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    « New Technology and Staying Relevant | Main | We're all in this together. Unless your Business Unit stinks... »
    Friday
    Aug122011

    Metric of the Day - $10M in Revenue per Employee

    Ten million in revenue per employee? How can you possibly get there? You're thinking revenue per employee comes in at around $150,000 maybe $200,000 in a good year.

    One of the ways you approach $10M in revenue per employee is by outsourcing relentlessly everything that you consider non-essential to your business, thus significantly reducing the number of people you directly employ, and allowing you to focus more fully on those critical differentiators for your business.

    The details behind this story are taken from a piece on Bloomberg Business Week about privately-held electronics manufacturer Vizio and their purposeful strategy of outsourcing most every function that they perceive to be not core to the design of their high tech products and to the customer experience they are trying to deliver. Vizio controls product design and customer support in-house, and just about every other function in the manufacturing and distribution process is contracted out to a large network of partners and suppliers across the globe.

    By shifting the employment relationship from in-house to contracted out, Vizio has managed to rack up close to $3B in annual sales while directly employing only about 300 people. Sure, there are tens of thousands of workers scattered across the partner ecosystem, and Vizio has to skillfully manage and coordinate this partner network to ensure production standards and shipping obligations are met. But I wonder if supply chain and vendor management for a few dozen, (or even a few hundred), key partners is in the long run a more manageable and profitable task than trying to directly recruit, employ, compensate, manage, develop, and do all the other 'people management' tasks that are often so hard to pull off well.

    Sure someone else, in this case the partner and supplier organizations still have to do all those pesky 'people' chores, but for a company set up like Vizio, it has to be seen as an entire set of challenges and problems that are not worth undertaking. They can maintain a really small but focused core team, can concentrate on the design and support processes they see as fundamental to their success, and can likely move and respond more rapidly to changing market conditions over time.

    And they probably have a lot less drama than naturally occurs when trying to get 50,000 people to all row in the same direction, play nice in the cube farms, and not leave a big mess in the break room microwave.

    What do you think? Are these kinds of 'networked' organizations the way of the future? Would it work in your business?

    Have a great weekend! 

     

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