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Why Small Teams Win: Eight Reasons to Stick To the “Two-Pizza” Rule
by Rich Karlgaard

Your organization is forming a new task force, cross-functional team, focus group—whatever you want to call it. And as usual, it’s time for the never-ending quest to “loop people in.” The more brains, the better, reason The Powers That Be. So they include as many high performers and thought leaders as possible. Soon, more volunteers trickle in because they want to be visible, to hitch their wagons to this particular star. And before you know it, the team is completely out of control.

The results aren’t pretty. It’s impossible to come to a consensus. You constantly get off track. You have to wade through piles of unhelpful input while refereeing between people with conflicting agendas. There’s entirely too much self-aggrandizing *bleep* flying around the table, while truly helpful ideas seem to have fled the building. Help!

If you’ve been a part of one of these blundering behemoths (and most of us have), you’ll probably cheer Rich Karlgaard’s suggestion that, generally speaking, we all need to trim the fat.

“As companies strive to stay agile and innovative, they’ve discovered that units of 8 to 12 people work best as the natural size of high-performance teams,” confirms Karlgaard, author of the new book The Soft Edge: Where Great Companies Find Lasting Success (Jossey-Bass/A Wiley Imprint, 2014, ISBN: 978-1-118-82942-4, $28.00, www.richkarlgaard.com). “This is the magic number for leadership teams, product teams, research teams, design teams, and more.”

In all industries and fields, small teams are beating out their unwieldy counterparts because they work, even at the very highest levels. For example, FedEx—a giant, incredibly complex company—has streamlined its core leadership team to CEO Fred Smith and 10 direct reports. This fosters high performance, says Karlgaard, and helps the company to present a single face to customers and shareholders.

Karlgaard also points to Amazon, where CEO Jeff Bezos uses the “Two-Pizza Rule” to determine team sizes. If a group can’t be fed by two pizzas, it’s too big.

Skeptical? Not convinced that small groups can handle your organization’s toughest challenges? Read on for eight reasons why Karlgaard says size isn’t everything.

Small teams are more entrepreneurial. Not too long ago, German software giant SAP blew up the management framework for its 20,000-person development department and replaced it with “mini-teams” of roughly 10 people. Each team had the competence and authority to make the decisions necessary to complete the entire product development cycle, including the quality of the software, the functionality, and the architectural blueprint. As a result, product development time was cut nearly in half in a three-year period. “That’s the power of putting aside your managerial pride and letting small teams loose,” Karlgaard confirms. “On their own, these mini-teams became incredibly entrepreneurial and found a faster, better way than when headquarters tried to help them. “But keep in mind, these highly autonomous ‘teams of 10’ needed to check in every two to four weeks to show progress,” he adds. “They had support. They had to work within a system. They had accountability. And that’s the secret of innovative teams: this ability to have autonomy, to have freedom, but within a strong, well-defined support system and with clear accountability.”

They also move faster. Generally speaking, the fewer people there are in a group, the easier it is to round them all up and build consensus. That’s because the meeting doesn’t need to be postponed (twice) to accommodate members’ conflicting schedules. You don’t need to waste time bringing everyone up to speed on new developments (again). There’s no need to twiddle your thumbs as the 27th person is given a chance to weigh in. And during the conversation, there are also fewer arguments and misunderstandings. “For these reasons, two-pizza teams are usually more agile and responsive than their bloated peers,” says Karlgaard. “Those qualities can often make the difference when it comes to surviving in today’s fast-paced and competitive economy.”

People in small teams trust each other. In the last mega-group you were part of, how many people did you trust? “Well, I don’t really know those eight people from R&D, so while I don’t not trust them, I’m also not sure that they wouldn’t put their department’s interests above the company’s,” you say. “I definitely know that those jerks from Sales have their own selfish agenda. Cameron and Rory have been after my funding for months, so I don’t trust them or any of their cohorts with my ideas…” And so it goes. “It,” by the way, is a big problem, because trust—or a lack thereof—has major implications on knowledge sharing, innovation, and outcomes. “When there are fewer people on a team, it’s much easier to get to know one another and become comfortable sharing ideas,” comments Karlgaard. “Remember, ideas can’t be pulled from heads—they must be offered willingly. And, yes, those great ideas are given only to those we trust. Not surprisingly, in big groups where knowledge is treated as currency (or worse, withheld altogether), creativity and innovation don’t exactly flourish.”

Sometimes, they’ll even sacrifice themselves for their teammates. At a dozen team members or smaller, members are not only willing to share information, they’re far likelier to come to the aid of another team member. If the mission is important enough, they’ll even do so at their own expense. It’s no surprise that the basic unit of the U.S. military’s Special Forces is the 12-person Operational Detachment. Soldiers will jump on a grenade to protect their fellow soldiers. The principle works in business, too. “In a small team, a marketing associate will stay up all night to sharpen another team member’s presentation,” Karlgaard points out. “An engineer will get her hands dirty to ensure the product is perfect at launch. This unity tends to fall apart as teams scale up. At 100 people, you sort of care about your team members, but you wouldn’t be too torn up if one of them looked bad in front of the boss or missed a deadline. Their well-being is just not at the front of your mind. More than that, though, as team size rises, unity becomes a daunting challenge. ‘No man left behind’ transforms to ‘every man for himself.’”

Small teams can become more specialized. In today’s workplace, there’s still value in knowing a little bit about a lot of things, but in many cases, it’s much more important to know a lot about a very particular area. Small teams can get to this level much faster than large ones. “It’s frustrating and time consuming to bring a large group of people up to speed on a focused, maybe even technical, subject,” notes Karlgaard. “You can’t move on until everyone understands the task at hand and the challenges you’re facing. The fewer people there are, the more streamlined the process becomes.”

They don’t waste your human resources. It’s hard to say no when someone wants to join a team, especially when they have a good reason. “C’mon, I have more institutional memory than Morgan over there.” “I’ve sold more of this product than 90 percent of the people at that table.” “This would be a great learning experience for me.” And so on. Yet can your company afford to spread its people so thin? Often, says Karlgaard, the answer is no. “When you allow an unlimited number of people to join a team, you may think you’re being transparent, maximizing your brainpower, and generally creating your best odds for success,” he says. “But chances are, a lot of them are not actively contributing. They’re actually wasting time that could be much better spent on other projects. When you whittle teams down to a small core group, you help ensure that everyone else is using their time and energy more productively.”

Small teams foster mentoring. Even in smaller teams, it’s likely that members will have different backgrounds, experience levels, and areas of expertise. In fact, says Karlgaard, two- pizza groups are a great environment for more experienced people to teach and coach less experienced ones. “I’m not saying that mentors need to take time away from the project to help develop mentees —though that’s certainly an option you may want to consider,” he comments. “A lot of the mentoring will happen organically as the team members work together and interact. This is good for the team’s productivity and for your company overall, because you’re developing more junior people without spending any extra resources. Plus, mentoring fosters engagement on both ends: Mentors feel that their skills and knowledge are appreciated and respected; mentees appreciate the personal attention they get as they work with in-house experts.”

Small teams weaken the glass ceiling. In small teams, everyone has to pull their weight, or else. There’s no room for favoritism, bureaucracy, or old boys’ club politics. When everyone’s collective neck is on the line, it’s in everyone’s best interests to listen to all opinions and back the best ideas, no matter the gender, race, background, sexual preference, etc. of the originator. And it’s easy to see how that benefits your organization. “Of necessity, small teams become meritocracies,” confirms Karlgaard. “On the other hand, though, we’ve all seen large teams devolve into oligarchies, or even not-so-benevolent dictatorships. Those types of groups not only inhibit progress, they can actively poison your company culture and contribute to the disengagement of valuable employees who, for whatever reason, aren’t part of the ‘in crowd.’” “Remember, lean and hungry is always better than fat and comfortable,” Karlgaard concludes. “Yes, it may take a lot of work to switch to two-pizza teams if your organization is currently clogged by overcrowded conference tables, and you may run into a lot of resistance. But like SAP and many other companies I’ve encountered, you’ll find that the effort is worth it. Small teams are the high-performance strategy of the 21st century.”

12 Tips for Creating and Nurturing Efficient Two-Pizza Teams Blow up your bureaucracy and replace it with teams of 8 to 12 people. This is not as radical as it sounds. Amazon founder and CEO Jeff Bezos calls it the “Two-Pizza Rule”—a team should be no larger than can be fed by two pizzas. In today’s fast-evolving business climate, two- pizza teams can be your organization’s best strategy for success. But how do you go about selecting and nurturing team members for maximum efficiency? Here are 12 tips:

Work your way to the smallest number, then subtract one. This advice has been borne out by numerous business leaders. The “minus one” philosophy forces the remaining team members to be creative. That’s where you start. Lean and hungry. Fewer than a dozen if you can manage. You can always add later.

Go with your gut—even when someone isn’t the “obvious” choice. In 1989, FedEx knew that it needed to update its old, slow technology. Its unconventional strategy was to ask Judy Estrin, a young Silicon Valley technologist, to join its board. At 36, with no experience as a CEO or on a large company board, Estrin wasn’t an obvious choice. But she was, as FedEx CEO Fred Smith noted, “blindingly bright.” The point? Don’t be afraid to go out on a limb if you believe an “unconventional” choice would be best for your team. Who is your Judy Estrin?

Choose people who are passionate. These are the ones who will spend extra hours on a project, who will think about that problem or product on the weekends, in the shower, wherever they go. Without passion, your team is likely to be a gaggle of clock-punching automatons. You can generally recognize passionate people by what they do, not what they say. Consider the approach taken by Mike Sinyard, founder of Specialized Bicycles. Sinyard hires only employees who love biking and watches to see who does lunchtime group rides to separate the “talkers” from the “riders.” Is this fair? Why not? It’s a bike company! Look for grit, too. Grit is the ability to overcome adversity. Look for individuals who have proven they can do so—those who don’t shy away from a challenge. Avoid those whose first move is to look around for someone to help them when they’re in a jam. Remember, a big part of what makes two-pizza teams tick is an intrepid, entrepreneurial spirit that isn’t daunted when the going gets rough.

Avoid needy prima donnas and self-aggrandizing MVPs. Yes, “team players” has become a business buzzword, but there’s a good reason for that. You really do want to staff your team with individuals who are willing to share, serve, and give credit where credit is due. You can also borrow the strategy of Eric Edgecumbe, COO at Specialized Bicycles, who asks, “Did you play any team sports in high school or college? Tell me what you liked about being on a team and what you didn’t like about being on a team.” Individuals’ answers can tell you a lot!

Aim for cognitive diversity. In other words, go beyond “shallow, legalistic” definitions of diversity. Cognitive diversity encompasses a broad range of variables—generational differences, educational and skill variation, and social and cultural elements, including, of course, race and gender. Cognitively diverse teams will come up with ideas and tackle problems in a variety of ways. Some members will trust their guts; others will crunch numbers. Some are analytical and logical; others are creative and intuitive. They will all think, feel, and see the world in unique ways, leading to the broadest range of ideas and solutions.

However, don’t emphasize your team’s differences. This can result in unhelpful pigeonholing. Instead, focus on finding common ground and providing what the group needs to move forward. For instance, all employees want a chance to be respected, to be challenged, and to grow. We all need credible leaders: people who encourage us and listen to us. We all want to learn more and receive training that helps us do a better job and get to the next level.

Encourage tough conversations. Easily won consensus isn’t always the hallmark of effective two-pizza teams. Sometimes, arguments need to happen. Tension needs to be addressed. It may be messy, and there will very likely be misunderstandings. But stay the course and urge people to speak up and have difficult conversations. In the end, their differing opinions and interests will sharpen the company and result in better products and services.

Give the gift of high expectations. Don’t be afraid to drive people, cajole them, and push them to find that last 1 percent of team performance. This motivates them far more than vague or easily met goals. When a team leader has high expectations, he or she is paying the team members a compliment. And when those expectations are met, the feeling of success not only becomes normative, it begins to grow and multiply. A virtuous cycle begins, and you institute a natural deterrent against the inertia that dooms so many companies and careers to mediocrity.

Be very clear about goals and boundaries. Don’t leave room for doubt. Don’t be passive- aggressive. When team leaders are as clear as possible in setting boundaries, people actually feel freer to express thoughts or make mistakes than when boundaries are vague.

Lead with real-world optimism. Great team leaders simultaneously drive and reassure people. Base this reassurance on the genuine belief that good things come from working hard and following a system. This kind of real-world optimism is more than hope—it’s the ability to approach your task as an opportunity. Let your team know that if they stay positive but alert and a touch paranoid—just a touch!—they’ll have a shot at achieving something bigger and better.

Keep a loose grip on the reins. Valuable team members will want some control over their own environments. If they have to run every detail by you, they’ll lose initiative. Provide support and mandate accountability, but leave the lion’s share of the decision-making with the people who will be eating those two pizzas. Don’t sacrifice productivity for the sake of bureaucracy.

About the Author

Rich Karlgaard is author of The Soft Edge: Where Great Companies Find Lasting Success (Jossey-Bass/A Wiley Imprint, 2014, ISBN: 978-1-118-82942-4, $28.00, www.richkarlgaard.com). He is also the publisher of Forbes magazine, where he writes a column, Innovation Rules, known for its witty assessment of business and leadership issues. He has been a regular panelist on television’s Forbes on FOX since the show’s inception in 2001. Karlgaard is also a serial entrepreneur, having co-founded Upside magazine, Garage Technology Partners, and Silicon Valley’s premier public business forum, the 7,500-member Churchill Club. He is a past winner of Ernst & Young’s “Entrepreneur of the Year” award. Karlgaard’s 2004 book, Life 2.0, was a Wall Street Journal business bestseller. A graduate of Stanford University, Karlgaard and his family live in Silicon Valley.

About the Book

The Soft Edge: Where Great Companies Find Lasting Success (Jossey-Bass/A Wiley Imprint, 2014, ISBN: 978-1-118-82942-4, $28.00, www.richkarlgaard.com) is available at bookstores nationwide, from major online booksellers, and direct from the publisher by calling 800-225- 5945. In Canada, call 800-567-4797. For more information, please visit the book’s page on www.wiley.com.