Team Genius: The New Science of High-Performing Organizations (25 page)

And jumping to the larger size does come with costs. Recall Dunbar’s numbers: the 7±2 team is at the upper bound of people with whom you are truly close, who are like family. By comparison, the 15±3 team is at the upper bounds of people you can truly
trust
. There is a very big gap between the two (though perhaps not as big as the one to come), and it can be decisive. In the smaller team, everyone works constantly with everyone else, each knows each other’s strengths and weaknesses, and ultimately, honor or blame accrues to everyone just about equally (remember how we apportioned credit for the microprocessor?).

We are also now beyond Jeff Bezos’s “two-pizza” rule, and so it is difficult to actually get the entire team together in one place and address every one of them personally. Moreover, for all the advantages of having an internal management, that new apparatus brings with it the problems of transfer and translation—messages and commands can sometimes change subtly (but materially) as they pass down the chain of command.

15±3 Team Creation and Management

Far more than any smaller team type can do, 15±3 teams can recruit for maximum diversity. There are several reasons for this:

•
      
Mass:
A dysfunctional member of a duo, a trio, or even a 7±2 team can be deadly, especially if he or she isn’t excised quickly. But a 15±3 team is big enough to absorb a certain amount of intrateam friction. This in turn means that you can recruit for a much greater range of diversity than ever—which in turn increases the team’s likelihood of success.

•
      
Size:
A 15±3 team is also big enough to allow a certain amount of migration within the team . . . which means that a talented member who doesn’t fit in one part of the operation may still find a welcome spot somewhere else.

•
      
Leadership:
In smaller teams, the leader—already doing his or her own work, plus committing time to supervising—doesn’t have time to “sit on” another team member who has huge potential but doesn’t quite fit in. But in a 15±3 team, with its two or even three layers of management, it is possible to assign a manager to focus extra time on making sure that a “challenging” member is successful.

As for running the 15±3 team after it is under way, the basic rules of management theory apply: Work through your subordinates but maintain a connection with all the team members; continuously monitor the team’s health; recognize hard work and achievement; defend the team against outside challenges; manage the budget carefully; and shepherd the team through major challenges and transitions. If you’ve built the team properly, it will take care of the rest.

B
eyond the 15±3 team, each team of increasing size is approximately three times that of the one before. There is no obvious genetic reason for this. More likely it is that the increasing span of control at one level eventually requires a new layer of management—which leads to the jump to a new team size.

Note also that the gaps between the team types also grow greater with each jump—eight from seven to fifteen; thirty-five from fifteen to fifty, one hundred to the next level. These no-man’s-lands of team populations quickly become huge, and are only slightly mitigated by the growing margins of error—which means that if you choose to create a larger team over a smaller one, you will inevitably be making a much greater investment. That’s yet another reason to keep your teams as small as possible.

At the 50 team level, we leave the world of midsize teams and enter the world of
large teams
, of which there also are two types:

•
      
Company 1:
These are 50±10 member teams (“50”). In real life, these teams correspond to midsize companies that are either small manufacturers or, with actual products being delivered to customers, start-ups at the series B level of venture financing. These are typically companies based at a single location, with dedicated salespeople, and a growing product catalog. Within larger organizations, this size of team corresponds with the size of a department.

•
      
Company 2:
These are established companies with 150±30 employees (“150”). They correspond to larger midsize companies than Company 1, but are still privately owned and mostly headquartered at a single location. Whereas Company 1 teams typically feature functional departments and three layers of management, Company 2 teams may have four layers of management and may feature the first appearance of business units or divisions. These larger teams, if a stand-alone enterprise, are typically at series C investment, with an impending acquisition or initial public offering. In a larger organization, this is the size of a product group or small division.

Company 1 and 2 team types represent the last appearance of what we might call
knowing teams
. The 50 team represents the largest team type in which mutual trust remains a defining element, even if it’s limited. In a 50 team, you can be pretty sure that no one is actively working against the interests of the group, mostly because you still know everyone, even if you work regularly only with a few of them, and some not at all.

50/150 company teams are the real deal, as underscored by the way they are treated by their employees, customers, investors, and various governments. For employees of 50 teams, they represent the opportunity for long-term employment and bonuses; and for the 150 teams there is even the chance at considerable wealth from
an acquisition or an IPO. And, at these sizes—and unlike with many bigger teams—everyone can grab the brass ring. Take the social networking company Whatsapp: three years in business, fifty-five employees . . . and sold to Facebook for $19 billion. That’s $120 million for even the least vested employee. Stock option plans are usually distributed more equitably at this level, and the chance for upward mobility through the ranks is greater.

