4 ms·

Interesting comparison, yet there are so many wrong implications that can be made from it that I don't Even know where to start. Compare to: short guys in glas

by vtail 16y ago

Interesting comparison, yet there are so many wrong implications that can be made from it that I don't Even know where to start. Compare to: short guys in glasses earn 100x as much as tall athletic guys. "Proof": compare Warren Buffett and Bill Gates with the local college basketball team.

maukdaddy 16y ago
They're not really drawing implications in that article. Profit(or revenue)/employee does provide a fairly decent, albeit rough, measure of efficiency. I think it's an interesting metric that more companies should look at. If that metric starts declining while your hiring is increasing, then it might be a good sign that you're becoming too large and bloated.
- vtail 16y ago
  "Dividing revenue by employee gives us a better look at which companies are the most efficient. And that’s what you see in the chart at the top of this post." craigslist's numbers are misleading here. Sure, they're extremely efficient by the above metric, because they were lucky enough to become a de-facto standard marketplace. I challenge anybody to find another example of a software company with 30 employees that is nearly as successful. MSFT revenue per employee is $631k, between eBay and Facebook. Source: http://www.wolframalpha.com/input/?i=microsoft+revenue+/+number+of+employees http://www.wolframalpha.com/input/?i=microsoft+revenue+/+num... (PS. Do I deserve extra karma for posting this cool WolframAlpha link ? :)
  - maukdaddy 16y ago
    How is CL misleading? They make a shitload of money with very few employees. Saying they were lucky isn't even relevant to the argument. Based on revenue per employee, they are fantastically efficient. MSFT was "lucky" enough to become the de-facto standard in their market, yet they aren't as efficient as CL.
- euroclydon 16y ago
  Efficiency? More like profit margin. Labor intensive industries can be very profitable, provided the scaling is efficient.
  - enjo 16y ago
    No.. efficiency. Your margin is relative to your total costs, of which employees are generally not even a large fraction. For instance take a site like Photobucket, they have a relatively small headcount (~150'ish I believe, most of which are not developers). Their cost drivers are infrastructure and bandwidth which I imagine is in the millions/month. This is a (very) rough measure of how efficient you are in terms of generating revenue. Craigslist is a big site, if they only have 30 employees (as cited above) than I have to imagine they have huge parts of their day-to-day operations automated. That's efficiency.
    - _delirium 16y ago
      "Efficient in terms of generating revenue" (per employee), sure, but that isn't the usual definition of economic efficiency. In particular, there's no real reason, when looking at a company's efficiency, to look at only a raw count of employees, and not take into account things like how much those employees cost, and what your non-employee costs are. A company with half the employees but orders of magnitude more infrastructure costs and lower profits, on the same revenue, isn't more efficient, even though it would rank better on this metric.
DilipJ 16y ago
Your analogy is poor, not just because neither Buffet nor Gates are short. I agree that the author's list of companies was selective, and a larger list would have provided more insight. But revenue per employee is an important metric for understanding the scalability of a company.
- vtail 16y ago
  I agree with you that my analogy is poor, and that revenue per employee is an important metric. My point was that showing craigslist there is misleading, for the reasons I listed in my other comment. It still amazing how well Google scales, and comparing it to craigslist shadows this fact.
- deleted 16y ago
  [deleted]
davidw 16y ago
More than anything, they just don't include that many companies. They need more in each size category, and some sort of standard deviation would be interesting... actually there are all kinds of interesting statistics you could run.

by vtail 16y ago

maukdaddy 16y ago

They're not really drawing implications in that article. Profit(or revenue)/employee does provide a fairly decent, albeit rough, measure of efficiency. I think it's an interesting metric that more companies should look at. If that metric starts declining while your hiring is increasing, then it might be a good sign that you're becoming too large and bloated.

vtail 16y ago
"Dividing revenue by employee gives us a better look at which companies are the most efficient. And that’s what you see in the chart at the top of this post." craigslist's numbers are misleading here. Sure, they're extremely efficient by the above metric, because they were lucky enough to become a de-facto standard marketplace. I challenge anybody to find another example of a software company with 30 employees that is nearly as successful. MSFT revenue per employee is $631k, between eBay and Facebook. Source: http://www.wolframalpha.com/input/?i=microsoft+revenue+/+number+of+employees http://www.wolframalpha.com/input/?i=microsoft+revenue+/+num... (PS. Do I deserve extra karma for posting this cool WolframAlpha link ? :)
- maukdaddy 16y ago
  How is CL misleading? They make a shitload of money with very few employees. Saying they were lucky isn't even relevant to the argument. Based on revenue per employee, they are fantastically efficient. MSFT was "lucky" enough to become the de-facto standard in their market, yet they aren't as efficient as CL.
euroclydon 16y ago
Efficiency? More like profit margin. Labor intensive industries can be very profitable, provided the scaling is efficient.
- enjo 16y ago
  No.. efficiency. Your margin is relative to your total costs, of which employees are generally not even a large fraction. For instance take a site like Photobucket, they have a relatively small headcount (~150'ish I believe, most of which are not developers). Their cost drivers are infrastructure and bandwidth which I imagine is in the millions/month. This is a (very) rough measure of how efficient you are in terms of generating revenue. Craigslist is a big site, if they only have 30 employees (as cited above) than I have to imagine they have huge parts of their day-to-day operations automated. That's efficiency.
  - _delirium 16y ago
    "Efficient in terms of generating revenue" (per employee), sure, but that isn't the usual definition of economic efficiency. In particular, there's no real reason, when looking at a company's efficiency, to look at only a raw count of employees, and not take into account things like how much those employees cost, and what your non-employee costs are. A company with half the employees but orders of magnitude more infrastructure costs and lower profits, on the same revenue, isn't more efficient, even though it would rank better on this metric.

DilipJ 16y ago

Your analogy is poor, not just because neither Buffet nor Gates are short. I agree that the author's list of companies was selective, and a larger list would have provided more insight. But revenue per employee is an important metric for understanding the scalability of a company.

vtail 16y ago
I agree with you that my analogy is poor, and that revenue per employee is an important metric. My point was that showing craigslist there is misleading, for the reasons I listed in my other comment. It still amazing how well Google scales, and comparing it to craigslist shadows this fact.
deleted 16y ago
[deleted]

davidw 16y ago

More than anything, they just don't include that many companies. They need more in each size category, and some sort of standard deviation would be interesting... actually there are all kinds of interesting statistics you could run.