SMB: If You Have 150-200 Employees, Do You Know About "Dunbar's Number", and How It Will Adversely Affect Your Business?
According to Wikipedia: "Dunbar's number, 150, is a suggested cognitive limit to the number of people with whom one can maintain stable social relationships—relationships in which an individual knows who each person is and how each person relates to every other person."
Discovered, almost accidentally, by Robin Dunbar a professor of evolutionary anthropology at Oxford University, "Dunbar's Number" is especially interesting to Entrepreneurs attempting to scale a startup. Typically, when a company approaches the threshold of 150 employees, the management system starts to break down;
The dynamics of companies change fundamentally when they exceed roughly 150 people, in ways that startup founders invariably struggle to address. Many startup CEOs say that after they pass this number, weird stuff starts to happen, The weird stuff means the company needs more structure for communications and decision-making.
It’s easy to see why a flat management structure, with limited hierarchical levels and consensus-based decision-making, ceases being as effective. Too often, staff is stalled because it isn’t clear who is responsible for moving a decision forward. Employees crave more feedback and career development than managers in the flat structure have bandwidth to provide. Also, information about and ownership of strategy, norms, and values aren’t spread adequately across staff, as an ad hoc approach to internal communications shows its limitations.
Recognize the Signs
Oxford University evolutionary psychology professor Robin Dunbar has theorized that humans can only really maintain personalized relationships with 150 people. He found this seemingly magic number ”in the typical community size of hunter-gatherer societies, in the average village size in county after county in the Domesday book, as well as in 18th-century England; it is the average parish size among the Hutterites and the Amish.” The so-called Dunbar’s number also is found in the size of military companies.
“There is no question that the dynamics of organizations change once they exceed about 150 or so,” says Dunbar. “The Hutterites deliberately split their communities at this size in order to avoid having to have a hierarchy and a police force. Keeping things below 150 means you can manage the system by peer pressure, whereas above 150 you need some kind of top down, discipline-based management system.”
Once the staff exceeds 150 people, employees are no longer the single, cohesive, culture-reinforcing unit they were during the company’s early days. Staffers become more specialized and entrenched with their teams, which are frequently sprawled across an office, or in several locations.
“It’s a conversation I’ve had with every single CEO I know who’s had a company that’s moved from 150 to 300 people,” says Patty McCord, who was chief talent officer at Netflix from 1998 to 2012, having joined when the video-streaming company was just about 30 people.
“I call it the stand-on-a-chair number,” says McCord, who coauthored an excellent deck on talent and culture at Netflix and now consults for companies such as Warby Parker, Square, and HubSpot, on leadership and organizational structure. Once a startup leader gets up on a chair to address the staff and someone yells out, “We can’t hear you,” she says, it’s time to start rethinking how you’re communicating.
Once a company grows beyond the 150-employee mark, it’s all the more crucial that leaders “ articulate on a pretty regular basis where we’re going, what we’re doing, and what we’re not doing.” This is when company culture and identity become less about being part of a single tribe of co-workers and, ideally, more about the customers they serve.
The Tipping Point
As companies grow, they add process and often start requiring more sign-offs for employees to get things done. It’s this type of bureaucracy that kills companies. Instead, leaders need to focus on sharing and empowering the business context—including analytics on what’s working and not—so that staff can find the right solutions themselves. Many companies have abandoned their policy for allotting vacation days and tracking them, believing it was more efficient to entrust employees to behave responsibly. For expenses, entertainment, gifts, and travel, the policy becomes “act in The Company's best interest.”
W.L. Gore & Associates, the maker of Gore-Tex fabric, has an unconventional approach to managing the changing dynamics that come with growth. The privately held manufacturer, which has more than 10,000 employees, generally doesn’t allow the staff at any of its factories to exceed 150 people before building another, self-contained factory next to it. That’s because founder Bill Gore felt that when a unit of workers got big enough, “we decided” became “they decided,” as management writer Gary Hamel, who has studied the company, explains it.
Gore died in 1986, several years before Dunbar would publish his work on Dunbar’s number. But Gore understood that workers in a 150-person unit could all know one another, and share a commitment to group goals and values—and that any growth beyond that would change those dynamics.
“That feels like about the right number,” says John Foley, the co-founder and CEO of New York-based fitness startup Peloton, which now has about 375 employees. “It was great when there was 50 people and I was a big enough personality and influence and we sat all together. The core nucleus of the founding team could create the culture. Now as we’re adding more and more people, that doesn’t scale.”
Managing Growth
1)First of all, streamline leadership structure so a smaller number of people have clearer responsibility for different parts of the business.
2)Secondly, create about a 10-person operating committee, or mastermind group, of top managers to meet weekly to share information about the health of the company and decide matters affecting multiple parts of the organization.
3)Third, spend time talking about values and goals with staff, write down a company history to share with all new employees and,
4)Fourth, start scheduling more regular all-hands staff meetings to discuss the business.
5)Fifth, develop your mission statement—to help define how the organization serves clients. This should be a bigger, more powerful influence on company culture than the sense of tribe that was cultivated early on as a staff.
6)Sixth, Continuous Leadership Development for staff at all levels. When the team develops a high-performance mentality they become fearless decision-makers, and self motivated; they take their performance to the "Next Level"!
It remains an ongoing challenge to add structure without crimping the creativity, speed, and individual empowerment responsible for success.Such changes in culture as companies get bigger are often positive, even if they’re disorienting.
If you want to get more out of your team for any of the following reasons:
=> Because the number of people on your team has been reduced, and yet you’re expected to produce the same, or better, results.
=> Your team is not producing the results that you expect, and you are concerned that your bosses and/or stakeholders are not going to be happy about that.
=> Members of your team are undermining each other or worse, undermining you, causing conflicts and frustrations for you. You would like to turn your team into a well-oiled machine.
Then, I’d like to help you access the untapped potential of your team by offering you special “Passport To Greatness" Group Coaching Sessions for your people.
During these sessions we will…
=> Create a crystal clear vision for the results that you want your team to produce, for the way that you’d like your team to interact with each other and for the kind of people you would like to have on your team.
=> Uncover hidden challenges that may be sabotaging your success with leadership and team building.
=> You’ll leave the session renewed, re-energized and inspired to create a powerful results- driven team that gets things done so that you can be the office hero and still have a flourishing personal life.
To claim this special coaching session simply click reply and answer the following questions:
1. How long have you been in this leadership position?
2. What are the biggest leadership challenges you're facing today?
3. On a scale of zero to 10 how important is it to you to get better results from your team?
4. What are your ultimate aspirations and goals as a leader?
Be sure to also include your name, phone number and email address when you reply so that someone from our office can get back to you and schedule your session within the next 24 to 48 hours.
All the best,
Duke