As an entrepreneur, building a business inevitably means working with others. Achieving our goals demands teamwork.
So, the bigger the team, the more we can achieve, right?
Yes and no. Although bigger organisations can usually achieve bigger results than their smaller counterparts, all other factors being equal, the paradox is that bigger organisations pay a higher price in their communication overhead. Literally, the bigger our team, the greater the cost of unproductive time in co-ordinating and keeping everyone aligned.
“The more the merrier” might hold true for social celebrations, but it’s anathema to agile projects, decisive leadership, and just getting things done.
In each team, consider just the one-to-one relationships each person has with each other team member. A team of 2 people has just one relationship to manage. A team of 3 has 3 relationships. 4 people have 6 relationships, 5 people have 10 relationships, while 6 people have 15 one-to-one relationships.
For each person added, have you noticed how the number of relationships increases exponentially? I won’t bore you with the mathematical formula for this principle, but consider: can a team of 10 people really be considered a “small” team when they have 45 one-to-one lines of communication?
That’s not even counting the various sub-groups that typically evolve as team size grows beyond 3 people.
If you identify with a democratic leadership style, that’s a lot of relationships to slow down your decision making. Big teams just can’t be agile when decisions are by consensus.
Interestingly, this comms overhead extends beyond internal team relationships to our suppliers and clients, too. If you’ve struggled to close a deal or finalise terms with a supplier, maybe there were simply too many fingers in the pie?
And if your growth strategy is through acquisitions, a big red flag is a target business with more than 3 shareholders, especially if some are silent partners.
In economic terms, the ceiling of marginal gains for each additional person added to your business is reached much sooner than we might think.
This is also why many small businesses fail to grow beyond small: the owner fails to transition from managing the work to managing the manager (who manages the work).
As you grow your business, watch out for the communication overhead: each person added to your team will add an exponentially greater demand for your attention.