In the early days of Amazon, before it became a nearly $1 trillion company, Founder and CEO, Jeff Bezos instituted a rule: every team should be small enough that it can be fed with two pizzas.
In his 2013 Amazon Shareholder letter, Bezos described his rationale for the “two pizza rule”:
“Great innovations, large and small, are happening everyday on behalf of customers, and at all levels throughout the company. This decentralized distribution of invention throughout the company — not limited to the company’s senior leaders — is the only way to get robust, high-throughput innovation.”
Keeping teams small, according to Bezos, is critical to unlocking innovation as an organization scales. How effectively does that strategy hold up at other organizations?
My company, Alpha, recently surveyed over 300 decision makers to discover their most significant challenges and decision making strategies. We gained insights into what team size contributes to the best outcomes. Here’s what we learned:
Anyway you slice it: Two pizza teams are here to stay
Nearly a quarter of respondents typically make decisions in teams of 6 to 10 people. However, only 8.4% of respondents say that teams of that size are best of decision making. Rather, almost nine in ten of respondents indicated that teams of 2 to 5 people make for the best decision making process!
Medium and large companies, with over 100 employees, are approximately 60 times more likely than smaller companies to rely on these small 2 to 5 person teams when making important decisions.
Small but nimble
The past decade has seen a rapidly increasing pace of innovation. This has not only created new customer experiences and reshaped major industries, it’s changed the nature of business decision making.
In small and large companies alike, there’s consensus that the context in which people work and make decisions is complex. 86.8% of respondents report their work environment is in constant flux or lacking certainty.
Given the pace of change and the need to make decisions and execute quickly, decision makers have been changing their approach and plan to continue to do so. Survey respondents say they want their teams to have more autonomy and less hierarchy so that those closest to the problem are empowered to make decisions. Improving company culture, recruiting innovative talent, and changing market conditions are most significant motivators for change.
It would seem that larger teams would have more bandwidth, resources, and ideas, but as Jeetu Patel, Chief Product Officer of Box, pointed out on This is Product Management, more effort often goes into coordination instead of productive ideation, development, and iteration.
J. Richard Hackman, a professor of social and organizational psychology at Harvard University and a leading expert on teams, echoes this sentiment in an interview with Harvard Business Review. “Another fallacy is that bigger teams are better than small ones because they have more resources to draw upon,” he says. “A colleague and I once did some research showing that as a team gets bigger, the number of links that need to be managed among members goes up at an accelerating, almost exponential rate. It’s managing the links between members that gets teams into trouble.”
When small teams make a big impact
Small teams can move faster because there’s less coordination and communication overhead, but large teams are important for mitigating risk and ensuring quality. Large teams seem well suited for large companies because they strive to maintain brand equity, comply with legal and regulatory constraints, and ensure a quality experience for their customers. Bezos shares wisdom about when smaller teams are better than large teams in the 2015 Amazon Shareholder Letter:
“Some decisions are consequential and irreversible or nearly irreversible — and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. But most decisions aren’t like that — they are changeable, reversible. . . [These] decisions can and should be made quickly by high judgment individuals or small groups.”
Bezos differentiated between irreversible and reversible decisions. Speed is critical when you’re making reversible decisions. When making reversible decisions, it’s better to take action and iterate quickly than it is to get stuck trying to reach consensus within a larger team.
In fact, about 43% of our respondents indicated that “too much deliberation” was one of the most significant challenges that they face when trying to make good decisions, and six in ten said that experimentation contributed to their most successful projects.
Bezos was right. Two pizza teams strike the perfect balance between fully-staffed, competent units and cumbersome bureaucracy. Well-fed individuals working in small teams are empowered to generate ideas, experiment, and iterate quickly.