[marcinzm]

>All this is to say that I got turned down recently for a place I really want to work because I only manage 5 people. Hiring manager wasn't interested because of that single data point. The job was to take half a team from someone who was managing 12 people. Bullet dodged, maybe?

Sounds like they wanted to scale the team in the future and the current manager isn't able to do that. Rather than demoting them they're bringing on another manager to take half the team. Eventually the new manager would grow their team enough to be promoted and the current manager would report to them. Messy but may be the least messy approach that keeps the current manager from leaving.