Team Genius: The New Science of High-Performing Organizations (3 page)

That’s not to say that older and larger organizations cannot maneuver effectively and even make stunning reversals in direction. But it is exceedingly rare. And it almost never happens unless a small, cohesive team is found at the center or top of that organization and is endowed with two other crucial factors: the
power to execute
its decisions across the entire organization, and the
trust
of its players in the periphery around that team. Indeed, even the largest organizations can maneuver widely and with stunning speed in the face of rapid change if they are built out of genius teams in support of an empowered leadership.

APPLE’S COMEBACK

One of the greatest examples in business history of a large organization’s maneuverability took place right before our eyes: Apple Inc. In September 2002, Apple’s future was thought to be so bleak, you could buy shares in Apple Computer at a price that valued its operating enterprise at less than zero. What you were buying, if you had been so bold, was Apple’s cash reserves of $5 billion. Beyond that, you were buying a prayer that Apple could do something with that cash.

Remember, this was five years
after
the return of Steve Jobs. Contrary to myth, Jobs did not immediately turn around Apple’s dismal fortunes. Yet just one decade later, Apple would drop the “Computer” from its name but win the world. It would become the richest company on earth in September 2012, valued at $656 billion.

Meanwhile, during that decade of Apple’s extraordinary ascent, other great American companies, stalwarts of reliable business success, fared poorly. Among them were Pacific Gas & Electric, Enron, WorldCom, Tyco, Adelphia Communications, US Airways, Trump Entertainment Resorts, Northwest Airlines, Lehman Brothers, Washington Mutual, Chrysler, and General Motors. Thus, even while Apple prospered, a greater number of American companies went bankrupt or out of business altogether than in any decade in the country’s history, including during the Great Depression.

How did Apple do it? Why did it succeed while its bigger and (initially) more successful neighbors faltered?

The simple answer is that during this period Apple managed to introduce a series of four monumental products and services—the iPod, iTunes, the Apple Store, and the iPhone and iPad—that created not only new industries but also entirely new multibillion-dollar market
categories
.

To understand how Apple did this, we need to appreciate the real contributions of Apple’s cofounder Steve Jobs, who had been out of
the company for twelve years, and who returned at the beginning of this historic era in the company’s history. It was, in fact, a wiser and more confident Steve Jobs who took command of Apple for the second time in 1997. And though he remained the same mercurial, rash, dangerously unpredictable, and impetuous Steve Jobs who had been driven out of Apple in 1985, he had learned two important pieces of wisdom in the interim: (1) Build a company that rewards risk rather than punishes it; and (2) Never forget that all successful enterprises, no matter how big and wealthy, are an aggregation of teams—large and small, loyal and renegade, stabilizing and anarchistic, from the lowliest engineers to executive row—all of them working, sometimes in harmony and sometimes at cross-purposes, toward the success of the company.

Throughout Apple’s story, in good times and bad, freakishly great teams from the unlikeliest corners of the company have arisen to play a crucial role in its future—and have often kept the company alive. They have come from design (the friendly competition between the Lisa and Macintosh teams), education (which gave the company a second chance when IBM captured the corporate market), the Apple operating system (which kept users loyal as company hardware declined in quality), and marketing and advertising (which maintained the Jobs style after he was fired) . . . and ultimately to the team organized by engineering chief Jon Rubinstein that designed and built the iPod and set Apple off on its third era. Many of these teams operated independently from the larger corporation—and a few were outright renegades. Almost every one showed a kind of genius.

Ultimately, it was these teams that built the early Apple, held it together under second-rate management through the hard times, and exploded with innovation in Apple’s resurrection and triumph. So the question is, why were Apple’s teams, often with many of the same members, so effective during some parts of the Apple story and utterly ineffectual in others? Three reasons:

Technology
—Where did the flexibility and adaptability of Apple’s teams come from? From the technology itself. As we’ve already noted, the pace of technological change is so fast that if you can latch on to it and hang on, it will accelerate you past all traditional competition. Unfortunately, as many companies have learned to their dismay, doing so is a lot harder than it looks. But Apple did keep up with Moore’s law. Because it incorporated the law (via microprocessors and the latest memory media) into its products, it built rapid change into its culture, and it unleashed its teams to pursue the quickest possible paths to their goals.