50/150 companies are also more independent and stable than their smaller counterparts, mostly because they can perform all of their necessary duties within their own operations rather than being at the mercy of outside contractors or suppliers—and when they do work with outsiders, it is both from a greater position of strength and with the ability to assign staff to monitor those providers. Having operations inside the team means that 50/150s enjoy a smaller overhead per employee than smaller firms for the same services. On the other end of the scale, 50/150 companies are also more resistant to market shock. They can endure a market downturn better than their smaller counterparts can—and if they can’t change direction as quickly as smaller teams, they are also more likely to have the cash, the inventory, and the physical plant needed to survive.

Then there is the matter of innovation: smaller teams are usually better at coming up with that one, big, category-creating product idea. But it takes a 50/150 company (or bigger) to consistently come up with a series of successful new products, all while upgrading their earlier products to push them along the curve to maximum profitability.

Finally, 50/150 teams have a unique ability to
scale
. Unlike with smaller teams, all the pieces are now in place, from line and staff operations to corporate offices to multiple layers of management. The company team, especially the 150 team, can simply grow by expansion, not invention, the former being a much simpler process.

Interestingly, one of the most compelling arguments for the 150
team appeared only in recent years: It can serve as the heart of a virtualized corporation. Mike’s 2009 book,
The Future Arrived Yesterday
, argues that the hollowness of the Internet-and-computer-driven “virtual” organization can be filled with the small, solid core of a permanent, tightly knit team that will provide a stabilizing center upon which a vast, infinitely adaptable “protean” corporation can be built from thousands of part-time freelance employees. 50/150 teams, with their last vestiges of teamwide trust, may prove to be the permanent cores of these companies of the future.

Note that 50 is one of the more obscure Dunbar numbers, corresponding (as you may not remember) to “the typical overnight camp size among traditional hunter-gatherers like the Australian Aboriginals or the San Bushmen of southern Africa.” That seems a bit of a stretch, a facile attempt to fill a blank space. He might have looked elsewhere. For example, a typical military company—three platoons and a headquarters—fits neatly within the parameters of this team type and, even better, it also bears the name “company.” So too do the legendary acting troupes of the Elizabethan era—thus, for example, Shakespeare’s King’s Men company—which would have performed at the Globe Theatre with twenty-six actors and an equal number of stagehands, seamstresses, and other workers.

By comparison, the 150 team is the most famous Dunbar number—and as such, it may be the most stable human grouping of all. It is the largest team in which all the team members still know each other. That fact, combined with the sheer throw weight of a team of this size—one that can recruit top-notch managerial talent to run it and (thanks to stock options) the best talent to man it—makes the 50/150 team a formidable force indeed. That’s why these teams, as companies, clubs, social groups, special forces teams, orchestras, and a thousand other human aggregations, dominate the modern world.

We’ll deal with these two company team types as one, because
they have more commonalities than differences. From here on out we will be looking at matters of elaboration and scale, unlike the paradigmatic changes we saw when moving from one small team to the next.

In 50 and 150 teams we see the rise of true
departmentalization
. That is, we see teams with internal operations that have sufficiently large memberships and infrastructure to operate all but independently. These departments are organized by professional specialty: manufacturing, research and development, HR, sales and marketing. The difference here between 50 and 150 teams is largely a matter of size and the number of divisions—thus, sales and marketing split, and then the latter divides again into PR, advertising, and marketing. In the larger company type, an IT department appears, as does a full-size finance department. The board becomes more active and formal. And most visibly, the team gains an
administration
—which in Company 2 includes a CEO, a COO, and perhaps a few other C-level executives and division heads.

Interestingly, while they share many of the same strengths, 50 and 150 teams have different weaknesses. The problem with 50 teams is both more complex and more dispiriting. As we’ve said, beyond 15±3 members, teams begin to lose their internal trust—and this can be a devastating transition.

We can remember one particular meeting with one of Silicon Valley’s most celebrated entrepreneurs, Tom Siebel, who founded the industry-dominant sales-force automation software company Siebel Systems and eventually sold it to Oracle for $6 billion. We encountered Tom in his office at about the point when the company was a 50 team. He was deeply depressed.

“What’s wrong?” we asked.

Tom replied, “I just got out of negotiations with a potential new vice presidential hire.”

