Korva is a scroll of the internet’s best ideas.
Shrinking teams lose to bigger ones
Why bigger wins
Picture Coca-Cola and Pepsi, both with full access to the same AI. If one shrinks its staff to produce the same output, the other can keep its people, aim for a product ten times better, and end up larger. That larger company is the one expected to win.
The case for cutting
The counterargument is that more people slow everything down by putting up barriers in the way of a product shipping. There is support for it from before AI: after the pandemic, many companies felt bloated and cut 15 to 20 percent of their staff, and CEOs reported moving about 20 percent faster as a result.
Why headcount stays
Teams do get large enough to slow each other down. Even so, the world's greatest companies are unlikely to be companies with 100 people, and people stay an asset when they are deployed on the right projects. Glean has more than a thousand employees and hopes to have 5,000 in five years. The model companies are hiring aggressively too.
Fewer people also means each one covers more ground. Productivity per person is expected to shoot up, and so are the demands: to earn the same revenue from customers, a company has to produce a product ten times better.
Why can bigger teams ship slower?
Fred Brooks argued in his 1975 book The Mythical Man-Month that adding people to a late software project makes it later. Every new person needs to be brought up to speed, and every pair of people is a channel that has to stay in sync. The number of pairs grows much faster than the number of people: a team of 10 has 45 pairs, while a team of 50 has 1,225.
How do companies keep large teams moving fast?
The most common answer is to split work into small teams that own a whole piece of a product. Amazon popularized the two-pizza rule, which holds that a team should be small enough to be fed by two pizzas. Each small team makes its own decisions and talks to others through defined interfaces instead of constant meetings. This lets total headcount grow while the number of people who must coordinate on any one decision stays small.
Why did companies cut staff after the pandemic?
Many technology companies hired heavily in 2020 and 2021 when demand for online services jumped and borrowing was cheap. In 2022, interest rates rose sharply and growth slowed, which made those payrolls harder to justify. Layoffs followed across the industry, and trackers such as Layoffs.fyi counted well over 100,000 technology layoffs in 2022 alone. Many of the companies described the cuts as a correction to hiring done in the boom.
More from 20VC with Harry Stebbings
