[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 
franchises.

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.
http://en.wikipedia.org/wiki/McDonald%27s
http://franchises.businessmart.com/how-much-does-a-mcdonalds-franchise-cost.php

> -- 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?
http://www.advfn.com/p.php?pid=financials&symbol=NYSE%3ABBI
Employees 48,000
Revenue per Employee 84,208
Net Income per Employee -11,629

This is CoinStar, who own RedBox.  Hopefully they earn most revenue from 
RedBox...
http://www.advfn.com/p.php?pid=financials&btn=s_ok&symbol=cstr&s_ok=OK
Employees 2,600
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.

sdw



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