[FoRK] RPE and understanding company performance
Stephen D. Williams
sdw at lig.net
Thu Jun 17 22:45:34 PDT 2010
On 6/17/10 10:06 PM, Bill Humphries wrote:
> On Jun 17, 2010, at 9:49 PM, Stephen D. Williams wrote:
>> In other words, unskilled / semi-skilled labor is a scalable commodity that is somewhat disconnected from the creation / management part of the business. For instance, if every employee of every McDonalds franchise were counted, the profit-per-employee would be tiny and hide what is really going on at the corporate level. Conversely, eBay's profit doesn't give you a good feel for average profit per working participant.
> Wow, Stephen, so the corporate level could sling all those burger orders and fill all those Amazon boxes?
> Put on some pants, dude. Your privilege is showing.
Hogwash. It has nothing to do with that. The point was "understanding
company performance", which was referring to company financial health.
The financial health of a company is based on how profitable they are
vs. risk that something will come along and make them insolvent. For
different businesses you have to measure that differently. All of this
is pretty much orthogonal to the financial health of employees at a
company. These numbers didn't indicate at all how much employees were
making at those companies or how they compared with other people with
the same skills at a similar company. You could potentially argue that
those showing the best on that graph were the "worst" companies because
they didn't pay out as much to employees as they "obviously" could
have. There is not enough information there to even reason about that.
My point was that EPE would be more useful it it were normalized in
various useful ways, which I'm sure happens. As another example, you
could compare a vertically integrated chip company with design to fab to
sales with another company that was fabless. The EPE should be
drastically different because you have far fewer and more skilled
positions at the second company. A relatively easy fix would be to
strip out the manufacturing, trucking, stocking etc. positions either at
cost or with an industry-average putative profit percentage for a
company that just does those functions. Then you could compare the
resulting EPEs more fairly.
Other obvious example classes would be earnings per attorney or doctor.
Or per engineer.
In the "sling all those burger orders" example, many chains already do
this: those burger slingers often don't work for the big corporation,
they often work for a local or regional entrepreneur who ones 1-N
McDonalds, being a real estate company, owns land and buildings and only
operates 15% of their restaurants. They don't even buy and sell food
direclty to their franchises, instead arranging for pipelines through
approved logistics operators in each market.
> -- whump
On 6/17/10 10:14 PM, J. Andrew Rogers wrote:
> Machines could.
Exactly why it is not interesting to have them included in all analyses.
How about we compare EPE of Blockbuster and NetFlix or Redbox?
Revenue per Employee 84,208
Net Income per Employee -11,629
This is CoinStar, who own RedBox. Hopefully they earn most revenue from
Revenue per Employee 440,304
Net Income per Employee 22,027
So is Blockbuster good because it employs many people or bad because it
is doing poorly? Because they are negative, you can't compare them in
certain ways, however the revenue per employee is a pretty good hint.
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