The Productivity Cost of Growth - Why Larger Teams Fail to Deliver Results
Headcount growth negatively impacts productivity in the short run, and increases costs in the long run. It requires focused effort to minimize these negative consequences.
Spending time away from large technology companies gives you time to think. I've recently had a few people ask me what most surprised me about leaving my corporate life. Surprising is an interesting question, because I expected the schedule flexibility, ability to exercise more, and spending more time with my family.
One answer to the question is that I was surprised at how easy it was to accomplish things. Big things are effectively impossible for me to accomplish, but small things are remarkably easy. When I want to change marketing copy on my website, I just change it. When I want to add a new pricing tier, I just make it. No discussion, no debate. After so many years of being embedded deeply in corporate behemoths, it felt odd to be able to just.. do things.
That thought prompted this article. I hope you enjoy it! If you're a paid member, thank you very much for your support. As I've mentioned before, there are now hundreds of paid members supporting my newsletter. I love that my articles have helped so many people with their careers. If you're just visiting, skim through my other articles (half my newsletter articles are available to the public for free) and see if you'd like to stick around!
Many people associate Amazon with incredible headcount growth. That was absolutely my experience over my years running organizations across Amazon. When I first joined Amazon, I had a 6 person team, and owned a few systems. Those same systems were supported by over a hundred people a few years later. Every organization I joined experienced the same type of explosive growth.
These critical path systems needed to scale for drastically increased traffic, integrations with more systems at Amazon, and new features. Each requirement added a new list of development tasks, which increased the headcount requirements for those teams.
Incredible growth also comes with a cost.
Adding new employees to a team adds overhead to your existing employees.
This increased headcount adds a need for coordination between individuals and between teams.
The above are negative productivity costs on an organization which is scaling for the purpose of increasing productivity. Counter intuitively, many organizations decrease their ability to be productive at the moment when they need to be the most productive.
New employees add cost to existing employees
I don't think it's a shocker to say that new employees temporarily add costs to your existing employees.
New employees need a significant amount of help in their first weeks. Engineers need development environments stood up. Managers need to get to know their peers and team members. Project managers need to examine all their in-flight tasks, and audit project status. Everyone needs to ramp up on the technology in use, project goals, and organizational strategy.
Once they're past the first few weeks, new employees still need significant assistance for months. Their code reviews require more attention. Their meetings are less efficient. They need corrective guidance on their plans more often.
A rule of thumb I've found useful is to assume that a new employee will be a net negative on a team for the first quarter, will have neutral productivity in the second quarter, and will begin adding value in their third and fourth quarters. They are rarely as productive as an existing employee until they have at least a year of tenure.
For fun, we can translate this into a math statement. You can skip this if you don't think this is a fun mental exercise.
Mona contributes 1 person year of effort (PYE) per year. You hire Krista to join the team. Instead of contributing .25 PYE of effort for the next quarter, Mona contributes .15 PYE, because she's spending a significant amount of time helping Krista ramp up. Krista contributes perhaps .05 PYE, as her contributions are slow and require a lot of Mona's time. Collectively, the team just produced .2 PYE, a decrease of .05 PYE for that quarter.
Next quarter, Mona is able to contribute .2 PYE, as Krista needs less of her time. Krista is now up to .1 PYE, as she's beginning to be useful and figure things out. Collectively, the team produced .3 PYE. Adding the first six months together, you'll see that the team produced .5 PYE, which is the same as Mona would have done on her own. Except you had twice as many employees.
While the exact math in your situation may be different, it's impossible to ramp up new employees without a negative hit on existing employees. The more complex your software and systems, the longer it will take new employees to be productive. So if you're building a simple website, perhaps your ramp up time will be decreased. If you're building complex software, you'll see something of what I outlined above.