AI Enables Small Businesses to Reduce Number of Middle Managers

Artificial intelligence is reportedly one of the factors driving small- to medium-sized businesses (SMBs) to reduce their number of middle managers.

SMBs have joined enterprises like Amazon and Meta in reducing their number of middle managers, Bloomberg reported Monday (June 30).

Among SMBs, the average number of direct reports for each supervisor doubled from three in 2019 to six in 2024, the report said, citing figures from payroll services provider Gusto.

The numbers vary by industry, with a smaller number of direct reports per manager at professional services firms and a larger one in fields like hospitality and food service, according to the report.

Gusto attributed the trend in part to SMBs trying to mitigate the impact of inflation and higher interest rates, per the report.

Artificial intelligence might also play a role, the report said. SMBs interviewed for the report said AI was now performing tasks previously done by middle managers, such as generating slide decks and project plans and collecting feedback.

PYMNTS reported in November that AI agents were making decisions that, until recently, required human managers. Sophisticated AI agents can navigate complex business processes independently, allowing humans to focus on high-value work.

Amazon CEO Andy Jassy wrote in a message shared with Amazon’s employees and posted in September that the company planned to reduce the number of managers in each of its organizations and require employees to work primarily in an office as part of an effort to “operate like the world’s largest startup.”

In the case of managers, Jassy said Amazon aimed to flatten organizations by asking each of its senior leadership teams to increase the ratio of individual contributors to managers by at least 15%.

When Meta announced in March 2023 that it planned to lay off another 10,000 employees after cutting 11,000 jobs about four months earlier, Meta CEO Mark Zuckerberg said the latest cuts were part of a restructuring plan that included flattening the company’s organizations, canceling lower-priority projects, slowing hiring rates and reducing the size of the recruiting team.

Zuckerberg said the principles guiding Meta included removing multiple layers of management and giving managers as many as 10 direct reports, canceling projects that are duplicative or of lower value, making every organization leaner, building an optimal ratio of engineers to other roles, investing in AI and other tools and studying the effectiveness of a distributed workforce.

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