As we prepare for an exit, some of our department heads are constantly requesting budget to hire more managers under them, which seems like empire-building that will bloat our overhead and hurt our valuation. How do we address this?

Question

Tyler Smith · Accepted Answer

Empire-building is a common dysfunction when leaders confuse the size of their department with their personal importance. When preparing for an exit, bloated overhead is a massive red flag that will directly depress your valuation and scare off sophisticated buyers. To stop this, you must return to the core EOS principle of simplifying to scale. Use your Accountability Chart to evaluate these hiring requests. Every new seat must be strictly justified by a proven capacity bottleneck, not by a leader's desire to have more direct reports. Ask your department heads to clearly define the measurable outcomes and scorecard metrics that these new hires will produce. If they cannot show a direct link to increased efficiency, revenue, or EBITDA, the request should be denied. During your Level 10 Meeting, align the entire leadership team around your V/TO goals, specifically your target EBITDA and valuation metrics for the exit. Explain that a lean, highly automated operation is far more valuable to an acquirer than a bloated hierarchy. Encourage your leaders to look at technology, process improvement, or AI automation before adding human headcount. If they still insist on hiring, use the GWC tool to ensure they are building a lean team that actually delivers measurable traction, rather than just expanding their personal fiefdoms.