People
—Like Google, Facebook, and Twitter today, Apple in its first two decades (and in its most recent decade) enjoyed an almost unmatched star quality—and it shrewdly used that charisma to attract the best and brightest young talent to join its ranks. But that’s the easiest half of the story. Hot companies can always draw talent; the real challenge is keeping it when the excitement ends, the stock options have been exercised, and the cultural cachet fades. Apple managed to create such a powerful culture in its early years—the “kool-aid”—that it still managed to retain a surprising number of those top employees when the excitement faded and Apple slogged through the dreary early nineties. They were still there to lead the company when Jobs returned.

Risk
—Steve Jobs’s greatest contribution to the resurrection of Apple was that he reinstilled a culture of risk within the company that had been missing for fifteen years under his replacements. At Apple in the twenty-first century, you were punished for taking insufficient risk—employees quickly learned to never approach Jobs with a careful plan or a conservative design. It is hard to convey just how rare such a risk-embracing culture really is in the corporate world. And Apple did it better, through its risk-taking teams guided by Jobs himself, than any company ever.

Speed, people, and a risk-embracing culture were just the ingredients. What made them work was their expression through
Apple’s army of established, loyal, and well-composed teams. Those teams, in turn, felt unleashed to pursue their destinies—and to show their commitment to the company—with the knowledge that their efforts, once again and at last, would be supported by the CEO himself. Together they enabled Apple to maneuver like no giant company ever had before. And for that opportunity, they were willing even to labor in near anonymity and let that CEO take most of the credit.

The result was historic. Unfortunately, the reality of how Apple and Steve Jobs achieved such astonishing results has been overshadowed by an irresistible myth that portrays Jobs as a brilliant lone wolf, executing one miracle at Apple after another, a solitary hero fighting against the high-tech status quo. There is a lot of truth to that image—except for the word “solitary.”

For one thing, you can’t ignore the thousands of Apple employees who brought their ideas to Jobs (he had few original product ideas of his own) and who, once they got his support, made those ideas real. But more than that, a careful look at Jobs’s remarkable career shows that he almost never operated solo; there was always at least one partner, some famous and others all but invisible, whom he could use as a resident genius, as a reality check, as a protector, to execute his ideas or to calm the chaos that he often left in his wake. In fact, Steve Jobs can be seen as a serial partner, pairing up with different business partners who best served each phase in his career: Apple’s cofounder Steve Wozniak (“Woz”), chairman Mike Markkula, John Sculley, Bud Tribble at NeXT, John Lasseter at Pixar. Some of these pairings worked brilliantly, for a while; others failed, either because Jobs chose someone too much like himself, or because he retained too much power and overwhelmed his counterpart.

But one of Jobs’s greatest strengths was his ability to learn, not least about himself and his weaknesses. Thus, his last choice for
a business partner was arguably his best: Apple’s COO (and now CEO) Tim Cook, a business partner who completed his skills, and whom he grew to trust completely.

Cook, a computer industry veteran from IBM, had been hired by Jobs soon after he returned to Apple. It was a team pairing of opposites. Low-key, disciplined, and organized, Cook was almost everything Jobs was not. Better yet, Cook seemed to understand Jobs, creating an environment at Apple that, on the one hand, kept him away from the daily functioning of the firm, while on the other implemented structures that made Apple instantly responsive to Jobs’s latest creative impulse.

Finally, Cook had to accept that he would have to work almost anonymously and behind the scenes. That’s because Jobs always insisted throughout his career—both because it gave him greater control over the company and because it reduced employee raiding—that he take almost all the credit for the company’s successes. Indeed, many people still believe that Jobs invented the Apple computer, the iPod, and the iPhone—and even many industry veterans can’t tell you who actually did. The trade-off was that Jobs was often intensely loyal to, and rewarded well, those people who acquiesced to this arrangement.

Tim Cook was willing to live with that arrangement. Steve Jobs rewarded him more than anyone by entrusting him with his company in the end. Together, they made the most powerful business pair-team of their generation. And the world learned of it only when Jobs became too sick to continue.

RECONSIDERING STEVE JOBS

The more you study the career of Steve Jobs, the more obvious it becomes that Jobs, the most famous solo businessman of modern
times, was partnered at every step along the way with another individual or team, most of them all but unknown to the outside world. Further, when he teamed up with the wrong partners, his career went into a tailspin; and when he found the right partner—an individual or a team—he succeeded beyond anyone’s dreams but his own.

