Businesses are powered by humans. When a business is created, it is typically formed by a sole proprietor or a small team, and an essential initial condition is a deep sense of trust within the nucleus of the entity. The success or failure of the venture depends on it.
Business growth and profitability
While not always the case, a key goal for most businesses is growth and profitability. As the business grows, teams expand, and the level of intimacy among team members begins to erode. Walls are erected between teams to protect a sense of team identity. This happens because there is an upper limit to managerial effectiveness in a nuclear team (Wharton School of Business, 2016).
When team size increases, cliques begin to form as like-minded individuals begin to coalesce. As the business grows, more nuclear teams are established as more specialization is needed to achieve scale. The concept of “us versus them” takes hold, and competition is established within the business. A critical mass is reached where trust among teams is no longer the initial assumption. Mistrust becomes pervasive as teams compete for resources and team goals begin to diverge from overarching corporate goals.
If you’ve worked in an academic or a business setting for any length of time, you have witnessed this behavior firsthand. Individual opinions begin to influence team dynamics, and an “anchor dragger” can pull down an entire team or turn teams against one another.
As a new manager, entrepreneur, or seasoned leader, it’s important to understand the dynamics of team size as the business grows. Unfortunately, this subject gets very little airtime in business school—my hypothesis is that team size dynamics are a leading cause of business and project failure, yet we tend to focus precious little energy on addressing the problem.*
Entropy
I won’t get into the physical definition of entropy, but it’s a word we should all know. Loosely speaking, entropy is defined as the natural tendency for a system to disintegrate or fall apart.** The more complex the system is, the more opportunities for disorder and chaos to be found within it. When applied to business, the larger and more complex the company, the more opportunity there is for disagreement and misalignment among teams and team members.
Entropy is a natural state is why investing in organizational health is so important in all business settings. Marriages take work to maintain and flourish, friendships take work to have any kind of permanence—why don’t we think the same way in business?
If you’ve been through any kind of marriage or relationship counseling, you are acutely aware that building and maintaining communication skills is the key to the relationship’s longevity. Developing the ability to deliver and accept constructive criticism, to both challenge and actively listen to other points of view, and to do so in a respectful and civil manner are all skills that need constant attention. These skills translate directly into a business setting.
I can personally attest that in a previous version of myself as a leader, I believed communication skills were just “fluff” and made them a low priority for investment. By applying the lessons learned through my own marriage counseling journey, I’ve learned that ensuring team members are equipped with the ability to engage in frank and fearless conversations is a necessary ingredient in building the trust that’s essential for healthy teams. This is why communication skills are typically listed as a top priority in solving the skills gap—effective communication is vital in all organizations and becomes increasingly important as complexity increases.
Creating clear goals
I strongly recommend adding “Fight Entropy” to your list of standard work and placing it toward the top of the list.*** When you create clear goals for your teams and ensure that these goals are congruent with overarching corporate objectives, the likelihood of conflict and chaos is reduced. In fact, the conditions for trust to flourish are reestablished—much like when the business was in its infancy. In this environment, teams and individuals see how their work contributes to customer satisfaction and business success—leading to more situations where everyone is rowing at the same cadence and in the same direction.
During my junior year of college, I took a math logic course as part of my computer science minor. The primary thing I learned from that experience was that the best logical proofs are almost always simple and elegant. Early in the course, I would find myself turning in homework with proofs that contained more steps than necessary—the instructor would invariably come back and present the class with a three- or four-line answer. I don’t mean to geek out on you here, but the point is that simplification, parsimony, and elegance won the day.
The same concept holds in business. Unnecessary complexity is one of the most insidious forms of waste. Complexity drives up costs, reduces flexibility, and ultimately harms the consumer experience.
Ironically, some of your employees like unnecessary complexity—they use it as a security blanket to prevent others from understanding how workflows from point A to point B. They rationalize it this way, “Better to live with a little chaos and inefficiency than risk losing one’s job.”
Worse yet, the protection of complex environments is typically not overt but, instead, lives in the subconscious. Many parts of the job—as currently defined—are wired into the subconscious brain, just as your trip to and from the office is. This is a primary “why” behind the length of time it takes to drive complexity out of systems—especially for established businesses populated by long-tenured team members.
Leading through change
When faced with this resistance to change, your role as a leader is to use change management tools and learning resources to help team members see the benefits of change and how a new set of standard work can help them grow both personally and professionally. Fighting entropy is a necessary, but not sufficient, condition for meeting business goals. There are many other key ingredients, like agility, innovation, balance, and differentiation, but I believe that if we all learn that regression to disorder is a natural process and to fight entropy earlier in the life cycle of the company as it grows, we will see more high-functioning teams, fewer artificial silos, improved trust, and ultimately, better business performance.
Creating balance is no easy task. It takes conscious effort and self-reflection to understand our own weaknesses, and it takes even more to correct our imbalances. However, I believe that you can’t be an effective leader without going through that difficult but necessary process of self-assessment and course correction.
Exceptional leaders understand the power of their words, identify and nurture human potential, model organizational purpose, and adopt a continuous improvement mindset to minimize organizational entropy.
References
- Jun 14, 2006. Wharton School of Business. Is your team too big? Too small? What’s the right number? Knowledge at Wharton. https://knowledge.wharton.upenn.edu/article/is-your-team-too-big-too-small-whats-the-right-number-2/.
* This hypothesis is supported by a handful of academic studies but needs much more investigation. Examples include The Effect of Team Size on Management Team Performance: The Mediating Role of Relationship Conflict and Team Cohesion, by Lars Erik Espedalen, 2016; Psykologisk Institutt and Group Size, Group Development, and Group Productivity, by Susan A. Wheelan, 2009; SAGE Publications.
** Entropy is a measure of the degree of disorder in a substance or a system: entropy always increases and available energy diminishes in a closed system, according to Dictionary.com.
***Standard work is simply the list of steps for a process that is the most efficient path to desired outcomes. Standard work is then continually refined to remove waste, enhance teamwork, and improve performance (with a maniacal focus on the customer). We will discuss leader standard work in greater detail in part 6.
