The team scaling fallacy: Underestimating the declining efficiency of larger teams

https://doi.org/10.1016/j.obhdp.2012.03.002Get rights and content

Abstract

The competitive survival of many organizations depends on delivering projects on time and on budget. These firms face decisions concerning how to scale the size of work teams. Larger teams can usually complete tasks more quickly, but the advantages associated with adding workers are often accompanied by various disadvantages (such as the increased burden of coordinating efforts). We note several reasons why managers may focus on process gains when they envision the consequences of making a team larger, and why they may underestimate or underweight process losses. We document a phenomenon that we term the team scaling fallacy—as team size increases, people increasingly underestimate the number of labor hours required to complete projects. Using data from two laboratory experiments, and archival data from projects executed at a software company, we find persistent evidence of the team scaling fallacy and explore a reason for its occurrence.

Highlights

► We provide evidence for a phenomenon we term the team scaling fallacy. ► This phenomenon finds that project labor is underestimated as team size increases. ► We find that errant estimators focus more on efficiency gains than losses.

Introduction

Across a wide range of industries and functions, from construction to consulting and from healthcare to new product development, work is delivered to customers in the form of projects completed by teams (Edmondson and Nembhard, 2009, Ilgen et al., 2005). Organizations turn to teams for many reasons, one of which is the increased speed with which projects can be completed when work is divided among many people. Organizations also rely increasingly on teams because knowledge is evolving so rapidly that in many settings, no single person has the depth of knowledge required to adequately serve customer needs. Teams also allow for specialization of member roles through the division of labor and can increase the knowledge resources available both within a team and through members’ external connections (Haleblian and Finkelstein, 1993, Moreland et al., 1996, Reagans and Zuckerman, 2001).

In many project-based organizations that rely on teams, an important key to competitive success is accurately estimating and adhering to project budgets and deadlines. For a business that delivers projects to customers, missing promised budget and deadline estimates can tarnish a previously good reputation with patrons, resulting in lost business. Such errors in forecasting may also turn projects that should have generated profits into money-losing ventures (Heskett et al., 1997, Wheelwright and Clark, 1992). Despite the importance of meeting deadlines and correctly estimating costs, industry statistics suggest that many project-based organizations struggle with these activities. For example, studies in the construction, healthcare, aerospace, and information technology industries have found that anywhere from 33% to 88% of projects are delivered late and over budget (Knight, 2011, Standish, 2009, Watson, 2008).

One possible explanation for these budget and deadline overruns is that process challenges arise when people work together, yet estimators do not properly account for them. Research on teams has shown that although increasing a team’s size provides the potential for many benefits (e.g., through increased specialization and expanded knowledge networks), the team’s actual productivity may suffer due to process losses (Levine and Moreland, 1998, Steiner, 1972). Increasing a team’s size can hamper its coordination, diminish its members’ motivation, and increase conflict among team members (Hare, 1952, Ingham et al., 1974, Moreland et al., 1996). An interesting question is whether estimators are sufficiently sensitive to these problems. In this paper, we investigate whether estimators exhibit a bias that we term the team scaling fallacy—a tendency to increasingly underestimate task completion time as team size grows. We confirm the hypothesis that the team scaling fallacy plagues estimators in both the laboratory and the field. We also identify and test an important driver of this phenomenon: the tendency to focus too much on the process gains associated with increasing team size, relative to the process losses.

Section snippets

Impact of team size on team performance

Before investigating the impact of team scaling on forecasting errors, it is important to consider how team size affects team performance (see Levine and Moreland, 1998, Moreland et al., 1996 for reviews of this topic). Increasing size offers a team multiple benefits. Labor can be subdivided across more team members, for example. This division of labor makes it possible to match workers with the tasks that are most interesting to them and for which they are best suited. It can also foster task

Experiment 1: do forecasters exhibit the team scaling fallacy?

In our first experiment, teams of varying size completed a project that was divisible among team members but required the integration of all the work into a single, final product. Estimators, who were not part of any team, were familiar with the kinds of workers who would staff the teams, but did not know any specific team members. This task was designed to model the way in which team projects are structured and forecasts are generated in many major industries (e.g., software design,

Experiment 2: does focus on process gains vs. losses affect the team scaling fallacy?

