In this post, we will look at how to compose effective teams. We will look, in particular, at optimal team sizes, diversity with respect to demographic composition, team personality, values, and abilities.
Team size
- Why care about team size?
- Team size was the number one positive predictor of creativity and innovation in teams (across 24 studies on 1359 teams; research here). Team size was a better predictor than:
- Other positive predictors
- Job-relevant diversity: team had different functional experts
- Goal interdependence
- Task interdependence
- Negative predictors
- Team longevity
- Background diversity (which school, place etc.)
- Larger founding teams => Better startup performance (research here)
- Larger size of board of directors => Better stock market and net income performance (research here)
- Smaller companies benefit much more from a large board
- Large teams vs small teams
- Large teams
- More capabilities
- More resources
- More information, input, ideas => more innovation
- Small teams
- More cohesive
- Better satisfaction; people know each other and feel valued
- Faster consensus, move fast
- Better individual contribution; no social loafing
- Is there an optimal team size?
- For optimal team satisfaction, 4-5 team members (research here)
- Note that this is not optimal for effectiveness
- Typically, 5-10 members is optimal for effectiveness
- >10 => more conflict, process costs, social loafing etc.
Diversity
What exactly does diversity mean?
- Surface-level diversity (Demographic diversity)
- Gender
- Age
- Nationality/race
- Background (educational, job-relevant diversity etc.)
- Deep-level diversity
- Personality
- Values
- Abilities
- Beliefs
- Motives
Why care about diversity?
- Diversity means multiple backgrounds and hence viewpoints; the downside is increased potential for conflict.
- Deep-level diversity becomes more important for team performance/processes over time (research here).
Demographic diversity
Why is demographic diversity important?
- Background diversity is a negative predictor for innovation (as we saw in the above picture). However, some elements of background diversity like education and functional background have a positive impact (research on the banking industry here, for example).
- Demographic faultlines are more important than mean/variance of a given indicator (research here).
- What is a demographic faultline?
- Multiple subgroups in a team that have similar demographic dimensions (age, gender, education etc.)
- A useful exercise to map out team members on these demographic dimensions, and see if faultlines exist.
- Demographic faultlines reduce cohesion, and increase conflict. Ability and personality faultlines do not have a similar impact (values > 0.15 or 0.2 can be considered significant; research here).
- With such demographic faultlines, subgroup cohesion might actually be pretty strong!
- These subgroups likely increase conflict.
- Demographic faultlines in top management teams reduces ability to make strategic decisions/risk-taking/innovation (research here). In particular, such teams were unwilling to expand into novel international territories (presumably, such a decision is supposed to be good).
- Strong faultlines reduce firm profitability (research here; 42 management teams and 2100 decisions), especially when there is not a shared objective.
- Strong faultlines actually enhance profitability when there is a shared objective. Note that developing a shared vision is a great way to offset faultlines in teams!
- Other ways to tackle strong faultlines
- Encourage belief in pro-diversity
- Encourage open communication
Deep-level diversity
- While background diversity is important in a team (as we saw above), we want alignment in personality and values, as we will see below.
Personality
How do we measure personality?
- Several flavors of personality tests:
- Myers-Briggs: 16 major personality types
- Big five: OCEAN mnemonic (Openness to experiences, Conscientiousness, Extroversion, Agreeableness, Neuroticism/emotional stability)
- A useful exercise is to map the team members on the big five types, and see how much diversity there is, as well as the average on each dimension.
Why care about personality?
- Knowing the personality of the team members helps us understand how to work with each other better, how to compose effective teams etc.
- Team performance with high conflict is better when teams are open to new experiences, and have higher emotional stability (research here). Helps you compose teams with such personalities.
- Team performance with high confidence is better when there are more extraverted people on the team, and when there is openness to experience (research here).
- The big-five personality types have a significant impact on team performance (research here). Conscientiousness and agreeableness are very important (you want the minimum level to be high here, not just the average). Emotional stability as well as openness to experience are also important (having a high average is good). Extraversion is useful, especially when the team is high in confidence (it might hurt if confidence in team is low).
Values
How do we measure values?
- Here's a standard framework (Hofstede's cultural dimensions) to think about values: use CLUMP as mnemonic
- Collectivism
- Long-term
- Uncertainty
- Masculinity
- Power distance
- A useful exercise to map out team members on these five dimensions, and see how much diversity there is, and the average for each dimension.
- Here's another similar framework (Tradition, conformity, security, power, achievement, hedonism, stimulation, self-direction, universalism, benevolence).
- Each nation/group holds these values in differing proportions
Why care about values?
- Enables us to design a team with values that encourage high performance, for example (or whatever other end needs to be met like innovation etc.)
- Collectivism in teams leads to higher performance (research here); having a high average is good.
- A good leader can encourage collectivism by providing a shared vision, shared goals etc.
- Person-team/company fit (a team member's perception of their fit with the team or company) is critical to determining job satisfaction, commitment to team, team cohesion, performance etc. (research here).
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