to hold their funds.

In a nutshell, SVB was forced to shut down by US Government. About $175B of customers’ deposits were seized, and as customers made a run for their money, it wasn’t available.

This means that companies had their assets frozen, and guess where these assets come in handy? To pay salaries and other companies at the end of the month.

We’re already seeing reactions from the market, like Remote’s CEO Job van der Voort is already jumping ahead of the chaos and saying that the company will advance the salary for people working in affected companies through Remote.

Could this be a publicity stunt? Maybe. But the fact of the matter is that this action will effectively help those not going to be paid this month because of the SVB fiasco.

Why am I raising this topic? Because this is another massive hit to the Tech Industry.

Yesterday I read an impressive tweet reporting a fist hand experience of a founder affected by the SVB. I highly recommend that you read the entire tweet.

Alexander Torrenegra @torrenegra

Silicon Valley Bank was the main bank for two of our companies, my personal savings, and my mortgage. This is how things unfolded for us: Between 2013 and 2023, all good. Thursday, 9 AM: in one chat with 200+ tech founders (most in the Bay Area), questions about SVB start to… https://t.co/RAB1XvslPE

This could be an isolated case or the beginning of a rollercoaster that will impact the remainder of 2023 and perhaps spill over to 2024.

Mark Cuban @mcuban

The tragedy of SVB is that its not the wealthy taking the hit. It's the thousands of companies who borrowed from SVB and were required to keep their cash in SVB. Those entrepreneurs and their employees and vendors are feeling the pain. And they are who the Fed should protect

If you want to read more about what happened (with a lot of important details), I recommend the issue below:

The Demise of Silicon Valley Bank

---

POST OF THE WEEK

It’s funny that amid this week’s newsletter, where I’m talking about the contraction of middle management, I focus on something like Empathic Leadership.

When I mean that this flattening process has a significant penalty risk, I mean that behaviours like empathic leadership, authentic leadership, coaching and mentoring of individual contributors or other leaders might disappear.

And this is really important for us to keep in our mind. Circumstances might change, but we, as leaders, are responsible for building our teams! 🚀