Large companies take longer to start projects. How much longer?

A plausible guess is that project lead time would be proportional to the logarithm of the company size. If a company with n employees has a hierarchy with every manager having m subordinates, the number of management layers would be around logm(n). If every project has to be approved by every layer of management, lead time should be logarithmic in the company size. This implies huge companies only take a little longer to start projects than medium-sized companies, and that doesn’t match my experience.

In my experience, lead time is proportional to something like the square root of the company size:

T = kE

where T is lead time, k is a proportionality constant, and E is the number of employees. For example, someone told me that he moved to a company 1000 times bigger and things seem to move about 30 times slower. That would be consistent with a square root rule.

If T is measured in days and k = 0.5, the square root rule would say that a solo entrepreneur could start a project in half a day, and a company of 130,000 employees would take six months. That seems about right. Of course small companies can move slowly, and large companies can move quickly. But it’s a good rule of thumb to say individuals operate on a scale of days, small-to-medium companies on the scale of weeks, and large companies on the scale of months.

The reason may be that large companies scale up well, but they don’t scale down well. They can put together large deals fairly quickly, relative to the size of the deal, but not small deals.

11 thoughts on “Project lead time”

1. I think it depends a lot on company culture. Large companies are eternally balancing the need to let small teams make quick progress with the need to avoid local optimization and figure out what makes sense globally.

2. Vivek is spot on. There is a real trade-off between processes that generate quick progress and organizational standardization across a big company. I’m not sure I know the best way to tackle it, but this is something I think about often.

3. But why square root? Did you just pick something that grows slower than linear but faster than logarithmic, or is there some kind of motivation for it (like there was in your logarithmic hypothetical)?

4. Aaron: Purely empirical. I have no theoretical explanation.

I’ve heard people say you have to triple your workforce to double your output. You could probably use that to derive some sort of rule with a different exponent than 0.5.

5. If you assume that every pair of involved people need to check with each other before committing to the project, you would get O(sqrt), would you not? That would mean the factor is the effective team size, where “effective size” is all the people connected to the project, not just the people actually working on it.

Longer enough that it costs more for a larger company to do it, often giving a smaller company an advantage. “The Innovator’s Dilemma” is an interesting read (in spite of being a business book) in this area.

7. Good thing about fitting your data with big ones, is that you can aways change the definition of which unit is the company until matches.

8. This seems about right, and may be explainable using some mashup of Geoffrey West’s scaling laws for the metabolism of organisms and organizations (e.g. http://www.cs.cornell.edu/~ginsparg/physics/Phys446-546/gbwscl99.pdf ; https://www.ted.com/talks/geoffrey_west_the_surprising_math_of_cities_and_corporations ), in which various power laws are seen with exponents that are a multiple of 1/4, and some of Albert-László Barabási’s work on the properties of network graphs with different power-law degree distributions.

9. David W. Locke

The population involved in launching a project is way less than the whole company. We launched projects twice a year. The matrix organization working on the project was a fixed size. Three functional units were involved at launch, more downstream. Functional unit management was not involved beyond assigning matrix members. Usually, those assignments were not changed. We all worked for the same department head. We had a product manager and did our own project management without a project manager. None of the functional unit people had any control over the content of the project.

I think you’ve made the case for the sup.

10. David W. Locke

Cognitive processes are always log scale. Recent research tells us that our brains chunk things and can only deal with four chunks in short-term memory. That gives you a base four system. This is down from seven plus or minus two, which is representative of a high school graduate, or higher for relevant experts.