Social Loafing, meet Peer Pressure

Founder team size has two contradictory effects on effort:

• The larger a team is, the more social loafing occurs: each founder has a greater incentive to "free ride" on a larger team and withhold effort. This causes each founder to put in less effort in a larger team.
  
• The larger a team is, the more peer pressure there is to contribute effort. As the extreme low end, in the case of a sole founder, there is no co-founder peer pressure at all.

By crunching data from the Cologne Founder Study and correcting for confounding variables, Backes-Gellner et al claim that, in terms of causation, social loafing and peer pressure combine in their population to make three-founder companies the size that makes founders work the longest hours. In other words, if you're at three founders, removing a founder makes the founders work fewer hours because of the removed peer pressure, and adding a founder makes the founders work fewer hours because of social loafing.

Having the hours worked peak at three founders can be unfortunate in that larger teams require spending more time on communication and coordination activities. In my opinion, larger teams should consider making an explicit effort to work more, rather than fewer, hours than three-founder teams, for example by agreeing from the outset on aggressive work-schedule expectations. This would compensate for the additional coordination overhead. This assumes that the coordination activities can be managed in a way that doesn't greatly increase mental fatigue, which I believe is a reasonable assumption.

See Also:

• Transparency, Inequity Aversion, and the Dynamics of Peer Pressure in Teams: Theory and Evidence