We’ve chosen to directly address the story of Steve Jobs because, for billions of people around the world, he is the very embodiment of the maverick entrepreneur who cast off all ties with those around him to take the unconventional, high-risk path to glory. His solitary, heroic image stands as a role model to uncounted young entrepreneurs in the generations that have followed him. He is the ultimate counterpoint to all of those compromising “team players,” the workaday drudges who must forever make nice to their coworkers; to all those mediocrities who are tied down by chains of professional courtesy, friendship, and partnership.

And yet in real life, Steve Jobs proved to be as dependent—indeed, even more dependent—as most of us on those chains. And, rather than tie him down or hold him back, the partnerships and teams in Jobs’s professional life (and in his personal life as well, but that is another story) were precisely what liberated him to unleash his genius, what empowered him to successfully run Apple, and, not least, what protected him from the excesses in his behavior.

If that is true for Steve Jobs, of all people, why isn’t it also the case for almost every other loner we honor in our culture? Might it be that the lone hero is actually the exception, and the two-or-more-person team the secret rule? Bill Gates? Well, he had Paul Allen, then Steve Ballmer. GE’s Jack Welch? Numerous field generals. Facebook’s Mark Zuckerberg? Sheryl Sandberg. Alibaba’s Jack Ma? Jonathan Lu. Invariably, when you look behind the great man or woman of industry, you find one or more other key players who, for one reason or another, stay in the shadows.

Finally, did Steve Jobs see himself as a lone hero? Perhaps, but it’s hard to ignore what he told
60 Minutes
: “My model for business is the Beatles: They were four guys that kept each other’s negative tendencies in check; they balanced each other. And the total was greater than the sum of the parts. Great things in business are never done by one person; they are done by a team of people.”

N
ow we turn our attention to another force behind the power of teams, whether teams from a hunter-gatherer tribe of prehistory or today’s leading-edge technology start-ups. Teams, it turns out, are not strictly practical responses to immediate challenges and situations. Teams are at the heart of what it means to be human.

Put another way, as human beings, we
must
form teams. It is encoded into our DNA. It has proved to be the critical factor in the rise of civilization.

The human drive to form teams is also a survival mechanism for individuals. Psychologists have long noted that solitary individuals, from hermits to unattached adults, typically have shorter life spans than their more social, mated counterparts.

The archaeological evidence suggests that even the earliest hominids always grouped together to live and hunt. In 1975, the
2.3-million-year-old remains of what appears to have been a hunting party of hominids who died together were found in Hadar, Ethiopia—suggesting that teams existed even
before
the members were fully human. In the Omo Kibish dry lake bed a few miles away, the anthropologist Richard Leakey found the nearly 200,000-year-old remains of another group of humans who, based on their tools and other artifacts, lived together as a family group or a small tribe.

Similar team behavior can still be found in the world’s surviving hunter-gatherers. For example, the San Bushmen of the Kalahari almost always hunt in teams, not least because their primary weapons (poisoned arrows and spears) necessitate a long time spent tracking and driving their prey, sometimes requiring days of pursuit by multiple trackers looking for signs. The prey is large—an eland can weigh a ton, an elephant ten times that—so can rarely be taken by a solitary hunter. When the animal is butchered, multiple hands are needed to transport the meat (and the necessary calories for the group’s survival) for what can be many miles back to the village.

This team hunting technique is at least as old as Neanderthals hunting mammoths, and likely much, much older than that. It is also as recent as last night’s military patrol in a war zone somewhere in the world.

The agricultural revolution took teams—and the division of labor—to a new level. Not only is it almost impossible to conduct planting and harvesting as a solitary farmer, but without a surrounding infrastructure to process, store, distribute, and trade the fruits of the harvest, the system just doesn’t work. Consider the special skills needed for a successful agricultural society: planting, harvesting, milling, baking, brewing, shipping and trade, animal husbandry, policing and protection, adjudication of disputes, marketplace management, building, taxation, and distribution.

With agriculture, we began to need the differentiated skills of our fellow human beings more than ever. This division of labor, formed out of aggregations of small teams, is older than human history. Babylon, the first true city, exhibited all of these characteristics six thousand years ago. By the time of the Sumerian, Egyptian, and Chinese civilizations, the process of division and aggregation had already become highly sophisticated. The pharaohs ruled a geographically vast empire of millions of citizens through layers of bureaucracy, their rule ultimately reaching down to small teams manning distant and isolated outposts. The Egyptian army fought in a team structure, and it wasn’t an undifferentiated mass of workers and slaves who built the pyramids.

