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Have you noticed fewer rungs on the corporate ladder lately?

 
 

For the last few years, as companies invest more capital into artificial intelligence, Big Tech has been cutting layers of management in what’s become known as the “Great Flattening.” Now, new data from Gusto, which provides payroll and HR solutions, shows small and mid-sized businesses (SMBs) are following suit and it’s reshaping the way teams are structured, developed and led.
 
 

From 2022 to 2024, the number of individual contributors per people manager at SMBs has doubled. Back in 2019, managers typically oversaw about three direct reports. Now, that number is about six.

 
 

Nich Tremper, senior economist at Gusto, says this isn’t simply a result of sweeping layoffs, but rather a quiet evolution.

 
 

“What seems to be happening is that as folks move on – older folks retire or others shift to new roles – businesses simply aren’t backfilling those managerial positions,” he says.
 
 
 

The change is largely driven by cost pressures. “We’ve seen the average labour cost increase nearly 20 per cent over the last couple of years,” Mr. Tremper says. “Small businesses don’t have a lot of leeway in their budgets, so they’re thinking through how best to maximize the productivity of the folks they have on staff. Part of that has come down to reducing management layers.”
 
 

But the consequences of a leaner org chart extend beyond budgets.
 
 

What we lose when we flatten
 
 

While some businesses may appreciate the savings and agility that come with fewer layers of hierarchy, Mr. Tremper cautions against seeing it as a purely positive shift.
 
 

“These middle managers are really important for organizations,” he says. “You have strategic decisions and guidance coming from the highest level of management, but it’s individual managers who are turning those directions into actionable steps.”
 
 

In other words, fewer managers may mean faster decision-making in the short term, but also the risk of teams lacking mentorship, development and day-to-day leadership.
 
 

“Highly productive sectors tend to maintain more managers with smaller teams,” Mr. Tremper says. “It suggests that first-line managers play a critical role in scaling their expertise, developing their teams and ultimately boosting productivity.”
 
 

Even in lower-productivity industries, measured by total output per hour worked, Gusto found that businesses with a higher share of managers tend to outperform their peers.
 
 

Managers are opting out, too
 
 

Not only are businesses hiring fewer managers but existing ones are leaving.
 
 

In late 2024, Gusto found that the quit rate among managers was about 10 per cent higher than it was in January 2022, when it was more of an employee-driven labour market.

 
 

“Quit rates are often viewed as a sign of labour market confidence,” says Mr. Tremper. “If managers are leaving, it could mean they believe they can find more meaningful work elsewhere. They might be looking to lead teams at other companies or return to being high-performing individual contributors.”
 
 

Some may even be taking the opportunity to pivot entirely. “For folks who are maybe no longer managers, this could be a chance to ask: What path do I really want? Do I want to be an individual expert? Or maybe this is the time to start my own business or consulting practice.”
 
 

Flattening with intention

 
 

The Great Flattening may seem like a cost-saving trend but it comes with trade-offs. While it can boost short-term agility, businesses that cut too deeply may sacrifice long-term development and stability.
 
 

Mr. Tremper says business leaders should think carefully about what they’re giving up. “When I think of the most effective managers I’ve had, they’ve cared deeply about my professional development. They created opportunities for me to grow beyond my current skill set,” he says.
 
 

Small businesses especially, he adds, rely on strong teams and strong teams often rely on great managers.
 
 

 
 
 
 
 
 

11 per cent
 
 

According to new data from book summary app company Headway, while many workers are enjoying a slow summer season, more than one in 10 say their workload has increased.

 
 
 
 

 
 
 
 
 
 

Experts say rebranding yourself is about more than a job title or what you wear. It’s important to be authentic about how you’re changing personally and professionally and share that story over time. On a more tactical level, you can also get new headshots, work with a coach and spend time connecting intentionally with your current network and new peers in your industry.