Different organizational needs call for different organization designs. Plenty of different structures exists to fulfill different kinds of businesses, but also different kinds of priorities and ideologies. While it’s useful to have models to borrow ideas from, I think that it’s very rare that an organization can borrow an existing model and apply it perfectly, so anything has to be adapted.

One thing emerges as almost obvious when reviewing these models: organization is needed for scale. A small group of people can almost have any structure and they will be able to work, no problem. As the company grows, every tradeoff has a weight. One of the variables with the largest weight is the communication cost — a variable that tries to summarize a number of other factors, like communication channel, structure, speed, transparency, etc.

I’ve been thinking a lot about this: how can we express more intuitively the communication cost in a way that makes easier to highlight its impact, and helps in making decisions when the organizational structure needs improvement?

In computer science we have Amdahl’s Law and Universal Scalability Law (USL), that attempt to model how tasks that get parallelized create a cost in terms of the communication needed to happen to align these tasks.

We can then translate this idea to teams — a group of people splitting up activities in order to reach the same goal.

There seems to be a direct analog for the incoherence penalty. Whatever time the team members spend re-establishing a common view of the universe is the incoherence penalty.

For a half-dozen people in a single room, that penalty might be really small. Just a whiteboard session once a week or so.

For a large team across multiple time zones, it could be large and formal. Documents and walkthrough. Presentations to the team, and so on.

M. T. Nygard (2018) “Coherence Penalty for Humans”

While there’s no formula for groups, this concept is somehow easy to grasp: there’s a cost of aligning people, and that cost of alignment is the reason behind many things:

1. The ideal team size being between 3 and 8 people
2. Multiple layers of hierarchy emerging as the company grows
3. Communication becoming more difficult across teams and units, and requiring more explicit processes
4. Project management becoming more and more of a necessity as the organization grows

and so on.

At a personal level, it’s particularly intuitive: we all know how challenging can be to make even a decision as simple as what to eat in a group of 2 people compared to a group of 10.

In an organization also there’s no space for dissent: if you can’t agree on what to eat, you can always split. If you disagree on what to build in your business? You’re not going to have a good time — even if it gets easier with the disagree and commit approach. The penalty for lack of alignment in a company is even higher.

There’s another aspect that this kind of general idea brings: there’s no way to eliminate that cost. Which is why there’s no perfect organization, no perfect organization structure, and no perfect set of processes. It’s important to recognize this: it’s a pain that no organization will ever be able to resolve completely.

If you keep in mind that the communication cost (or coherence penalty) exists, you’ll be able to evaluate better the trade-offs you’re making in your own organization.