Startup Best Practices 2 - Startup Team Sizes

At its core, a startup’s advantage in the market is the speed created by focus. When a team is well orchestrated, they can accomplish amazing things. Creating an environment that fosters communication best is therefore an essential part of startup management. But how best to do it? Founders have to balance span-of-control with span-of-managerial-responsibility.

In an article this week’s New Yorker, Amazon’s founder/CEO Jeff Bezos is quoted on the subject with a contrarian point of view:

Communication is a sign of dysfunction. It means people aren’t working together in a close, organic way. We should be trying to figure out a way for teams to communicate less with each other, not more…

Bezos reduces communication with the two pizza box team. He reasons, if you can’t feed a team with two pizzas, it’s too large. Metcalfe’s Law shows that the number of relationships within a team increases geometrically as the team grows. Most agree that smaller teams reduce communication overhead, improve focuse and produce more.

But how should a startup manage lots of small teams? How many reports to a manager and how many managers? At Google, I measured the product manager to engineer ratios across different projects in the company. More generally, this metric is called the span of control. On average, the ratio was 1:7. But we observed enormous variance. Search engineering saw ratios of 1:20 or higher. Newer consumer products might have 2 to 4 engineers per PM.

Why such variance? The best reasoning I’ve found is Peter Drucker’s. Drucker created a complementary concept called span of managerial responsibility which he defined as: “the extent to which teaching and assistance are needed.”

In other words, very senior engineering teams, like the ones on Google Search Quality, don’t need much teaching and assistance most often because they have extensive experience. These team can thrive at spans of control of 15+. More junior teams, teams new to a field or teams building a new kind of product will demand greater managerial responsibility, which means smaller teams.

Some startups pursue flat organizations without managers or with rotating managers. 37Signals and Valve employ very flat management structures which enable employees to self-organize. These novel management styles can be effective, but only when the span of managerial responsibility doesn’t demand lots of assistance.

There is no universal optimal team size, according to research. But the best team size for a startup is the one that balances span-of-control and span-of-managerial-responsibility. And if that’s too hard to figure out, 7 is a good first stab.

Second in a Series on Startup Managment. The first post is Situational Management.

Published 2013-11-20 in startups  Best Practices  Culture 

Tomasz Tunguz is partner at Redpoint. I write daily, data-driven blog posts about key questions facing startups. I co-authored the book, Winning with Data. Join more than 20,000 others receiving these blog posts by email.

Read this next: