In the chapter about team structure from my book Digital Product Leadership, I gave some real-life examples of team size from Gympass, Conta Azul, and Locaweb. However, one thing that is not in that chapter is how we defined the ideal team size. So here’s an article focused on this topic, which I believe can be helpful not only in regular times but also now that VCs funding seems to be slowing down at lower valuations.
When I joined Gympass in 2018 the company already had 800 people but the product development team, i.e., product managers, designers, engineers, and data people, were only 32 people, i.e., 4% of the company which seems quite low. Soon after I joined the company I had to present to the board my plan to increase this team and I decided to include a slide with a benchmark of some well-known tech companies.
I used Linkedin to get some estimates of the product development team size of these companies compared to the total number of employees. The majority is having between 24% to 40% of their workforce in the product development team. The exception is Apple, with 20%, but we need to consider that they own all of their stores, so all the sellers in the stores are their employees as well. Conta Azul, Locaweb, and Lopes are from my past experiences. Lopes, a traditional real estate company working on its digital transformation had around 11% of its workforce in product development. At Gympass we were able to bring from 4% in mid-2018 to 18% by the end of 2019.
However, we can not define ideal team size only by benchmarking. We need to consider other inputs, from within the company:
So we need to know how much we can invest and what we need to do in order to define the ideal size of our product development team.
Some time ago we had the COVID-19 crisis and now we are facing an economic crisis that is making VCs funding slow down and generate lower valuations than we had prior to 2022. Many startups are having to make layoffs because of this situation. Even companies like Google, Meta, and Apple mentioned that they will slow down hiring.
So, what should be the product development team size in a crisis? Well, how much to invest is the input to be considered. Do we need to reduce how much we invest in our product development team? By how much? What is the impact of this reduction on what to do and the results that could be generated by this team? Having fewer people will make the team drop some balls, i.e., a decision needs to be made on what to stop doing. Some objectives and results should be de-prioritized since we will have to lay off some people and will have a smaller team. Is that simple. Less money implies in a smaller team, which implies fewer things this team will be able to do and, consequently, fewer objectives and results can be prioritized.
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