“Bad candidate?” we asked.

“No, just the opposite.”

“So what’s the problem?”

Siebel shook his head. “He started negotiating for which office he wanted and all sorts of other perks.”

“So what does that mean?”

“It means that we’re not a team anymore. We’re not a start-up. We’re not all in it together anymore. Now people join the company for what they can get out of it.” He frowned. “I knew it was coming, but I didn’t think it would be so soon.”

Management challenges become amplified when a team grows as large as 150 members; this is typically also the moment when the team becomes visible to the outside world and becomes, for the first time, the target of recruiters. It is the moment when it first begins to bleed the talent it needs to make the next big leap.

ORGANIZING AND MANAGING 50/150 TEAMS

50/150 teams are rarely created from scratch. That is just too complicated and expensive a proposition with little prospect of immediate return on investment. Instead, these teams are usually
grown
—either directly from a smaller team, or through the amalgamation of several teams. The interesting question is: How do you jump the gap between the optimal size of the smaller team to that of the larger one? The good news for 50 teams is that the jump from the 15±3 member team is objectively rather small; the bad news is that this gap, from eighteen members to forty-five, is actually larger than the smaller team.

Management itself must also experience growth, usually just the insertion of a layer of management between the ones already in place. For the 50 team, this means adding a third management layer between the senior management and individual subteam leaders. This is usually accomplished by clustering the subteams (generally
two or three) by common technology or market and assigning a
group leader
to manage each of those clusters.

For the 150 team, the growth of management becomes more complicated. At this point, the subteams may have grown to
divisions
(they certainly will at higher levels) with their own internal leadership. It is here that the next layer of management—the restoration of individual team leadership—will usually be added. Needless to say, this will make the 150 a bit bottom-heavy in management, but it beats the alternative—and that situation will be rectified at the next bigger team size.

450 TO 1,500 AND BEYOND—TRIPLING DOWN

Finally, we look at very large teams, which can range from 450 members to 1,500 members and beyond.

These very large teams are considerably different from the smaller teams we’ve already studied, and there are entire libraries of texts on management and organizational theory addressing these particular organizations, so we feel little need to add to the pile. Instead, we propose to tackle key issues of these large teams that are not usually addressed in those texts.

The first of these is that it is critical to recognize that these large organizations—battalions, regiments, and brigades; faculty, staff, and administrations; publicly traded corporations, governmental agencies, nonprofit foundations, television networks, and so forth—are still, in their essence,
teams
. In fact, they are often dazzling hierarchies of teams, from scores of pairs and trios up through multiple midsize and large teams. This combination is the hidden dynamic of companies—though it is rarely recognized. And it is interesting to speculate just how much greater performance companies could achieve if they did, in fact, recognize that they were actually aggregations
of teams and not just masses of individuals, and focus on the care and feeding of those teams.

But the enterprise itself, no matter how large, is also a giant team. It shares the common dynamic of all teams—from the 100,000-member global corporation down to two people sitting in an empty office. Even if it is greatly attenuated, it will also live out the life cycle of teams. In other words, it needs to:

•
      
Stay as small as possible, and as close to the optimal team sizes as it can.

•
      
Focus on and constantly improve communications.

•
      
Maximize the diversity of skills and attitudes.

•
      
Recognize and celebrate achievements and milestones.

•
      
Carefully manage transitions.

We’ve listed these requirements before, but it can’t hurt to serve up a reminder when it comes to the very un-team-looking big organizations. Speaking as journalists who have visited hundreds of companies, we find that too many large organizations assume they have grown too big for the practices that sustained them when they were young and scrappy. Nothing could be further from the truth—in fact, they need to assert those practices even more for the sake of morale, loyalty, and coordination. The need is more acute than ever today: as the market changes more quickly, employees are scattered around the planet with little in-person interaction, and fundamental threats can come from any direction.

In addition, maximizing the performance of big and small internal teams strikes us as one of only two ways to counter the diminishing return on investment per added employee that becomes extreme at this level (the other being productivity tools).

Finally, effective small teams, given freedom of action and strong lines of communications to senior management, may be the
only way that a large enterprise can salvage some of the innovation and creativity that first made it a success. That is, this may be the one true answer to Clayton Christensen’s “innovator’s dilemma” by allowing for the internal creation of disruptive new technologies. In fact, this is exactly what Apple did under Steve Jobs through the first decade of the twenty-first century, with Jobs himself acting as small-team protector for the iPod, iPhone, and iPad.