Enhancing Business Success through Innovation and Entrepreneurship- Part Two

Team Size, Construction, and Duration

In the first part of this article, we outlined seven critical traits of innovative teams that propel their businesses to success: Team Size, Team Construction, Team Duration, Team Alignment, Team Empowerment, Vision, and Culture. In this part, we’ll elaborate on the first three essential success factors- Team Size, Construction, and Duration. (You can access the complete article here: https://www.marlboroughst.com/think/teams )

Team Size

The concept of optimal team size ties into evolutionary psychology and organizational theory, drawing on insights from Dunbar’s research on social groupings and Conway's team coordination and communication principles.

Dunbar Numbers and Layers

Robin Dunbar's research suggests that human cognitive limits, based on brain size, restrict the number of meaningful social relationships one can maintain. The most famous number, Dunbar’s Number (150), is the upper boundary for meaningful relationships—the kind of people you could approach for a casual conversation or join uninvited in social situations.

Additionally, Dunbar proposed Dunbar Layers, which describe deeper and smaller circles of relationships:

• 5 close friends: Your innermost circle, usually those with whom you share deep emotional connections.
• 15 good friends: A slightly larger group, including friends you can confide in or rely on for support.
• 50 friends: A group you know well and might engage with more frequently than acquaintances.
• 150 meaningful contacts: People you maintain enough familiarity with for social engagement.

Team Size and Dunbar Layers

Interestingly, these numbers align with the size of effective elite teams. For example:

• Special Forces teams (e.g., SEALs and Green Berets) tend to operate with 12–16 members.
• Sports teams range from 5 players on a basketball court to 11 players in soccer or football.

This alignment suggests that team effectiveness diminishes as the group size exceeds the cognitive and social capacities described by Dunbar.

Conway’s Law and Communication Overhead

Melvin Conway highlights a structural constraint on teams based on the complexity of communication. He suggests that the team size should be at most seven subordinates per leader. The communication overhead in a team is described mathematically by the formula:

Communication Overhead = N (N?1) / 2

This equation indicates that as team size grows, the complexity of coordinating tasks increases exponentially, eventually reducing productivity as members spend more time communicating than working.

Amazon’s “Two-Pizza Team” Rule

Amazon popularized the Two-Pizza Team concept, which is rooted in the same principles. Teams should be small enough to be fed two pizzas, which generally limits them to about 6-10 members. This approach minimizes communication overhead and keeps teams agile, avoiding the inefficiencies of larger groups.

Key Takeaways:

• Dunbar’s Number shows the cognitive limits of social relationships, with layers of intimacy that match optimal team sizes.
• Conway’s Law emphasizes limiting team size to reduce communication complexity, ideally maintaining 7 or fewer subordinates per leader.
• Amazon's Two-Pizza Team rule recommends teams of around 6-10 members to maintain efficiency and productivity.
• Elite teams and sports teams often align with these limits, rarely exceeding 15 members, optimizing for trust, communication, and collaboration.

Keeping the size between 5 and 15 members for high-performing teams maximizes effectiveness while minimizing communication overload.

Team Construction

Constructing high-performing teams requires more than limiting their size; teams must also be equipped with all the skills and resources necessary to achieve their desired outcomes. Successful organizational practices emphasize the importance of cross-functional teams and aligned identity for innovation and effectiveness. Below are the core concepts of team construction and innovation:

Cross-Functional Teams

The idea behind cross-functional teams is to include every skill set required to achieve their goal, reducing external resource dependencies and enabling innovation:

●?????? Diverse skill sets reduce reliance on other departments, speeding up time to market.

●?????? The team owns the entire process, from ideation to execution, promoting ownership and responsibility.

For instance, in a Special Forces A-Team, every role necessary for successful execution behind enemy lines is represented: leadership, medics, engineers, weapons specialists, intelligence, and communications experts. Similarly, in corporate or product teams, cross-functional teams should include skills like product management, engineering, QA, DevOps, and operations. This model contrasts with traditional functional silos, which lead to delays and conflict over responsibility.

The Tyranny of the “How” vs. the “What”

One common organizational misstep is structuring teams around how tasks are done (i.e., functional organization) rather than what they are trying to achieve (outcome-focused teams). While most leaders agree that "what" is more important than "how," many organizations are still structured along functional lines:

●?????? Product management is separate from engineering

●?????? Engineering distinct from QA

●?????? Operations as a separate unit from product teams

However, organizational structures, especially those defined by functional boundaries, can hinder empowerment. When work must travel across organizational boundaries or collaboration is unclear, it increases affective conflict. This conflict focuses on disagreements about ownership of tasks and decisions, slowing progress and stifling innovation. Functional organizations and waterfall development methodologies exacerbate this problem by reinforcing siloed thinking and conflicting priorities.

