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

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.