Exception overload
At forty people, exceptions accumulate faster than they can be remembered. Each one feels reasonable in isolation. Together they erode consistency.
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Veritas Insights
Organisational scale and HR systems
The 40 person problem.
Most HR systems do not fail because organisations grow too large. They fail because organisations grow just large enough that memory, goodwill, and informal coordination stop working.
What the 40 person problem is
DefinitionThe 40 person problem describes a recurring organisational threshold where informal HR governance collapses. At this size, teams are too large for founders and managers to remember every agreement, exception, and precedent, but too small to have built formal systems to replace memory.
The number is not exact. In some organisations it appears at 35. In others at 55. The pattern is consistent.
Why this threshold exists
Up to roughly twenty people, organisations run on shared context. Decisions are remembered because the same people were present. Policies are flexible because intent is visible.
Between twenty and forty, organisations stretch that model. Informal notes, emails, and conversations fill the gap. It still feels manageable. It still feels human.
At forty, something changes. Not culturally, but cognitively. No single person can reliably reconstruct past decisions. Exceptions begin to contradict each other. New managers inherit ambiguity without history.
Organisations do not lose values at forty people. They lose recall.
This is why teams at this stage often experience a sudden increase in frustration, perceived unfairness, and internal escalation, despite believing that nothing fundamental has changed.
A common misdiagnosis
Leaders often interpret the symptoms as performance problems, attitude issues, or management weakness. In reality, the underlying issue is structural. The organisation has exceeded the limits of informal governance.
Inherited ambiguity
New managers inherit decisions without rationale. They are asked to be consistent without access to precedent. This creates defensive management behaviour.
Invisible rework
HR time shifts from delivery to reconstruction. Policies are reinterpreted. Investigations are repeated. The cost is rarely measured.
Leave approvals
At fifteen people, leave is approved conversationally. At forty, similar requests receive different outcomes. The absence of precedent turns routine requests into conflict.
Performance management
Early performance issues are addressed informally. Later, when patterns emerge, there is no record of earlier interventions. Escalation feels sudden to staff and managers alike.
Contracts and role scope
Roles evolve organically. By forty people, job scope varies materially across individuals with the same title. This creates pay, expectation, and fairness tension.
Design for memory replacement, not control
Systems at this stage should replace human memory, not constrain managerial judgment. The goal is recall, not rigidity.
Standardise rationale before standardising rules
Capturing why a decision was made matters more than enforcing uniform outcomes. Rationale creates fairness across time.
Introduce systems before the pain is obvious
Organisations that wait until conflict becomes visible experience systemisation as bureaucracy. Those that act earlier experience it as relief.
Design for the moment memory stops working
See how Veritas supports small and growing teams as they transition from informal coordination to structured governance.