Johanna Rothman at ITJOBBLOG has a great article called Why Team Size Matters. Her argument is that teams of more than 9 people lose the intimacy required to function effectively due to the non-linear way communication paths expand as you add people.
4 people, (16-4)/2=6
5 people, (25-5)/2=10
6 people, (36-6)/2=15
7 people, (49-7)/2=21
8 people, (56-8)/2=24
9 people, (81-9)/2=36
10 people (100-10)/2=45
*Communication Paths=(N*N-N)/2
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