Managing Your Business Using the ‘Two-Pizza Rule’

Author: Larry Chester, President

All businesses are created with the intent to succeed.

Statistics prove, however, that unfortunately many do not. In fact, according to the U.S. Bureau of Labor Statistics (BLS), “20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more.”

These statistics have stayed relatively consistent since the 1990s.

This considered, business owners today should do everything in their power to ensure their teams are functioning at their peak potential. Productivity is important because providing more goods and services translates to higher profits.

But how do you achieve high levels of productivity in your teams?

There are many methods out there—creating SMART goals, the Eisenhower Matrix, the Two-Minute Rule, the list goes on. But have you ever considered managing your business using the ‘Two-Pizza Rule’?

Let’s discuss the Two-Pizza Rule and how it can help you manage your business.

What is the Two-Pizza Rule?

Today, meetings are notorious for being a waste of time. In fact, research shows that in an hour-long meeting, 15% (or nine minutes) of its time is wasted.

As a result of highly unproductive meetings, Jeff Bezos, the billionaire founder of Amazon, created the two-pizza rule. The two-pizza rule is simple enough, stating that in an internal team meeting, there should only be as many attendees as could comfortably share two pizzas.

The theory behind this rule doesn’t have so much to do with pizza; but instead, points toward the fact that smaller teams are more productive. In fact, recently, many studies have shown that adding more team members hinders team productivity. “There’s a growing consensus among business professionals that five to eight” team members is the magic number.

This reduced number leads to higher levels of:

• Engagement
• Accountability
• Productivity

But more on this later.

How the Two-Pizza Rule Can Help Your Business Succeed

Think back to a time when you were in a large meeting or team. How smoothly did things run? Was it productive? Did your ideas and feedback feel heard? Chances are more than likely ‘no’ and that things were chaotic on some level.

The data speaks for itself: small teams are more efficient. Here are three ways the two-pizza rule can help your business succeed.

1. Increased Employee Engagement: Using the two-pizza rule to create smaller teams increases employee engagement and helps foster a higher sense of autonomy. In fact, a report by Gallup shows that U.S. companies with fewer than 10 employees scored 42% engagement levels; for larger companies, the average engagement level was below 30%.
2. Higher Levels of Accountability: The concept of there being “too many cooks in the kitchen” is a popular saying for a reason. With fewer people involved, there is more room for accountability. Abhijit Bhaduri, founder of Abhijit Bhaduri & Associates, says that “accountability [often] gets diffused in larger teams. On the other hand, with smaller teams, setting up meetings or connecting in person gets easier.”
3. Increased Overall Productivity: There are many benefits to having a productive team. Lumen writes that as productivity increases, a business can “turn resources into revenues, paying stakeholders and retaining cash flows for future growth and expansion.”

This considered, as a business owner, promoting and maintaining a productive workforce is likely at the top of your list.

In a smaller team, like in the Two-Pizza Rule, there are fewer levels of management, which means you’re able to make decisions faster.

Reducing turnaround time is a huge benefit for any business.

A Final Word

Although the Two-Pizza Rule is not an absolute essential for your business by any means, it does remind us of an important statistic: Smaller teams are more productive.

By focusing on your employees’ experiences, you can create a meaningful impact now and in the future. Read on for more information on how to put your team first this year.