What is crucial to note is that this division has never stopped. At no point in the development of civilization, and across six millennia, have small, fundamental teams ever been abandoned as unnecessary or obsolete. Rather, they remain essential building blocks in the structures of ever-larger institutions. Even the largest human groupings ever created—Xerxes’s Persian army, the Soviet Red Army in World War II, China’s People’s Liberation Army today, the Roman Catholic Church, the million employees of Walmart—are aggregations of an uncounted number of small teams managed by an ever-larger superstructure of larger teams.

Thus the modern army has its army groups, corps, divisions, battalions, and companies. Yet armies still come down to teams, elements, and squads. Great corporations may have country or regional organizations, divisions, and offices. But they too ultimately devolve to partnerships, sales teams, departments, work groups, and pairs. The same is true for the great religions (from the office of the pope to the parish priests) and national governments.

Over and over, the size and structure of these teams are repeated through history, be they Caesar’s legions or IBM.

WHY DO TEAMS FORM THE WAY THEY DO?

This kind of consistency and durability, not just in type but also in
form
, through the course of human history suggests that something much more than only coincidence—or even practicality—is at work. It suggests something deeply human. With few exceptions, human beings don’t do well alone. We thrive while operating in certain organizational schemes.

Why should this be so? We believe there are several explanations.

One is the nature of leadership itself. Researchers into the nature of leadership recognized decades ago that even the best leaders have a limit to their successful
span of control
, usually six to ten people—the number of individuals whom they can personally manage at the highest levels of productivity. Beyond that, even the most talented leaders simply don’t have enough intellectual, emotional, or temporal bandwidth to provide the requisite personal attention. Thus, smart leaders begin to divide up their direct reports into multiple teams, each with a subordinate emplaced and empowered to serve as the new team leader.

As a result, multiples of this basic span of control—with any added command superstructure—consistently appear in larger organizations throughout time.

A second force at work in creating team archetypes is
structural stability
. Here one can draw an analogy with atomic theory. Certain molecules, particularly simple ones (atmospheric oxygen, cyanide, carbon monoxide, benzene), are inherently stable due to the nature of their atomic bonds and their structure. Others are much more volatile (isotopes, ions, radioactive elements, and so forth) and unless constantly maintained in their unstable condition, they will quickly revert to more stable structures.

Human teams exhibit the same combination of stability and
volatility. Some teams, most obviously pairs, but also large groupings such as the 150–160 people in a typical tribal village, are considerably stable. They are, in fact, what unstable teams typically collapse into. Pairs, of course, are the most stable of all, not just because of their simplicity, but also because they manifest those most basic of all human relations: friendship and marriage. Living things have been genetically wired for pair-bonding ever since the first species exhibited sexual differentiation and mating.

But add a third team member and things become much more complicated—sometimes even explosive. Trios work, of course, but often it seems they do so only by serial pairing. After all, history doesn’t show many triumvirates and troikas, especially among rulers, that have survived for long. Intel of the 1970s and 1980s was a noted exception, with its famous trinity of Robert Noyce, Gordon Moore, and Andy Grove. More recently, Google’s triumvirate of Larry Page, Sergey Brin, and Eric Schmidt has worked well. China’s telecom giant Huawei uses an office of three CEOs, rotating each for six-month stints at the top. Stability is provided behind the scenes by its press-shy founder, Ren Zhengfei. When trios work, it’s because their individual members’ skills are so different yet dovetail perfectly. Google’s cofounder Sergey Brin plays the role of futurist. His fellow cofounder, Larry Page, is the CEO. Chairman Eric Schmidt, fifteen years older than the other two, is the diplomatic ambassador.

OPTIMAL SIZE AND THE MAGIC FORCE

Beyond three members, the next optimal team size has been the subject of considerable debate.

Here’s Susan Heathfield, a human resources expert: “So, optimum team size is not an easy answer. From experience and research, the optimum team size is 5–7 members. The team size that
continues to function effectively is 4–9 members. Teams are known to function cohesively with a size up to 12 members.”
¹

Remember that two-million-plus-year-old hominid hunting team? Twelve members. The small tribe discovered by Leakey? Two dozen members. This suggests that small teams of a consistent size are not only intrinsic to being human, but historically are among humanity’s most enduring characteristics. Even in the age of global wireless coverage and the World Wide Web, it’s hardly surprising that small teams aren’t going away any time soon. Indeed, they will likely remain intrinsic to human beings as long as there are human beings.

