The situation
Consider an organisation where a small team, already stretched thin, is given the one resource it has been asking for: more people. Four new hires join a team that has been struggling with workload. Six months later, output per person has fallen, and the team — now larger — reports feeling busier than before the hires arrived.
The obvious explanation is onboarding drag: new people take time to become productive, and the dip is temporary. But by the time this is being discussed, onboarding is long finished. The more interesting detail is what changed structurally. Before the hires, five people coordinated through a single daily conversation — a habit so embedded nobody thought of it as a system, because it wasn’t designed, it simply accumulated. At nine people, that conversation stops working. Not because anyone is less capable, but because a format built for five people to stay aligned cannot carry the same load for nine without becoming something else: a longer meeting, several parallel side-conversations, written updates nobody quite reads in full. Coordination that used to be free — a byproduct of five people sitting near each other — now has to be built, and building it takes time, attention and often a formal structure that did not previously exist.
What the research says about this pattern
This is close to a textbook description of what Larry Greiner, in his landmark Harvard Business Review work on organisational growth, called reaching a crisis point at the edge of a growth phase. Greiner’s argument, based on his study of how organisations evolve, was that each stage of growth is built on a specific dominant practice — in an early-stage business, often direct, informal coordination through a founder or a tight core group — and that practice works precisely because the organisation is still small enough for it to work. As the organisation grows past that size, the same practice that made it effective becomes the thing holding it back, and Greiner described the resulting friction as organisations “experiencing the irony of seeing a major solution in one period become a major problem in a later period.”
Edith Penrose’s earlier and still-foundational work, The Theory of the Growth of the Firm, offers a complementary explanation for why this catches organisations by surprise. Penrose argued that a firm’s rate of growth is limited less by market opportunity than by its existing managerial capacity — what she and later scholars called the “Penrose effect.” Growth requires the people already inside the organisation to absorb and direct new people and new activity, and that absorption capacity is itself limited and slow to expand. Hiring adds hands; it does not automatically add the coordinating capacity those hands need in order to work well together. In the scenario above, the four new hires were, in Penrose’s terms, added faster than the organisation’s capacity to coordinate them — which is a different problem from simply needing more people, and a much less visible one, because it shows up as declining output rather than an obvious shortage.
A third, older strand of research adds the economic logic underneath both accounts. Ronald Coase’s 1937 paper, “The Nature of the Firm,” argued that organisations grow by internalising activity that would otherwise happen through market transactions, and that this internal coordination has its own cost — a cost that rises as the scale and complexity of what is being coordinated increases. Coase specifically noted what he called decreasing returns to the entrepreneurial or managerial function: past a certain point, the cost of organising one more unit of activity inside the firm grows faster than the benefit of doing so, at least until the organisation adapts how it coordinates. The five-to-nine-person team did not simply need more hands; it needed a different, and more expensive, way of coordinating those hands — and nobody had budgeted for that cost because it had never previously existed as a line item.
What was specific versus general
What was specific to this situation: the exact headcount threshold, the particular shape of the daily conversation, the particular team’s function. Different organisations hit different numeric thresholds depending on the complexity of the work being coordinated and the density of interdependency between roles — a team of engineers building independent modules may sustain informal coordination well past nine people, while a team handling live client escalations may hit the same wall at six.
What was general — and this is the part the research above consistently supports — is the underlying mechanism. A coordination method that scales by proximity, familiarity and repetition works only within a size range that keeps those conditions intact. Growth, almost by definition, eventually breaks one of those conditions: people who used to sit together no longer do, people who used to know each other’s work well enough to anticipate it now don’t, repetition that used to reinforce shared understanding now happens too infrequently or too unevenly to keep everyone current. When that break happens, the organisation does not become weaker in a general sense. It becomes weaker specifically at coordination, while individual capability may be entirely unchanged or even improved.
This is also why “add more people” is a genuinely reasonable-sounding response that often fails to deliver the expected result. It treats the constraint as a labour shortage, when the research above consistently locates the actual constraint elsewhere — in coordination capacity, in managerial absorption, in the cost of organising activity that used to organise itself. None of this means hiring was the wrong decision. It means hiring solved one problem (not enough hands) while quietly creating a second, less visible one (not enough coordinating structure for the hands now available) — and the two arrived at the same time, which is part of what makes the pattern so easy to misread as a single, simple issue rather than two separate ones.
There is also a timing asymmetry worth noting. The benefit of additional headcount is usually visible quickly — the work is now, at least nominally, distributed across more people. The cost of the coordination gap tends to surface more slowly, often only once whatever informal mechanism was compensating for it finally gives way. That lag matters, because it means the moment a leadership team is most likely to notice something has gone wrong is not the moment the underlying change actually happened. The daily conversation that used to work did not fail the day the ninth person joined; it failed some weeks or months later, once enough small misunderstandings and duplicated efforts had accumulated to become visible as a pattern rather than a series of unrelated one-off mistakes. By the time that pattern is visible, it can look like a culture problem, a hiring-quality problem, or a leadership problem, when the more parsimonious explanation is simpler and less personal: a specific coordination mechanism was carrying more than it was ever built to carry.
The same pattern appears across many kinds of organisation; see Other Sectors for how it is read elsewhere.
Questions worth considering
- When headcount increased recently, did anything about how work gets coordinated change deliberately — or was the previous informal method simply expected to keep working at a larger scale?
- Is a current sense of “everyone is busier” actually a workload problem, or a coordination-cost problem that is being misread as one?
- What is the coordination mechanism this organisation currently relies on most heavily, and at roughly what size does it start to strain?
This perspective is part of Growth.
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