CHARTS: We analyzed revenue per employee to show why Amazon, Meta, and others ar...
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CHARTS: We analyzed revenue per employee to show why Amazon, Meta, and others are axing workers with brutality and speed
Mass layoffs at tech firms indicate they want to become efficient.
One productivity metric to watch is revenue per employee, which has fallen at some big firms.
We crunched the numbers to show the bloat — with one notable exception.
Tech's year of efficiency is in full swing, but some companies have more to do than others to turn their fortunes around.
More than 300,000 workers in the sector have been laid off since the beginning of 2022, as companies discover that their pandemic gains aren't permanent and the economy slows down.
Meta CEO Mark Zuckerberg has talked about the need to get "leaner" and flatter." Amazon boss Andy Jassy stipulated the importance of simplifying in a note announcing the firm's second round of layoffs. The two companies have laid off a collective 48,000 staff in the last five months.
Tech investor and PayPal mafia member Keith Rabois recently said it's about time major firms cut back after years of over-hiring. As he sees it, the biggest tech firms are bloated and unproductive and he's called for a refocus on one particular metric: Revenue per employee.
This is a get-back-to-basics measure of efficiency and productivity, assigning a hard dollar value to individual workers. It's calculated by dividing a company's annual revenue by the number of its employees. A company might appear financially healthy if it's doing massive revenue — but if it has masses of workers and poor or waning profitability, low revenue per employee might signal inefficiency and bloat.
But just how bad is it?
We crunched the numbers for big tech companies between 2018 and 2022 — and the analysis shows why so many are brutally cutting back on jobs.
1. Tech giants grew. They didn't become more efficient.
Tech companies swelled in the years up to and during the pandemic, but more manpower didn't necessarily mean more money.
The chart shows Amazon, Meta, and Twitter in particular hired heavily from 2018, but also experienced declining revenue per employee. It probably isn't a coincidence that all three companies have been among the most aggressive with job cuts over the past few months.
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