For example, in a functionally aligned company:

• A product management team might define a problematic solution to implement efficiently. Under pressure to deliver quickly, the engineering team may need help to meet the requirements.
• The operations team could face issues due to design decisions that affect service availability, leading to conflict with engineering.

This type of conflict arises because teams feel a sense of ownership over different aspects of the project (e.g., revenue, time to market, availability), and each group prioritizes its objectives. There is no shared responsibility for the overall outcome.

In contrast, cross-functional teams that organize around “what” they aim to produce enjoy better collaboration, faster delivery, and higher levels of innovation. Fred Brooks’ Mythical Man-Month uses a surgical team analogy to describe this approach: the entire team is constructed to support the "surgeon" (or critical deliverable), maximizing the surgeon’s success.

Cross-functional teams are designed to reduce affective conflict and promote cognitive conflict, the beneficial kind that drives innovation. Experientially diverse teams, which include members from different skill sets and perspectives, are more likely to generate cognitive conflict. This conflict revolves around what should be done and why, leading to better decisions and solutions.

However, diversity in experience can also lead to affective conflict if not managed well. If team members don’t see themselves as part of a shared outcome-focused team, they may begin to argue over who owns decisions. This is why fostering a shared identity within the team is crucial.

Conflict and Innovation

The two types of conflict are:

1. Cognitive Conflict: Productive and beneficial, this conflict focuses on what to do and why to do it. It fosters brainstorming and creative problem-solving, resulting in more significant innovation. Because of their diverse expertise, cross-functional teams tend to generate higher levels of cognitive conflict, leading to better decision-making and outcomes.
2. Affective Conflict: Detrimental to performance, affective conflict arises from disputes over who is responsible for what or how tasks should be done. This type of conflict delays progress, lowers morale, and stifles innovation. Affective conflict is more common in functionally aligned teams where boundaries between responsibilities aren’t clear.

Cross-functional teams that identify primarily with their shared outcome—rather than their job function—tend to have lower affective conflict and higher cognitive conflict. This alignment around outcomes fosters collaboration, reduces bureaucratic delays, and boosts morale.

Team Identity and Empowerment

Social identity plays a critical role in the success of cross-functional teams, and as feelings of empowerment increase within a team, so does the level of innovation. Empowered teams take ownership of their outcomes, which fosters engagement and creative problem-solving. This sense of "ownership" encourages team members to innovate, make decisions more efficiently, and maintain a high-quality standard. Empowered teams are more likely to take initiative in resolving issues and bringing ideas to fruition, leading to faster time to market and higher overall quality.

• When individuals identify primarily with their team’s outcome, they are more likely to collaborate effectively and reduce affective conflict.
• When individuals identify with their functional role (e.g., “I’m an engineer” or “I’m in QA”), they are more likely to create silos, leading to territorial disputes and conflict.

For example, in Special Forces A-Teams, members identify primarily with their team (ODA), and only secondarily with their job function (medic, engineer, etc.). This reduces intra-team conflict and creates a strong bond of shared purpose.

Similarly, in businesses, when individuals view themselves as part of an outcome-oriented team (rather than a siloed function), innovation flourishes. Teams that share ownership of successes and challenges are likelier to make real-time trade-offs and collaborate toward the best overall outcome.

Serial Entrepreneurs and Loose Ties

One notable trait of successful serial entrepreneurs is their broad and diverse network of loose ties. These individuals—often in the Dunbar range of 15 to 150—provide external validation, diverse perspectives, and new ideas that entrepreneurs can test and integrate into their businesses. Diverse teams with external networks are often more innovative because they source best practices and ideas from multiple fields.

Key Takeaways

1. Cross-functional teams should include all necessary skills to achieve their outcomes, reducing the need for external dependencies.
2. To avoid affective conflict, teams should organize around what they produce (the outcome), not how they make it (functional roles).
3. Cognitive conflict drives innovation, while affective conflict slows progress and decreases team morale. Cross-functional teams encourage cognitive conflict and minimize affective conflict.
4. To foster a collaborative, innovative environment, team members should identify with their team's outcome rather than their job function.
5. Empowered teams with shared ownership of outcomes experience higher morale, faster time to market, and increased innovation.

Team Duration

Bruce Tuckman’s model of group dynamics outlines the four stages of team development—Forming, Storming, Norming, and Performing—which have significant implications for Agile development and team management in modern organizations. Here's a breakdown of each stage and its impact on Agile practices:

1. Forming

In the Forming stage, a team is just beginning to come together. Team members are polite and focused on getting to know one another but lack trust and understanding of the group’s goals.

