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Proper Squad Sizing is important for minimizing loss of trim when the unit wheels. By having the shorter men in the middle take a normal pace in a wheel, the taller men on the outside can more easily stretch their pace to keep the line trimmed. Those on the inside must shorten their pace, but ease of doing that is not dependent on leg length.
The Canadian Forces Drill Manual illustrates this process on page 2-28, from a single rank in which the tallest individuals have formed to the right and the shortest to the left: