Why No Company Should Have More Than Seven Employees

A few years ago I used to work for a big company with hundreds of people I didn’t know at all. After two years, I quit and joined a small company with 30 or so people. I’m still at that company, but during these past three and a half years it has evolved into a a medium sized company with more than five times the original head count.

It may not be evident, but size matters when talking of companies.

A smaller company creates happier people.

In his book, The Tipping Point: How Little Things Can Make a Big Difference, Malcolm Gladwell claims that 150 is a magical boundary that changes a lot of things. Apparently when a group of people grows beyond that size, it becomes impossible for us to keep track on all the people in the group and their relations between each other.

I don’t know about you, but to me 150 sounds like a lot of people.

There is another magical number in psychology as well: seven (plus or minus two). It’s a number used for quantifying the limits of our working memory, as well as many other cognitive capabilities. And not only that, seven is also considered a perfect number in many religions such as Judaism, Christianity, Islam and Buddhism.

So why not also as a limit for company sizes? Here are seven minus two reasons why your company should never grow beyond seven people.

1. Less hierarchies

A bigger company means more layers of managers between people.

In a small company Todd the programmer would go straight to Jean from marketing for marketing issues. But when the company grows, this changes: Todd talks to his boss Susan. Susan talks to Jean’s boss Mark. And Mark finally goes to deliver the message to Jean.

What a complete waste of everyone’s time and money. But more importantly, it separates Todd the programmer from the good folks in the marketing department.

2. More participation

In a small company everyone is involved in everything.

It doesn’t matter if your title is Engineer, you can still visit the client’s premises to do some support work, or chat with the CEO about the future of the company.

But would that happen at Microsoft?

I doubt it.

They would never send their programmers to handle customer relations.

And I suppose Mr. Ballmer is way too busy to listen to my ideas on how he should be leading the company. He only has time to talk to his core team: people like Bill Gates, Paul Allen and Ray Ozzie.

But in a small company everyone is in the core team.

3. A better understanding of the big picture

When you are involved in pretty much every aspect of the company, you always know what’s going on.

In a big company, if you aren’t at the top of the management pyramid, someone hands out tasks to you, saying “This is really important to the company.”

But that doesn’t make you feel that the job is important. The only thing that does is the knowledge of the business decisions behind the task.

The understanding of the big picture.

4. A feeling of ownership

I’m not afraid to say that in my current job, my main feeling is “I just work here”. I’m not saying it with a negative tone or anything. It’s just a fact. This is a pretty good job, but it’s still just a job.

I just work here.

But when you understand the big picture behind the decisions and participate in making them, things change. You start feeling that you are an important part of the company. This is what researchers and managers would call the feeling of ownership.

And no, you don’t gain that feeling by getting stock options. You get it by participation.

And that can only happen in a small company.

5. Closer relations

A common saying is that you need to have at least one good friend at the office to be happy at work. It makes sense.

But what if you could be friends with everyone in the company? Even best friends?

This sounds utopistic to most because we’re immediately thinking about the big companies in which we spend our days. There is no way I could be best friends with all the 150+ people in this company.

So if we want to make the goal come true, we need to change the reality: In small companies where everyone works closely together with each other, feels like owners, participates in decision making and understands the big picture, being best friends is the natural end result.

So, I challenge you: don’t grow your company. Outsource. Be careful and recruit only people who fit in your corporate culture. But don’t grow if you want to keep your people happy.

15 thoughts on “Why No Company Should Have More Than Seven Employees”

  1. Jarkko – I have a baby about to have a meltdown and a very looming deadline but I HAD to comment on this post. This is one of the best pieces of writing I’ve read in a very long while. People will be linking to this for a long time. Great job – I’m so impressed! (Also mildly jealous, but that’s not relevant.)

  2. HI Jarkko – Found you through Naomi. :) This is a great post. I’ll never work for a large company ever again, for exactly the reasons you list here.

    Nicely done!

  3. Damn now that’s a tough question. and a good one. How big should we grow our company? I find myself wanting to carefully work a rebuttal on why you should grow your company beyond 7+/-2. I’ll have to think about it.

    I’ve been finding that 10 people is about the limit of a person’s (or at least my) ability to focus wholey upon and manage. More than that and communication dissolves. Therefor, at that point one must evolve layers. A professional project manager answering to Peter & I to help manage another team.

    There is a lot to be said about working with your best friend, but couldn’t that have happened at Microsoft as well as at S&P?

    Good post, will chew on the cud and think about it.

  4. I used to think feeling ownership is key to delivering results. Not just in your workplace, but in life in general… But I realised not everyone needs that feeling. For some people it simply doesn’t work. Their head is adjusted in a different way.
    But again, it’s up to you if you want to work with such people. In a small company, I guess, you are more likely to be asked for opinion.

  5. Great post. I totally agree.

    Luckily I am currently a monolithic software house of only 1 employee, so the only way is up.

    When I get to 7 I will revisit this post!

  6. Very timely article! I’ve worked for Paul Allen (who resigned from Microsoft in 1983 by the way), Ray Ozzie and now Steve Ballmer and Bill Gates! Two of those were startup companies and they were definitely the best of times.

    Don’t get me wrong – Microsoft is an excellent company to work for. There are lots of smart and passionate people, and you can follow any path you desire. Some people just like to work in a large environment with anonymity and loads of resources, branding and clout (ever try to call on a Fortune 500 company as a startup? not easy). I know product groups at MS who have hundreds of people, and they constantly jocky for new “headcount” to accomplish their goals.

    Meanwhile, more nimble startups with good ideas and aggressive code schedules are pushing out code at breakneck pace that is getting used every day by millions of people! Although, the amount of this software paid for by anything other than advertising is questionable, and I personally don’t believe ads are an unlimited funding source. MS is not dying, contrary to popular belief, but we could certainly “slim down”.

    At our current headcount of around 80,000 people, we could create over 11,000 7-person companies overnight!

    Very well written – thanks for taking the time to share your perspective!

  7. Ha, now this is what I call discussion – thanks for all your comments, they are really insightful, almost like blog posts of their own.

    Naomi: I’m glad you liked the post – hopefully your son isn’t too mad at me now ;)

    Susan: Thanks Susan. I’m happy you liked the post, and hope you’ll like what’s coming up in the future as well.

    shane: You’re right, working with your best friend could have happened at Microsoft. In fact if there are around 80,000 people at MS as wlrock says in his comment, I’m pretty sure that some of the employees are working with their best friends.

    But my point is that in a company as big as that, you’ll never be able to be best friends with everyone – you won’t even get to know all of them. :)

    So, how many people do you have working with you / for you? Because actually, I don’t even know if you are best friends with anyone else in your company except Peter – I just wanted to have a chance to link out to you ;)

    Dora: That’s a tricky question. I know many people say that they aren’t interested in ownership, but I don’t know if I believe them or not.

    I’m not talking about ownership as physically owning the company or shares of it, but about ownership as a state of mind: when you accept the company goal and mission and are involved in setting it – and feel that your input in the company (or even a non-profit organization) as a whole is important, that’s the feeling I’m talking about.

    And I would be ready to claim that every human being has a need for that. I might be wrong, in which case please shoot me down :)

    Jon: Thanks! And good luck with your company!

    wlrock: This is a great comment! It’s good to remember that even giants like Microsoft started from something small. I’m sure that in the beginning, the guys at Microsoft were working with their (best) friends and had a great group spirit.

    The benefits you list about Microsoft are real, and I won’t go disagreeing about them. But still – 80,000 people is huge! :)

  8. 80 000…HUGE…the following idea doesn’t apply for it but…I was wondering that would it work out if you had groups with 7 people? And you had 7 of those groups.. ? You could already have ~50 ppl working for you AND you’d keep closely connected :)

  9. Hi Jarkko,
    the article really resonates with me. However let me add a small comment that I haven’t seen so far in the comments:
    I’ve been working at several small companies. At one of them me, wanting to be developer full time, was forced to spend a portion of my time (too much) as a sys-admin. There is the big possible disadvantage I’ve seen working for small companies: you have to be the jack-of-all-traits sometimes. In the big company I work right now, all these sys-admin issues are taken care of for me. Still small companies have that glow over them of being oftentimes more flexible than BigCo…

  10. I agree, absolutely.
    The only reason I switched job (around 6 years back) from a small (around 30 people company) to a BIG (??) company was to get the ability to pass the resume-screening phase. Even today, I feel the company that I was working for 6 years back was my best professional experience so far. No,I was not a so-called leader or manager there…No, I was not getting handsome paycheck…No, I was not getting any incentives….No, we were not working in an ideal, cool atmosphere. In fact, I was not happy about quite a few things that we used to do. But now I realise that personally I was growing exponentially working there. In last 6 years, working in BIG companies, I have not managed to learn even 50% of what I did in those 2 years in a small company.
    The best-of-all was everybody on our team had become so passionate about their work that we were almost free of office politics and gossips. I sometimes, really wish some people should be loaded with so much work, without paying them a penny, so probably they will realise the valuable time that they waste in office politics and gossipping and also they start respecting their work and their less-fortunate collegues.
    Oh no…now I am spreading negative vibes…why? probably because I have ample time to crib…and may I say to write feedbacks on the blog articles ?…:)

  11. Veera: Sure, you can manage a big company by adding layers – after all, I would assume that for example companies such as Microsoft and Google are pretty well managed.

