7 ms·

It always astounds me that growing the number of employees is one of the key metrics of "growth" startups looks for. As if an unprofitable company with 500 empl

• aaron-lebo 9y ago
  It was the same way with Digg. Hundreds of employees to do what exactly? In hindsight, maybe not shocking it died. Reddit is doing the same, ~300 employees to run something that a team of 30 could (of course, not all are engineers). It's crazy. Reddit plans to expand to 300 employees by the end of the year from its current 230. That's already up from the 140 the company had at the beginning of 2017. Huffman declined to share revenue numbers, and the company is not profitable. https://www.bizjournals.com/bizwomen/news/latest-news/2017/08/reddit-raises-200m-for-new-1-8b-valuation.html https://www.bizjournals.com/bizwomen/news/latest-news/2017/0... Don't know how accurate this is, but Twitter is at 3500 employees now, down from 3900. https://www.statista.com/statistics/272140/employees-of-twitter/ https://www.statista.com/statistics/272140/employees-of-twit... There's something fundamentally wrong with the way the industry builds products.
  • debacle 9y ago
    It's the valuation trap. If twitter was satisfied with a valuation 2-3 orders of magnitude lower than what it is, it would be highly profitable right now.
    • bluGill 9y ago
      The question is CAN twitter be satisfied. I'm not talking if the investors, ego, or all those others will be satisfied, can it survive at all? The question is how many people are actually needed to keep the lights on. One person can read the latest CERT notices every day and decide "we need to upgrade our servers before we are hacked", but from there the upgrade can get hard: how many people are needed to to stage and test the upgrade. How many people are needed to keep the servers running? How many people are needed to ensure that twitter doesn't become a has been unable to keep up with their competition (who presumably is adding new features all the time)? The above is a complex question. I don't know the answers, so while I lean to agree with those thinking twitter should cut people until they are profitable I can never be entirely sure. Even if twitter took my advice and it worked out I can't be entirely sure their current path (too many people) wouldn't be better in the long term. Or alternatively if they continue on the current path I cannot be sure if cutting people would have been better.
      • charlesdm 9y ago
        The answer is probably: a lot less. Let's be honest, with the exception of Google, there are very few technology companies (not consulting companies) in the world that actually need 10.000+ employees.
  • ojbyrne 9y ago
    It's easy to say that from the outside, especially if you cherry pick unsuccessful companies. Google has 72k employees, Facebook has 17k. What exactly do _they_ all do?
    • robotresearcher 9y ago
      Taxes aren't going to avoid themselves.
      • charlesdm 9y ago
        Multinationals generally retain a top tax law firm for that, not an in house tax lawyer.
        • Vindicis 9y ago
          Smaller companies will. Multinationals generally have in-house tax specialists to deal with all of that. Case and point: General Electric. Assuming by multinational you're talking about Fortune 500 and not companies operating in more than one country.
    • spyspy 9y ago
      How long was it before those companies broke even though?
      • tqkxzugoaupvwqr 9y ago
        Facebook burnt through $700M if I recall correctly. Back then this was unheard of. Though, most of it was to support their explosive organic growth while ad revenue was catching up. Google made money almost from the start I think. Reddit has been losing money since its inception.
        • gogopuppygogo 9y ago
          Facebook paved the way for this second tech boom from my perspective. VC's suddenly had FOMO again when it came to user growth over profit.
  • s73ver_ 9y ago
    I guess it'd be more helpful to see a breakdown by employee type/duty. Stuff like Reddit/Twitter would be considered to be something that needs to be up 24/7 (by their users/investors/etc). That means either shift work, or a lot more people so you can rotate the on-call duties. When you're a fresh, new company, you can get away with having one or two people do that in perpetuity, but after you get VC funding or have been around for a while, those people are going to expect you to hire on more help for them so they don't have to be on call all the time.
    • amygdyl 9y ago
      I think a classic reason for ever expanding head count, and in ZIRP era economy, valuations, is because management tries to end run failures of immediate objectives and keep trying more elaborate end runs. Yes, UberCab will be a fine multi city service if they have poured such subsidy into their operations, that every last competitor is bankrupt.
