In Master of Magic having multiple participants act as a single unit was very important to considering that unit's overall potential strength.
If there are 8 guys in a squad of pikemen all your upgrades to them count 8 times. If you used the same upgrade on a solitary figure, like a hero, the upgrade counted only once.
It gave some balance between elite armies and regular armies with extra help. A rank of 4 rangers, a high-end range unit, could be gunned down by a squad of 8 slingers, a slightly above-average range unit, if both of them had, say, an attack buff of +2. The slingers effectively get +16 while the rangers only get +8. As units gained experience the "rank-and-file" units would become stronger than the elite units, or at least relatively less weak. Some considered Halflings overpowered because of this; I'd say along with the unique early-game flying missile units of the Draconians Halflings were the strongest faction in MoM.
WoM updates that quite brilliant game mechanic from MoM and makes the "multiple soldiers in one unit" effect completely customizable. If you want 8 rangers and you have the gold you can build them then go mop the floor with those upstart slingers. (Assume "rangers" and "slingers" are WoM equivalents.)
I'd prefer being able to train small squads then later on merge them into larger ones, but for the complexifying effect this would have on the UI I don't mind the system the way it is. Being able to build singleton units should be allowed, as all that would take is one more check-box on the "Train" dialog, and it could even default to "four" so that players don't accidentally make one spearman when they really need to make those guys in groups of at least 4.
By the time you're ready to build units for which a single soldier is obviously the right choice, like scouts or sentinels, you'd have figured out what the three "squad size selectors" do and you'd only build a single-soldier unit if that's what you really wanted. Defaulting to 4 keeps the player from making an obvious mistake but allows us to spend big on the sight- and movement-enhancing equipment without having to pay 4X.