Why is an organization of 100 people so different than an organization of 20 people? It relates to basic human nature. Human relationships are mostly formed through one-on-one encounters. At 20 people, not only is it possible for the CEO to have a personal relationship with every employee. It is also possible for every employee to have a relationship with each other. With 20 people there are only 190 total relationships possible in the whole organization.

It is relatively easy to keep 20 people aligned when they all have some knowledge of what everyone does, and they are in regular contact with most parts of the organization. However, when the organization grows to 100 people the situation is radically different. You might think that going from 20 to 100 is five times more complicated, but with 100 people there are 4,950 total relationships possible in the organization. This is over 25 times as many relationships required for everyone to know what everyone else is doing. That is just not going to happen and therefore requires a fundamentally different method of coordination as the organization grows to 200 or 2,000 employees.