Your head office is growing faster than your branches

1The new floor

Composite example, not a specific client

The group has moved to a new floor on one of Riyadh’s business streets. It has a marketing team of 11, a “business excellence” unit, three coordinators for the area managers, and a weekly report that takes two days to compile and one minute to read.

In two years the branches went from 20 to 24, up 20%. Head-office staff went from 30 to 48, up 60%.

Every hire had a good reason, which is what makes the problem hard: there’s no single wrong decision to point at.

2The navy that shrank while its admiralty grew

In November 1955 the history professor C. Northcote Parkinson published a satirical essay in The Economist. Its first line became a law: “work expands so as to fill the time available for its completion.”¹

His numbers, as he told them, came from Britain’s Royal Navy between 1914 and 1928. Capital ships fell from 62 to 20, by about two-thirds. Officers and men fell by about a third. But Admiralty officials, the office that ran the navy, rose from 2,000 to 3,569. A 78% increase, while the fleet they ran was shrinking.

It is a satirical essay, and both his figures and his reading have been challenged since.² But the pattern he described is what matters here, and you may well have seen it yourself.

3Why head office grows on its own

Parkinson explained the growth with two forces, in his words:

First: an official wants to multiply subordinates, not rivals. When work presses on a manager, he doesn’t ask for a peer to share it; he asks for two assistants below him.

Second: officials make work for each other. A draft passes one desk, gets amended at another, then comes the minute, then the follow-up. Soon seven people are working hard on what one used to do.

None of them is lazy, and that’s the point. Head office grows because every hire creates coordination work, and the coordination work justifies the next hire.

4The one number

The doctrine has a number that measures exactly this. It is the ninth metric on the board dashboard, reviewed every quarter:³

G&A dilution factor = G&A growth ÷ revenue growth

G&A here is everything head office and management spend above the branches: salaries, rent, systems and advisers.

Below 1, head office gets lighter relative to the business, and scale works for you. Above 1, it grows faster than the business it serves, which the doctrine calls the operating-leverage trap.⁴

Illustrative example: group revenue grew from SAR 200 million to 236 million, up 18%. G&A grew from 20 million to 25.4 million, up 27%. Factor = 27 ÷ 18 = 1.5. For every 1% the branches grew, head office grew 1.5%.

In riyals: had the factor been 1, G&A would have been 23.6 million. The difference is SAR 1.8 million a year. That’s more than the branch in last season’s first episode cost, SAR 1.2 million.⁵ A whole branch every year went to head office.

Two practical notes. Compare each quarter with the same quarter last year, so a season like Ramadan doesn’t fool you. And if revenue didn’t grow at all, don’t divide by zero: any G&A growth at that point is a warning in itself.

One honest line: I looked for a published Saudi benchmark for G&A as a share of revenue in restaurant groups and didn’t find one. That’s the factor’s strength, not its weakness: it compares you with yourself, not with an average whose method you don’t know.

5Where the money leaks

G&A sits above every branch’s contribution. Every extra riyal at head office needs extra contribution from the branches just to keep group profit where it was, and it’s the same riyal that would have funded the next branch.

Every head-office “initiative” lands on the branch manager as a report. A new template, a weekly meeting, a dashboard. And what gets measured becomes what gets chased, as we saw in episode four.⁶

And sometimes the branch is blamed for what head office made. When new branches underperform, the search starts in the branches. Last season we talked about the decision that waits on the owner’s desk.⁷ A bloated head office is a queue of the same kind, just with more layers.

This episode isn’t against head office. A group of thirty branches needs a strong one. The message is that head office should earn its growth, not that the finance team should be let go.

6The Sunday-morning question

One question, one metric, one rule

Freezing head-office growth until the factor falls below 1 is the doctrine’s own rule. The “two consecutive quarters” and the branch metric for every role are my additions, a starting point for your group to adjust. The Saudi Scale Playbook has a tool that works it out for you, alongside your area managers’ span of control.⁸

8Credit, and the next episode

C. Northcote Parkinson wrote the joke that became a law. The new floor, the two-day report and the one-minute factor are ours.

Over seven episodes we’ve seen seven ways a mistake repeats as you grow. The season’s last episode is a letter to anyone standing at his tenth branch right now: “To the owner of branch ten: your next crisis is already written.”