In Experiment 2, we attempted to replicate the team scaling fallacy found in Experiment 1 using a similar construction project, but this time eliciting estimators’ views about the relative importance of process gains vs. losses as team size increases. Experiment 2 thus allowed us to test our second hypothesis concerning a possible mechanism driving the team scaling fallacy.

This new experiment relied on within-subject estimation (participants estimated the number of person–minutes required to

Field study: evidence of the team scaling fallacy

Our field study extended the results of Experiments 1 and 2 by investigating whether the team scaling fallacy affects estimators in a natural setting. In particular, we examined whether project managers at a large international company were also more likely to underestimate the effort required to complete projects by larger teams. By examining the team scaling fallacy in the field, we could see whether this phenomenon persists when forecasters have considerable experience and receive frequent

General discussion and conclusion

In three studies, we found evidence that the team scaling fallacy is a real and persistent bias. Optimistic errors in forecasting the total labor required to complete team projects increase as the size of the project team increases. This bias is exhibited by both outsiders estimating the effort required to complete a project and by insiders who will be completing the project themselves. The bias is evident whether estimates about teams of varying size are made between- or within-subjects. We

Acknowledgments

We thank management at the site of our field study for their commitment to this work. Max Bazerman, Chip Heath, Francesca Gino, and Christian Terwiesch provided valuable feedback on earlier drafts of this paper. Associate Editor Richard Moreland and four anonymous reviewers offered careful guidance that helped to improve this paper. The first two authors were supported by the National Science Foundation under Grant No. 0943210. Any errors are our own.

References (65)

  • B.A. Bechky

    Sharing meaning across occupational communities: The transformation of understanding on a production floor

    Organization Science

    (2003)
  • C. Bluhm et al.

    Interpersonal complementarity and individual differences

    Journal of Personality and Social Psychology

    (1990)
  • B. Boehm

    Software engineering economics

    (1981)
  • M.B. Brewer et al.

    Choice behavior in social dilemmas: Effects of social identity, group size, and decision framing

    Journal of Personality & Social Psychology

    (1986)
  • F. Brooks

    The mythical man–month: Essays on software engineering

    (1975)
  • R. Buehler et al.

    Exploring the “planning fallacy”: Why people underestimate their task completion times

    Journal of Personality and Social Psychology

    (1994)
  • R. Buehler et al.

    Inside the planning fallacy: The causes and consequences of optimistic time predictions

  • G. Chen

    Newcomer adaptation in teams: Multilevel antecedents and outcomes

    Academy of Management Journal

    (2005)
  • T. DeMarco

    Slack: Getting past burnout, busywork, and the myth of total efficiency

    (2002)
  • M. Diehl et al.

    Productivity loss in brainstorming groups: Toward the solution of a riddle

    Journal of Personality and Social Psychology

    (1987)
  • A.C. Edmondson et al.

    Product development and learning in project teams: The challenges are the benefits

    Journal of Product Innovation Management

    (2009)
  • J.A. Espinosa et al.

    Familiarity, complexity, and team performance in geographically distributed software development

    Organization Science

    (2007)
  • T. Gilovich et al.

    Heuristics and biases: The psychology of intuitive prediction

    (2002)
  • W.H. Greene

    Econometric analysis

    (2003)
  • J.R. Hackman

    Leading teams: Setting the stage for great performances

    (2002)
  • J.R. Hackman et al.

    Group behavior and performance

  • J.R. Hackman et al.

    Effects of size and task type on group performance and member reactions

    Sociometry

    (1970)
  • J. Haleblian et al.

    Top management team size, CEO Dominance, and firm performance: The moderating roles of environmental turbulence and discretion

    The Academy of Management Journal

    (1993)
  • A.P. Hare

    A study of interaction and consensus in different sized groups

    American Sociological Review

    (1952)
  • D.A. Harrison et al.

    What’s the difference? Diversity constructs as separation, variety, or disparity in organizations

    Academy of Management Review

    (2007)
  • C. Heath et al.

    Cognitive repairs: How organizational practices can compensate for individual shortcomings

    Research in Organizational Behavior

    (1998)
  • J.L. Heskett et al.

    The service profit chain: How leading companies link profit and growth to loyalty, satisfaction, and value

    (1997)
  • Cited by (100)

    • Too many bosses, too many teams: Overcoming the challenges of team innovation in matrix organizations

      2023, Handbook of Organizational Creativity: Leadership, Interventions, and Macro Level Issues, Second Edition
    View all citing articles on Scopus
    View full text