How to scale up your team to greatness

April 10, 2014, 6:36 PM UTC

The best teams are small, have many women, and know how to have a good fight.

Smaller teams of four to five work more effectively, according to Robert Sutton, professor of management science at Stanford University.

FORTUNE — My Stanford University colleague, Huggy Rao, spent seven years studying how organizations scale up excellence. We discovered that the process happens largely through teams — by growing new teams at the right rate in the right way and weaving together the efforts of multiple teams across the company.

Such dynamics are crucial to even tiny young companies. For example, Pulse News, maker of a “news aggrega­tor” app, was started in 2010. Performance problems began to flare up after the company grew to just eight people. So founders Akshay Kothari and Ankit Gupta split Pulse into three small teams. Almost immediately, the young company started producing better software and doing it faster — and people were getting along better and helping each other solve problems.

MORE: Whole Foods takes over America

When the company expanded to 12 people (working in four teams, all in the same room), each team maintained a bulletin board that communicated their current work to everyone at Pulse. Every afternoon, each team gave a short talk to the company about what they were working on and where they needed advice and help. Pulse continued to rely on small teams as it grew to 25 employees and 30 million users; the company was bought by LinkedIn (LNKD) for $90 million in 2013.

Whether you are growing a startup like Pulse, opening multiple new locations, or spreading new practices across an existing organization, we identified five hallmarks of effective teams that will help you sustain excellence as you grow an organization or expand a program’s reach.

Keep teams small

This is especially important when teams do work that requires intensive information exchange and coordination. For most tasks, four or five is optimal, and once teams get larger than 10 or 12, performance and interpersonal relationships really suffer. Many careful studies show that this happens because of cognitive overload. It is far more difficult to coordinate your activities and to keep track of the quirks and moods of 10 teammates than three or four. That is why, for example, the Navy Seals use four-person combat teams and McKinsey engagement teams usually have four consultants. In World War II, the U.S. Marines used 12-person combat teams at first, but quickly reverted to four-person teams because so many performance and morale problems reared their ugly heads. And a Harvard University Business School study by Melissa Valentine and Amy Edmondson found that when the emergency department of a large hospital assigned doctors and nurses to four different six-person pods (rather than trying to function as one big group), not only did communication and trust improve dramatically, waiting time for the average patient dropped from eight hours to five hours.

MORE: Wal-Mart goes (somewhat) organic

Use hierarchy to defeat bad bureaucracy

As organizations grow, in addition to dividing large teams, you will need to add a few more layers and a bit more process to weave together what happens across teams. Look at Pulse. After they divided into four teams (each with a leader) they used the bulletin boards and brief afternoon reports to foster communication and coordination across the four teams. Hierarchy, process, and manager are sometimes treated as dirty words. Yet as organizations get larger and more complex, these are necessary measures so long as they are used in small doses and with proper precautions. Chris Fry, who leads engineering at Twitter (TWTR), emphasizes that when rules, roles, and processes cause people “to feel as if they are walking in muck,” wise leaders use the hierarchy to repair the bureaucracy.

Create shared time rhythms within and across teams

This is an effective approach for coordinating action without resorting to overly close supervision or long lists of rules as an organization expands. When everyone in an organization practices the same rituals at the same times and has similar goals and shared deadlines, they understand what to work on, how their work fits with others, and when to put forth extra effort — so there is less need for administrative “muck.” A few weeks back, I visited a Canadian startup called BuildDirect, which has about 200 employees and specializes in delivering heavy building materials to homeowners and contractors. Each BuildDirect team (including the top team) has a brief stand-up meeting (or “huddle”) every morning to keep people focused on key goals and to identify and resolve obstacles. In addition, every 60 days, people throughout the company pause and evaluate the five most important goals for the next 60 days, called “the five rocks process.” New goals are added and old ones removed; there are never more than five. CEO Jeff Booth reports that the daily huddles and 60-day rhythm help employees focus efforts and understand how their work fits with colleagues throughout BuildDirect — usually without asking their bosses.

MORE: Peppridge Farm’s president: I failed in grad school and bounced back

Learn how and when to have a good fight.

In the best teams, members “fight as if they are right and listen as if they are wrong.” Pixar’s Brad Bird, who won Academy Awards for directing The Incredibles and Ratatouille, is renowned for encouraging his teams to disagree openly with him and others. His goal is to make it safe for everyone to be “humiliated and encouraged together.” As Intel (INTC) teaches every full-time employee, a big part of “constructive confrontation” is knowing when to stop fighting, make the decision, and start implementing it — even if you disagree with it. They learn and live by the mantra “disagree and then commit.”

Add more women

Carnegie Mellon’s Anita Williams Woolley and her colleagues studied 669 people in two- to five-member groups. Groups with higher percentages of women performed better on difficult tasks such as “visual puzzles to negotiations, brainstorming, games, and complex rule-based design assignments” — which the researchers deemed “collective intelligence” indicators. This happened because groups with more women usually had superior social sensitivity and thus cooperated and wove together their talents more effectively. Members listened more carefully, allowed others to take turns speaking, and weren’t stifled by one or two overbearing members — which increased their capacity to perform complex and difficult tasks. Socially sensitive men also help make teams smarter. But if you can’t test for this trait before forming a group or adding new members, remember that women, on average, are a better choice.

MORE: Rupert Murdoch on his divorce, succession and his empire’s future

In short, scaling up an organization is often portrayed as a “problem of more”; after all, the challenge is to add more employees, land more customers, open more locations, spread new change programs and technologies, or otherwise expand a footprint. But scaling is also a problem of less. The best leaders and teams keep thinking about what they don’t need and ought to stop doing. When a team has too many members or too much red tape. When it is time to stop pursuing older, less important goals and focus on new and more pressing achievements. When it is time to stop arguing and make a decision. And when a team has too many men for its own good.

Robert Sutton

is a Stanford professor and co-author (with Huggy Rao) of

Scaling Up Excellence: Getting to More without Settling for Less

 (Crown, 2014) which is the source of the main ideas in this piece. Follow him at Twitter