How many VPs can a small company have?

A person’s job title matters. A lot. It matters to the individual, to the business, and to the outside world.

Job titles have value. They’re a type of currency. But where there’s currency, there’s the threat of inflation. And while inflated titles seem harmless, they can create confusion, credibility hits, and even legal trouble.

That’s especially true for small and medium-sized organizations, where job titles are essential for recruiting and retention. Small companies need to recognize an employee’s tenure and growing responsibilities. One way to accomplish that is by paying them more. Another is by recognizing them through a title change.

Of course, promotions occur, and those usually involve taking on an expanded role and a new job title. The supervisor of a small team becomes the manager of several supervisor-led teams. Then they take on an entire department and become a director.

Things progress from there. It’s natural and appropriate.

But is it appropriate for an employee in a smaller company to have a title that’s conventionally associated with high-level roles like vice president? How does it complicate things when their counterpart at a larger competitor would be a director or manager?

Those distinctions are important for a few reasons.

The problem with title inflation

Consider the word manager. In smaller companies, I often find managers who don’t manage anyone. Instead, they’re the only person responsible for specific tasks. It’s confusing and implicitly invites questions like “Who or what do you manage, exactly?”

Owners of smaller businesses often reach for titles as a substitute for pay increases, and they do so at their own peril. Should a 20-person firm have any VPs? What about a company that’s much larger, but still small by corporate standards?

As a business grows, using exalted titles early on leads to awkward and sometimes perverse situations where it’s impossible to distinguish between the layers of assistant VPs, VPs, and executive VPs.

I’ve especially noticed this trend with the title of executive VP. Companies often use it to show some distance between existing employees who grew up with a company and the senior hire they bring on board when they need someone with larger-scale industry experience.

There can also be legal implications, since some titles carry the expectation of authority.

Titles that contain “chief” and “president” are especially risky. A third party might assume that the person has the authority to make certain commitments on behalf of the company. Where’s your recourse if the person with that title acts on that assumption improperly?

Finally, title inflation and mismatches cause headaches and heartache during a crucial stage of the business lifecycle: integrating two companies. That’s especially true when a larger one buys a smaller one. Depending on the state or province, it can be demotivating and costly to mainstream one company into the other.

I’ve seen more than one sales VP opt out when they learn that in the new org structure, they would now be a sales manager—even though their team would be bigger and they’d be responsible for a much larger book of business.

Everything else about the position was a step up. But the title was the sticking point.

Fighting inflation, title edition

So how can you avoid title inflation pitfalls? For me, there are a few core principles to keep in mind as you’re crafting titles and growing careers.

Inform, don’t obscure.

In business and in life, clarity is an essential value. Grounding titles in clarity is the first, most foundational principle for avoiding inflation.

A person’s title should carry meaning both internally and externally. It should convey their role and give a concrete sense of whether they manage people, and at what level. Are they the lead for a single team or senior management within the organization?

My Puget Sound friend and colleague, Culture Engineer Aaron Schmookler, sums it up well: “Managers supervise people. Directors manage managers. C-Suite folks coordinate complex systems and make strategic decisions.”

For management tiers, it’s best to stay within those simple, well-understood definitions.

Words mean things.

Ninja, guru, alchemist—these words each have very rich and meaningful definitions in their proper context. But does a “code guru” or a “dream alchemist” genuinely inform you about what a person does?

There’s nothing wrong with plain, conversational language.

Let’s do a gut check: Which leads to greater understanding? “Code guru or “back-end development lead”? “Dream alchemist” or “talent development coach”? The former may be evocative, but the latter is precise. Chase that precision.

Consistency is clarity.

Clarity matters in language. It’s also vital to your org chart. When “manager” means different things to different people within one organization, you risk confusion and even resentment.

Titles should also have a certain logic, and you should apply it consistently. What you do in one part of the business applies to others. For example, managers or directors should have similar responsibilities and authority throughout your organization. Generally, job requirements and compensation should be equitable, too.

Change needs to reflect reality.

Titles are not carrots. They’re descriptive signifiers that point to a person’s real responsibilities.

In a recent conversation with Seattle-area Leadership Educator and Author Jim Hessler, he shared the insight that the currency people are actually reaching for is respect, opportunity, or influence. Those aren’t just the domain of management or executive roles.

If you’re trying to incentivize someone within your business, do so honestly. Add genuine responsibility, opportunity, or organizational mobility with a title change—and not necessarily tied to the management ladder. If someone is a high-value individual contributor, find an accurate title to honor their efforts.

Scale is strategic.

With titles, as with business growth, scale needs to be strategic.

Don’t scale someone’s title up to director when they only manage five people. Resist the urge to declare someone a VP before that realm of executive responsibility exists. There will be time for promotions as your organization grows, but pre-populating those positions may lead to conflict when you do scale.

Ultimately, these principles come down to some key values that underlie good business: clarity, humility, and accountability. Be thoughtful about how you develop your employees’ careers, and keep yourself accountable to honest, realistic reflections of their responsibilities. All the while, stay grounded in what your business is and what it needs.

It might be tough to withhold a shiny new title from a deserving team member. But in the end, it may be best for your business—and the people who make it work.