The compounding interest of smaller teams
Have you ever wondered why smaller teams feel much more personal than larger teams, even when they’ve only been together for a short time? Compounding might have something to do with it.
Compounding is a term that’s often used in investing. It’s the principle underlying the exponential growth of the value of an investment portfolio. Earnings from previous investments are reinvested and are used to generate extra income. Sometimes called the hockey stick principle, where an investment grows slowly but starts to speed up over time.
I realized that this principle also applies to teamwork.
Psychological safety in teams
In teamwork, psychological safety is the number one factor related to high-performing teams, as shown in Google’s Project Aristotle. In his classic book The Five Dysfunctions of a Team, Patrick Lencioni identifies Absence of Trust as the most important dysfunction in low-performing teams.
Psychological safety and Trust lead people to voice their concerns, take initiative, share ideas, and help others. Psychological safety and Trust are the foundation for high-performing teams.
Therefore, when building a team, one of the first things to take care of is psychological safety. But what is rarely mentioned is the effect of team size on the ability to grow psychological safety.
Smaller teams are able to connect quicker
Imagine that you are able to grow your personal connection to one person on your team every week. That increase in personal connection enables sharing of ideas, concerns, and personal histories. At first, you share something small, and a good experience will lead you to build trust, meaning you start sharing deeper and more important things.
The team starts to share more, work out ideas, voice concerns, and in the process creates its own best working environment.
On a five-person team, the cycle time to connect with each team member is five weeks. On a ten-person team, it’s ten weeks. Meaning that in the same amount of time, the smaller team has had two moments to grow.
Taking compounding into account, this means that the smaller team is able to grow their trust and psychological safety at an exponentially quicker rate than the larger team.
The smaller team can connect and grow quicker, and it can use that connection to grow even quicker in the future.
In conclusion
I have always been a fan of smaller teams. Going back in my memory my favorite teams to work with have always been smaller teams, exactly because of how much simpler it is to create a personal connection. My personal preference for smaller teams is also backed up by research.
But up until now, I’ve never been able to put the finger on why this was exactly. Compounding might be part of the answer.
