Facebook and Google generate over $1Mn in revenues per employee annually

Among the tech giants, Facebook's average revenue per employee is the highest, at $1.16Mn/employee, just marginally ahead of Google's. 

So what does a high revenue per employee indicate? Basically, it indicates the revenue generating efficiency of a tech business, where the primary cost driver is really the employees - engineers, managers and sales people. Of course, this is not a perfect measure. Amazon for example, wouldn't technically be as comparable due to their costs of physical goods, but by and large, this works for most tech and knowledge-based companies.

This metric also indicates how much the company can invest in talent. With over $1Mn of revenues per employee, both Facebook and Google can both offer employees better direct compensation. More importantly, they can also invest in top-notch infrastructure, support and perks for each employee. Being able to cream off the best talent in the industry and supporting them well would go a long way in sustaining competitive advantage. 

The open question of course, is whether Facebook can scale revenues by10x to Google's $38Bn while maintaining the same employee revenue efficiency, or would it do even better. My guess is that Facebook's revenue per employee would decline from here - mainly because they'll start to employ more people into adjacent areas of growth where monetization won't be as effective as the core business (e.g. a recruiting a full division for Instagram where there's still no revenues...)

Motivating the killer zombie game designer: Valve Software

Valve is the company that is responsible for many hours of sleep deprivation during my time in college. Instead of running simulations for my GPRS thesis, I'd be up late at night fragging my fellow hostel-mates on Counterstrike over the LAN. It set a new bar for FPS games and has continued to do so with new titles, including the super fun Left4Dead that pits you and your buddies against the zombie apocalypse.

Valve's employee handbook was recently published on the internet and it is a humorous, well-illustrated and  well-written document. It shows what it takes to run a company that relies on creativity and innovation. Much of it resonates well with what Daniel Pink writes about  in his book Drive. The core idea is that businesses in the new economy need to think about new ways to motivate (and implicitly, attract) employees. Carrots & stick approaches work well for repetitive tasks where efficiency matters, but not for spurring creativity and innovation. Daniel anchors around three elements of motivation : Autonomy, Mastery and Purpose. I've highlighted how Valve puts this in practice, at times quite radically:

Autonomy : Freedom to direct own work

- It starts off with self-directed project involvement. While poking fun at Google's famous 20% time, Valve allows full autonomy for employees to sign up for projects

"We’ve heard that other companies have people allocate a percentage of their time to self-directed projects. At Valve, that percentage is 100. Since Valve is flat, people don’t join projects because they’re told to. Instead, you’ll decide what to work on after asking yourself the right questions. Employees vote on projects with their feet (or desk wheels)."

- Informal teams instead of hierarchical org structures, titles and job descriptions. Teams and roles are formed and structured organically and are temporal to the project. 

"Project teams often have an internal structure that forms temporarily to suit the group’s needs. Although people at Valve don’t have fixed job descriptions or limitations on the scope of their responsibility, they can and often do have clarity around the definition of their “job” on any given day. "

Mastery: Getting better at something that matters

- Explicitly calling out the need for broad skills and expertise within an area. 

"The most successful people at Valve are both (1) highly skilled at a broad set of things and (2) world-class experts within a more narrow discipline."

- Evaluating performance closely based on mastery. Instead of performance metrics that are team-based (e.g. sales), evaluation is based on individual contribution and mastery plays a large role. Valve gets the teams to rank their team members based on (i) Skill/technical ability, (ii) Productivity, (iii) Group contribution and (iv) Product contribution. 

Purpose: Contributing to something that is larger than oneself

- Being part of top-rated games played by millions of people already should be an impressive purpose, but the handbook goes further in painting out the purpose.

"Valve will be a different company a few years from now because you are going to change it for the better. We can’t wait to see where you take us. The products, features, and experiences that you decide to create for customers are the things that will define us."

All very Utopian... and raises questions to whether if all this is all nice internal PR. I think what makes this real though, is that they recognize what they'll not be good at by taking this path. 

As Michael Porter puts it "Strategy is about making choices, trade-offs; it's about deliberately choosing to be different". Too many companies say they want to do empower employees and remove hierarchy, etc. but in designing their org and policies, also start introducing elements for maintaining consistency, structure, etc. - leaving them with no HR strategy at all and nothing more than a set of hollow new mission and vision statements.