• Productivity: Low, as individuals aren’t fully aligned on team objectives.
• Conflict: Minimal, but any disputes stem from unclear expectations or differing personal goals.
• Agile Impact: Leadership is crucial to setting clear goals and ensuring everyone understands the team’s purpose and objectives early on. Establishing ground rules and expectations helps the team transition smoothly to the next stage.

2. Storming

The Storming phase is characterized by increasing conflict as team members express their ideas and vie for control. Misalignment of roles and approaches leads to friction, especially when trust is still low.

• Productivity: Often lower than in the Forming stage due to unresolved conflicts and power struggles.
• Conflict: High affective conflict as team members argue over decisions and responsibilities.
• Agile Impact: Agile practices aim to resolve affective conflict quickly through open communication and frequent retrospectives. Good leadership is critical to ensure the team doesn't get stuck in this phase. Setting clear roles and responsibilities and embracing Agile’s iterative feedback loops can help the team progress.

3. Norming

In the Norming stage, team members begin to accept their roles and responsibilities, trust starts to grow, and the team develops a set of norms for working together. Cognitive conflict rises, and the team begins to work more effectively.

• Productivity: Rising as the team becomes more cohesive and focused on achieving shared goals.
• Conflict: Low affective conflict, higher cognitive conflict, which benefits innovation and performance.
• Agile Impact: In this stage, the team begins to gel and work more smoothly, making it a productive phase for Agile teams. Agile frameworks encourage constant improvement through practices like retrospectives, which help teams refine their norms and collaboration methods.

4. Performing

The Performing stage is ideal, where the team operates at high productivity with strong trust, collaboration, and shared goals. Teams are self-sufficient and can handle healthy conflict without leadership intervention. The group identity is strong, and members are loyal to each other, as well as the outcomes they collectively work toward.

• Productivity: High—teams are focused, efficient, and consistently deliver high-quality work.
• Conflict: Primarily cognitive conflict, which is productive and helps drive innovation and improvement.
• Agile Impact: Agile teams in the Performing stage deliver the highest levels of value to their organizations. These teams are adaptable, embrace feedback, and continuously improve without external guidance.

Challenges with Short-Term Teams

In Agile development, teams often face disruptions when they are temporarily formed around specific initiatives or projects (e.g., virtual or matrixed teams). These teams frequently cycle through the underperforming stages of Tuckman’s model (Forming and Storming) without reaching the higher performance phases of Norming and Performing. This is particularly problematic when teams are formed for initiatives shorter than six months, as they don’t have enough time to progress past the early stages of group development.

Ideal Team Duration and Structure

Tuckman’s model suggests that teams should ideally remain together for at least one year, with the optimal duration being around three years. The first six months are often spent forming trust, resolving conflicts, and setting norms, so the team’s peak performance happens in the second half of the first year and beyond.

• Three-Year Limit: Beyond three years, there’s a risk of groupthink or stagnation, where the team may become too comfortable, which can reduce innovation.
• Semi-Permanent Teams: Rather than constantly reshuffling teams for different projects, it's more productive to move work to the team rather than the other way around. This helps maintain high levels of trust and familiarity while allowing teams to refine their collaboration continually.

Agile Implications

1. Long-Term Teams: Agile organizations should prioritize forming long-term, cross-functional teams that remain intact for extended periods to achieve high performance. Keeping teams together for at least six months to a year maximizes their productivity and potential.
2. Move Work to Teams: Teams should be multidisciplinary and capable of handling various work types. Instead of assembling a new team for each new project, moving projects or tasks to existing, well-established teams is more effective. This prevents the team from repeatedly restarting the Forming and Storming phases.
3. Team Ownership: To reach their highest potential, Agile teams must stay together and “own” their work and outcomes. This fosters a sense of responsibility and shared vision, essential for progressing to the Performing stage.

Key Takeaways

• Team duration matters: Teams should be kept intact for at least 6 months, ideally up to 3 years.
• Move work to teams: Agile organizations should aim to move work to stable teams rather than forming new teams around work.
• Build multi-disciplinary teams: Teams should have the diverse skill sets necessary to handle their workloads without relying on constant external input.

Continued in Part Three

The final installment of this article will elaborate on the final four essential factors in team success: Team Alignment, Team Empowerment, Vision, and Culture. Look for Part Three next week.

(Or you can access the complete article now: https://www.marlboroughst.com/think/teams )

By Chip Correra, Partner

Marlborough Street Partners

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