  • ryandrake 9y ago
    Whenever you start asking "Why does company X need all these people, what do they do?" Think about your time playing Kerbal Space Program and learning how the rocket equation works. In order to get a heavier rocket into space, you need more fuel, which itself weighs more, so you need even more fuel to launch all that extra fuel, which itself weighs more, etc. The same kind of thing is true with companies. In order to hire X more employees who "do actual stuff" you need to hire X * Y% more other employees to support and manage those do-ers, which, themselves need X * Y% * Z% more other other employees to support and manage them. Suddenly you have Digg with 300 employees. That's kind of how it happens. I don't think there is such a thing as a medium-to-large company with just "do-ers" sitting there doing things without support staff like project managers and HR personnel (not to say these people don't do things, just not in the sense of directly making products, which is the root of the "what do all these employees do?" question)
  • amygdyl 9y ago
    I have to just say that I can't think of anything else except that advertising sales just does not scale. You may point to Google. But they are what in UK financial regulation speak, is called a Systematic Internaliser. They operate a two way market without substantial open interest not provided except internally from client order flows executed according to their own instruction interpretations.
  • nylonstrung 9y ago
    In the case of Reddit they are doing a massive redesign though and were building out a mobile app
• mrkurt 9y ago
  Number of employees isn't a key metric of growth for any startup. It _is_ a way to try and drive growth, though. So when VCs want companies to hire, what they're really asking for is companies to put the money to work to make it grow faster. Some companies just can't grow even while hiring a ton of people. And to answer your question, the 900 people at twitter are doing sales, community work, support, etc, etc. That stuff balloons fast.
  • spyspy 9y ago
    Hiring as an attempt to drive "real" growth (revenue/market share) I can understand but my argument is that the marginal gain of every new employee seems to drop off quickly. I can understand hiring more sales reps if that's the bottleneck in getting new customers or more support staff if that'll improve customer retainment. I just don't support hiring 20 more project managers because that's what someone feels like the company should have at this stage.
    • mrkurt 9y ago
      Yes, I think what you're witnessing is badly managed companies, or companies that don't have much of a future. I'm fairly sure no VC on earth would recommend hiring 20 more project managers.
      • pcsanwald 9y ago
        I agree, but I also think that if your product isn't where the VC thinks it needs to be, and you've got plenty of money in the bank, that VC isn't going to tell you to take all the time you need: they are going to tell you to focus on hiring great people so you can build faster. "You need to hire more/better people" is just the standard response to almost any problem.
    • nylonstrung 9y ago
      How else could you put invested money to work in a company with no assets except to spend it on advertising though?
    • 9y ago
• mathattack 9y ago
  For enterprise software companies, the numbers matter, as they're roughly proportional to revenue. For example, if I'm in build mold, I may scale my non-engineering organization as: - Each salesperson I hire a million dollar quota - Every 2 need a Sales Development Rep - Every 2 need a Sales Engineer - To generate pipeline for them, I need X dollars of marketing spend per salesperson (scales linear) and this will require a marketing department of Y people. - Every $2 million in revenue requires a support person - Management is 1 employee out of 5 - Every $2 million in revenue requires engineering support overhead of another body. - Every X employees requires an additional head in Finance and HR. These #s are all made up, but it's a way of thinking why people use headcount as a proxy for revenue, especially when revenue #s are private. This is much less true in consumer focused companies, or resellers.