Certainly, small teams are as important as ever in the modern “hunting party.” In its smallest units, the British Army operates at the limits of Heathfield’s numbers, with a single “fire team” composed of four soldiers, and a “section” of two fire teams—eight soldiers—commanded by a corporal. In the US Army, a squad is two fire teams of four riflemen and a staff sergeant in command, for a total of nine; in the Marine Corps, it is three four-man fire teams with a master sergeant commanding, for a total of thirteen. In real life, however, such as in Vietnam or World War II, attrition, delays in replacements, and shortages of personnel meant that the typical squad was always short two or more members. Comparable unit sizes can be found in armies throughout the world (for example, the Russian army unit is nine members; the Chinese People’s Liberation Army, twelve).

Why this particular size? We’ve mentioned the normal effective span of leadership. But there are more everyday and pragmatic reasons as well. Once again, they are as old as human beings and combat. For example, a squad was the number of soldiers who could effectively hear the orders of their commander in the clash of battle. In the Roman legions, the size of a squad—eight—was defined by the number of soldiers who could share a standard tent.

Two thousand years later, long after the constraints of tent
size are gone and soldiers can communicate in combat via radio to an audience of any size, the squad—that basic unit of military organization—remains the same size. This suggests a force far deeper than tradition or immediate practicality at work, but something deeply human. Any organization forming small teams should be wary of ignoring this magic force.

WHY SEVEN PEOPLE BEAT A HUNDRED

What is that force? It may be, as we’ll investigate in depth in upcoming chapters, that the very nature of the human brain—in particular, short-term memory—revolves around what the psychologist George Miller famously called “the magical number seven, plus or minus two.” That is, human short-term memory is capable of capturing and briefly holding between five and nine items of information—for example, zip codes—and has only a limited repertoire of tricks to enhance that power (notably, “chunking” small clusters of data, such as the way we conceptualize telephone numbers as a three-digit area code, a three-digit local prefix, and a four-digit direct number at the end).

That the optimal size of small teams is the same as the effective range of short-term memory in our brains is unlikely to be a coincidence. Our minds seem to work best in pairs and in that zone of seven plus two other entities. Below that, the team often devolves into pairs or trios; above that, it moves toward splitting down to the stable quintet or sextet.

It’s not surprising then that, wherever you encounter small units and teams even in the modern world, they rarely deviate from the basic half dozen or the aggregated-dozen-member archetypes. This strategy is as old as history and as new as the creation of new product teams at the most cutting-edge technology companies. Here’s
the Canadian team management consultant Mishkin Berteig on the priority of the right team size:

Imagine that you have just been “given” a software development group consisting of 100 developers. Now imagine that you are given a really important project to work on. Which would be better?

        
a. Get all 100 people working on the project (with good project management, leadership, etc.), or . . .

        
b. Find the 7 strongest people in the group who are willing to work on the project (in other words, the seven strongest people that are actually interested in the project) and get them working on the project, fire the rest of them, and spend the savings on giving the 7 people the absolute best tools and environment they need and want, and spending the rest to make them happy/comfortable.

Personally, despite the severity of scenario (b), I would definitely bet on it and not on scenario (a).
²

The notion of optimal team sizes has gotten considerable support from other quarters, some of them quite unlikely.

For example, consider Parkinson’s law, first formulated in 1955 by the British naval historian Cyril Northcote Parkinson in an article in the
Economist
.
³
In it, Parkinson argued for a rule about the behavior of organizations—particularly government bureaucracies—that has now become part of our language:

Work expands so as to fill the time available for its completion.

Parkinson wrote the article as satire, but it captured a profound truth about human organizational behavior, and it has posed
a challenge to sociologists and human resource managers ever since.

Parkinson even proposed two reasons for this phenomenon:
⁴

•
      
An official wants to multiply subordinates, not rivals, and

•
      
Officials make work for each other.

That’s why, Parkinson noted, even though the British Empire was shrinking rapidly as he wrote his essay, the total number of people employed in the British government to manage the empire was still growing by 5 to 7 percent per year “irrespective of any variation in the amount of work (if any) to be done.”
⁵