    The downside is that by adding layers you separate people from each other, and create office a growing ground for office politics. I think your example of having seven managers below you is no different from the traditional approach (Correct me if I’m wrong, though) in this sense: between someone who works for one of your seven managers and you there is already a layer of separation, not to mention two people working in two different branches in your organization.

    Arjan: I see your point. I’m the kind of guy who is interested in doing all kinds of things (insanely interested in everything, you know) so maybe my point of view isn’t completely objective. :)

    Narendra: Those are great points you make about learning, passion and office politics.

  12. I work for a company of just over 20 employees. (Two only work about 2 weeks a year.) My mother has worked there for close to 30 years, and I’ve known most of the folks there I whole life. When this last chance to work there came up, it was a no-brainer. It felt like home, and yet, completely ackward the first few weeks. Now I was walking in the door not to visit for 10 minutes, but to work there. My boss, the managing editor, does ask my opinion on things. The only downside I’m finding to such a small company is that when there’s tension or a conflict, it really affects the entire office. Thankfully most of it can be diffused fairly easily for me, at least. I get along with everyone so far. The owners definitely made it a family company. All 5 of their children are part owners and three of them work there. My mother and step-dad met there and both still work there, and there is one other married couple, and two other mother-daughters working there. Overall, it is one of the best places to work in my rural home state. You just can’t find many places where you can say “It’s a great place to work” any more.
    The only benefit I see to working at big places, for which my husband had worked, is the benefits can be bigger and better, and the extras can sometimes be really fabulous, but often only for the managers, which he was one. The stress level was very high and all about producing the numbers!
    I enjoy your blog when I get to it! Thanks!

    Libby

  13. We made a strategic choice not to take employees (for better or for worse). We have a core of 7 contractors and a periphery of about 20 who are working at any one time. I am good friends with a few in the core, getting to know others and just testing the boundaries. Currently our goal is to grow our core to 15.

    I had a really interesting dialog with Reid (http://www.wearesharks.com/) and asked him how he liked to be managed when working on a project (on of my new favorite questions). He explained that his last owner boss was also an incredibly close friend, which had its positives and negatives. One issue was that the line between work and personal was often blurred and it could cause issues. He said he liked to have a good personal relationship with someone, bu the best friend thing wasn’t necessary and maybe was a handicap.

    Still mulling over his answer. Food for thought.

    @wlrock – how do you scope teams and sense of identity in that level of organization?

  14. Libby: I can imagine that at best working in a family company is something that you just can’t experience in any other kind of company. If the relations between the family members working in the company are warm and close, I’m sure that a big part of it shines through the whole company and makes it great for the non-family members as well to be part of it.

    I guess the picture I have in my mind is rather idealistic could be from an episode from “Touched By An Angel”… But still, the way you describe your work place somehow just makes that image stronger.

    Shane: That sounds like a nicely scalable organization model. What I like about it is that your contractors (if I understand it correctly) are free entrepreneurs too, so while they get a lot of work from you guys, they are still their own bosses. I know that this kind of arrangement doesn’t suit everyone (some people just need to have the “security” provided by a steady job), but to me it sounds just perfect.

    In fact I have been pondering a lot on the thought that in a perfect world everyone would be an entrepreneur and we would then just be business partners or contracting for each other. I know it could never work in the really large scale because not everyone wants to do everything that comes with entrepreneurship. But in a case like yours, it sounds like something that just might work rather well. :)

    Reid’s thought sure is an interesting one, and I have to think about it as well. My brother and a close friend (both mine and my brother’s) have been business partners for a few years – it would actually be great to hear their comments on these thoughts (Lauri, if you’re reading this, how about a comment? ;)

  15. I’ll probably think about this a whole to lot more, but off the cuff. It scales quite nicely with the flow of work. Our overhead remains manageable and is intrinsically tied to the quantity of work in our pipeline (with exceptions for R&D on products and refinement of business strategies). I have also found productivity to be somewhat higher per dollar spent as we are hiring “experts” – meaning they do not charge us for the time they have to spend learning something. The only struggle is that we do not have control over their availability. Not always an issue, but it can be frustrating at times. I see this as a phenomenal model for small firms, and do not know yet if it is sustainable at a larger scope.

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