  • rjzzleep 9y ago
    Does it? Revenue is != profit though. This is where it bothers me. Startups start out by taking a share of the enterprise companies lunch by doing things that enterprise companies can't because of the structures they built. At some point when startups get successful they flip a switch a switch and try to become more enterprisy. They might get a "real" CEO, one of the big performance metrics becomes by how many hundred people you can grow the company per year and at some point if they make this transition successfully the company will start to stagnate. Back in the days when I went to some Erlang user group I was complaining about how I could solve a problem and rather than solving the problem the guy wanted to grow the engineering team to 20 people(from 5) some government contractor said that I don't get how the system works. You think that solving the problem is the key performance metric, but the actual metric is how many people the manager manages. One of the comments I saw below is true though. They grow the numbers and then they don't have proper management to fill the gaps. But what's proper management to begin with? If they "invest" in their people they will promote their earliest employees to director of xyz. Congrats, now some random crappy junior javascript developer is now your Director of Engineering and it will be legitimized by the $10000 Leadership 1 weekend course he got at Stanford. He will do 1 on 1s with you and try to talk about your future. But here's the problem though. Where do you get good management? Anecdotal evidence, I once sat at a dinner table and next to me was some old school business guy with his friend, a senior management guy at another company who recently got fired, saying that the worst thing you can do is hire middle management that is weaker than you. He will always try to keep the lower tier below himself. I'm supposedly in a leadership position in my company, yet the thing that no one ever wants to hear in upper and mid management is fixing issues. Ironically I recently did a PMP certification to see what the fuss is all about(granted, it's not really a management certificate). Nothing I saw in that formal guidebook aligns with what I've seen in real life. So if you can't get good management from other "enterprise" companies, and you can't get good management from your early employees and you can't get it from training, then why strive for that model to begin with? It seems like the only rational explanation for all of that is to pump up to numbers so you can aim for a nice exit on the ipo.
• elmar 9y ago
  WhatsApp had 55 employees when was acquired by Facebook, probably hard to find a better example on how to stay lean and create huge quantity of value.
  • sokoloff 9y ago
    Instagram was also extremely lean (13 employees, maybe?) from what I recall.
    • mrkurt 9y ago
      Both of these companies are very focused consumer oriented companies. They don't do sales, they don't do marketing, they do minimal support. Instagram was also not profitable yet. They would have easily ballooned to 100 people if they'd tried to become profitable.
    • nostrademons 9y ago
      YouTube was 65 when acquired by Google. Craigslist has 50 now, and had 28 as of 2009. Reddit IIRC was 6 employees until they were spun out of Conde Nast in 2011. (Some of those early employees are on HN; maybe they can correct me.) PlentyOfFish was one guy until 2008, 5 years after its founding. It was doing a couple million in revenue then. The big labor-intensive function seems to be enterprise sales. If you're just building a product for people to use or charging self-serve for use, you can do that with a small engineering team. As soon as you start charging $100K for the product or ad sales on the product, then you need to start hiring people to convince customers why they should spend $100K for your product. Of course, each salesperson makes more than they cost, so it's still rational to hire them.
      • nylonstrung 9y ago
        The common element between all of these is that they are communities based around network effects. In the case of at least the last 2 they also used community moderators which can be seen as a tremendous HR hack in some ways
• whipoodle 9y ago
  Being understaffed really limits your ability to do stuff, and it also sucks for the people you do have. (Source: I live this every day of my working life.) Also, by the time you're in this spot you should have hired already, and digging your way out will be so costly in terms of forfeited opportunity and the strain on existing employees when spinning up new ones. While on the other hand, if you don't grow your customer base you're gonna go out of business anyway. It's very easy to look at a going concern from the outside and say "what are all those people doing?!" The definition of bloat is not "things I didn't think a company would have to deal with because I don't work there".
• avn2109 9y ago
  >> "...number of employees is one of the key metrics of 'growth'..." Measuring a company's success by count of employees is like measuring the skill of an aerospace engineer by the weight of the airplane he designs. It is true that all successful airplanes have a nonzero weight, but more ain't always better.
• erikb 9y ago
  I think there is some truth behind it. Yes, profitability doesn't directly increase with number of employees, but having many has other advantages. For instance you can drive bigger bargains, you can take on bigger customers, you can get bigger loans, and you have a bigger influence on politics, law, etc. I don't believe that 500 to 900 employees makes a big difference, but you can feel a huge difference between 5, 50, 500, 5000 and 50000 employees.