In the earliest days of a startup, the organizational chart is usually a flat line. Everyone is sitting in the same room. Everyone is doing a bit of everything. And everyone technically reports to the founder. As the company grows, this structure breaks down. You eventually need to formalize who answers to whom. This brings us to the concept of the Direct Report.
A Direct Report is an employee who reports directly to a specific manager or supervisor. This person receives their assignments, performance reviews, and career guidance from that manager.
For a founder, your direct reports are the people you speak to every single day. They are the lever you pull to move the organization. The quality of your relationship with these individuals dictates the speed and health of your company.
The Span of Control
#The most common question founders ask regarding direct reports is simple. How many should I have?
This concept is called the “span of control.” Management science generally suggests that a manager can effectively handle between five and eight direct reports.
If you have three direct reports, you might be underutilized or micromanaging them. If you have twenty direct reports, you are almost certainly neglecting them. It is mathematically impossible to provide high quality guidance, feedback, and strategic direction to twenty people in a forty hour work week.
When a founder tries to manage too many people directly, they become the bottleneck. Decisions stall because everyone is waiting for your approval. You become a router of information rather than a processor of strategy.
The Sacred One-on-One
#Having a direct report implies a specific responsibility. You owe them your time. The primary mechanism for this is the one-on-one meeting.
Many founders treat direct reports like task rabbits. They only talk to them to ask for status updates. This is a mistake. A status update can be an email. A one-on-one is for coaching.
Your job with a direct report is to unblock them. You need to ask what is slowing them down. You need to align their personal career goals with the company’s mission. If you are not doing this weekly or bi-weekly, you are not managing them. You are just watching them work.
Direct vs. Indirect
#As you scale past twenty or thirty employees, you will have to hire managers. This creates a layer of “indirect reports.” These are the people who report to your direct reports.
This is a painful transition for many entrepreneurs. You are used to knowing everyone’s name and exactly what they are working on. Suddenly, you have to trust your VPs to manage the front line.
You have to accept that you cannot manage the whole company directly. You manage the people who manage the company. Your influence becomes indirect. You shape the culture and the strategy, which then filters down through your direct reports to the rest of the organization.
The Selection Criteria
#Who should report to you? In a mature company, this is usually the C-Suite (CTO, CFO, COO). In a startup, it is often a mix of functional leads and key individual contributors.
You need to ask yourself a hard question. Does this person need my specific mentorship, or do they just need a manager? If they need your specific vision, keep them as a direct report. If they just need someone to approve their vacation and check their code, they might be better off reporting to a functional lead.