What Size Company is Most Efficient?

If you’ve ever wondered what size company is most efficient, a compelling argument says  the best size for a company—in the sense of a firm or corporation—is the same as that of an armed forces company, which is a military unit consisting of 80–250 soldiers.  According to evolutionary anthropologist Robin Dunbar, it’s only possible to have stable, meaningful social relationships with between 100 and 230 people (with an average of 150 people).

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Dunbar explains in How Many Friends Does One Person Need?:  Dunbar’s Number and Other Evolutionary Quirks that within the primate family (which includes monkeys, apes and humans) there’s a general relationship between the size of the brain and the size of the social group as well as a theoretical cognitive limit to the number of people with whom you can maintain social relationships.

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Dunbar argues that the typical human being can only have 150 friends—despite all the frantic ‘friending’ activity currently taking place on Facebook and Twitter– because humans aren’t cognitively organized to easily keep track of new people.   The 150 number, known as Dunbar’s number, is the number of people you can have a relationship with involving trust and obligation, where, he says, “there’s some personal history, not just names and faces.”

The average group size of a wide range of human communities appear to support Dunbar’s hypothesis, from  the average size of Neolithic farming villages to the typical size of pacifist Hutterite and Amish church congregations to the smallest standalone unit (the company) in all modern armies since the 16th century.  Dunbar’s research also indicates this is the point at which businesses start to need formal management structures if they are not to fall apart as they grow in size, citing the example of manufacturer W.L. Gore—famous for its Gore-Tex outdoor clothing as well as its non-hierarchical, team-based management structure—which employs Dunbar’s number as a principle to organize its business.   According to Dunbar, when Gore-Tex was growing rapidly in the 1980s, founder Bill Gore visited his factory and realized he didn’t know everyone working there.  He came to the conclusion that once a company had more than 150 people, things no longer ran smoothly, which led him to cap the size of each Gore-Tex factory at 150 employees.

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On the other hand, Dunbar’s number seems to be contradicted by online networks like Facebook, where the average US user has 342 ‘friends,’ more than twice Dunbar’s number.   Laura Thomson, Engineering Manager at Mozilla Corp., claims Mozilla was “able to ‘dodge’ Dunbar’s number until it reached about 500 people” by using tools and practices to increase trust and engagement among remote and distributed workers.   She concedes that, as teams grow and projects become more complex (Mozilla currently has around 1,000 employees), you’re still going to need a certain amount of process or organized, rule-based hierarchy, which she calls a Minimum Viable Bureaucracy.

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The jury is still out on the question of whether Dunbar’s number can be applied to online social networks since it’s debatable if online interactions count as stable social relationships.  Whether or not 150 is the most efficient human group size, Thomson’s experience at Mozilla definitely suggests that organizing a company made up of more than 150 people requires a communication system that connects groups of roughly that size and permits them to work toward common goals.

This means that communication (face-to-face and electronic, from the mailroom to the boardroom) is in the end the key element in organizational success since it is the quality of your communications that will ultimately determine how well your people related to each other.  By helping make sense of an organization’s communication patterns, the emerging discipline of Organizational Intelligence can help CEOs understand the relationships that drive their company’s business–by identifying communities as well as employee workflow and collaboration patterns across geographies, divisions, and internal and external organizations. Organizational Intelligence solutions provide insight into how to preserve the close-knit community feeling that spurs employees to help each other and your customers out—as your company’s headcount approaches or exceeds Dunbar’s number.

(Writing by Roger Smith; editing by Amy Canter, Janina Energin, and Hendrik L Clarke) Roger Smith, Technology Marketing Specialist at Hypersoft Information Systems, a 20-year-old software consulting firm specializing in Organizational and Operational Intelligence [image: yourdon].

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CEOWORLD Magazine, the world's leading business and technology online magazine written strictly for CEOs and forward-thinking high-level executives at companies around the world. ( info@ceoworld.biz )

Email: info@ceoworld.biz