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How layers piled up
The layers piled up during growth. Nubank went from a million customers to 140 million, and things broke all over the place. When things are on fire, the easy answer is to add managers, and by that natural process the company ended up vertical with little visibility.
Closer to the ground truth
Every layer is a chance for a message to get distorted, and a message that has passed through 10 layers arrives distorted. Removing layers puts leaders closer to the ground truth. Nubank also built information systems with access to everything happening across the organization, a company brain that sends the CEO updates on the AI transformation, product launches, metrics, and features.
Skipping the chain of command
The other piece is attitude. In traditional organizations you cannot jump a manager to ask the person doing the work, because a chain of command has to be respected. At Nubank the CEO goes to whoever has the best information, and problems get solved together when something is not moving.
Why do messages distort as they pass through layers?
Each person who relays a message summarizes it, emphasizes what they think matters, and leaves out the rest. In his 1932 book on memory, psychologist Frederic Bartlett had people retell a Native American folk tale in sequence. The story grew shorter and changed in meaning with each retelling. Organizations with many layers have many such handoffs.
Why do companies add managers when things break?
A new manager gives a failing area a single person to hold accountable, which is a quick fix. The cost shows up later as more layers and more coordination. Cyril Northcote Parkinson wrote in a 1955 essay in The Economist that administrative staff tends to grow regardless of how much work there is. Companies that grow fast often find their structure built from many such quick fixes.
Why is there a limit on how many reports a manager can have?
Each additional report adds relationships the manager has to track. In 1933, management consultant V. A. Graicunas argued that the number of possible interactions among a manager and subordinates grows explosively as the team gets larger. Classic management advice held that a manager should supervise only a handful of people. Tools that give a manager real-time information are meant to reduce the work of tracking each person.
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