From mobile

Company growing pains

By December 6, 2007 2 Comments

Posted by mobile phone:
Many of you will have observed how companies go through a big personality shift as they grow. I’ve always explained that by the simple logic of size – as a company gets bigger there is more stuff going on and as it gets too much for people to keep in their heads you get a shift to a more process oriented culture.

Reading Gladwell’s Tipping Point yesterday I thought his ‘law of 150’ added something to this assessment. Simply put, the law is based on empirical observation that in groups larger than 150 people communication starts to break down and schisms start appearing. It seems that with groups up to that size we can cope mentally with knowing everyone and keeping a check on all the relationships within the group, but at around 150 we hit some kind of natural limit and it becomes too complicated. (Incidentally, the 150 limit is apparently a function of the size of our neocortex – other primates with smaller neocortex’s live in correspondingly smaller groups.)

In my experience the change comes for startups somewhere in the 50-100 employees range (and it is often a traumatic change). As most small companies depend on intimate relationships with a number of people who aren’t on payroll it is unsurprising that this is less than Gladwell’s 150.

Tangentially related is the notion that we subconciously use each other as external memory devices. As Gladwell explains it, we naturally optimise by remembering the things that stick in our brains most easily and relying on people close to us to remember the things that stick naturally with them. This resonates with me and I can easily see how my wife and I divide up the list of things we need to remember between us (it is actually embarrassingly gender stereotypical so I won’t go into it here, but you get the picture). The interesting thing is that as a result you become bad at remembering the things that other people are good at. The optimal solution for you (and the group) is for you not to bother with that stuff – so you’re brain simply doesn’t.

I bring this up here for the insight it gives into the notion of of organisational memory and the wrench a small company feels when a founder or long-standing senior exec leaves the business.