It is fashionable these days to speculate about robots taking jobs. Less well-observed, is the fact that seemingly great companies are being built today with far less jobs to start with. What if you only needed a small number of people to do extraordinary things?
When Facebook acquired the mobile messenger service WhatsApp for $19 billion in 2014, it had grown to 420 million monthly users in just four years. More impressive was the number of employees — just 55. Instagram, bought for $1 billion, had 13. YouTube, bought by Google in 2006 had 65. Compared to telco or media firms, the differences in headcount are astonishing, but also raise a bigger question — what is the right way to grow a company?
In 2009, under pressure for a number of bold decisions, the CEO of Netflix, Reed Hastings, decided to make public an internal slide deck about how he hired, fired and rewarded employees. It became known as the ‘Netflix Culture Deck’, and has been viewed nearly 15 million times on Slideshare. It was nominated by Facebook COO Sheryl Sandberg as one of the most important documents to come out of Silicon Valley.
In the deck, Hastings challenges the idea of ‘growing up’. There is a conventional view that fast-growth firms must add significant processes and procedures to deal with increasing complexity. In Hastings’ view, more process does not mean greater maturity, but rather results in a decline in talent density, as the number of high performing employees starts to fall with total employment growth.
At first, process is not a problem. Process-driven companies are efficient, have strong market share, and tend to make few mistakes. That is, until the market shifts due to new technology, competitors or business models. At that point, all of the mavericks that could help the company adapt have left the building, leaving the employees that are only good at following process, and the ‘company grinds painfully into irrelevance’. The solution, according to Hastings, is to increase talent density faster than business complexity.
Knowing how many people are needed to get something done is not an easy problem to solve. One of my former employees used to enjoy giving two people the same job in the company — like dogs in a pit, to see which one would survive. If both stayed busy — then he would be satisfied that the work was enough for two people.
Start-up companies have an incentive to get more leverage from their human capital. If there is a smarter way to do something, they no choice but to find it. And perhaps that is the point.
What the small have to do to survive is sobering advice for those companies that are big enough to have forgotten.
