> In a way, every scaling startup is an experiment in empirical microeconomics research on “What parts of the typical corporate form are necessary and which are pageantry which we only keep around due to anchoring, the sunk cost fallacy, and tradition?” Every time a startup bites the bullet and hires a VP of Sales, a lifecycle email copywriter, a retirements benefits administrator, or a cook, count that as a published result saying “Yep, we found this to be necessary.”
They also need large departments for everything else: Accounting, engineering, HR, legal, facilities management, marketing, IT, customer service, etc. You simply can't run a huge business without a large number of employees, and you need a deep management hierarchy for that to remotely work.
Customer service tends to scale linear to sales, while engineering may or may not, so it gets pretty impossible to run a massive company with few employees without being massively hands off.
Engineering definitely scales sub-linearly to revenue (unless you're a body shop), but it's definitely always still above a constant. Large tech companies would be crazy to keep their engineering teams artificially low, because when you're making billions in revenue the added headcount ends up paying for itself even if it's only capturing that last 1% of possible product efficiency gains. Like, Google Search could be nearly as good as it is now with 1/20th the engineers -- but that last bit of improvement is still absolutely worth having the much bigger team.
Management guru Tom Peters has claimed all you need to do is outsource; and the minimal corporation is a CEO with a computer & phone. This was in the 90s, tho.
This clearly doesn't actually work though; how many Fortune 500 companies can you point to that use a mostly outsourced employee base, even for their core functions? The closest you can get is likely an Uber or similar, but all they've outsourced is drivers and janitors; they still employ many thousands of engineers, salespeople, etc.
Also, the management chain still exists, it's just at a different company. But from the worker's perspective that's irrelevant; just as many people still have bosses.
Well that is a bit of a showing up to a luxury/sports car/truck discussion and saying 'my daily driver is a bicycle' philosophical difference/smartassery. It is clearly objectively worse in several ways (cargo capacity, max speed, environmental conditions) but better in ways that the others don't even try for (no emissions, gives exercise to the operator, negligible road wear). They fundamentally aren't even trying for a monolith but to become 'independent' as possible. Less charitably it could be called sophistry to self-justify their flaws and failings.
A hypothetical 'outsource everything' company would be perfectly agile because everything else is fungible replaced with whoever is doing the outsourcing regardless of what is going on everywhere else. The downsides are not only that they are the reverse ofvertically intergrated in that they give up margins to everyone else in the chain and that they have no differentiator other than what they can provide as 'middleware' and outsourcing everything to stay that agile means that it is shrank by design. They would have to provide real value margin as a middleman in order to exist long term vs the clients 'just putting all of the pieces themselves'.
The point is that large corporations have fundamentally moved society forward in many ways that small single-person companies simply cannot do. You don't get smartphones and automobiles and electricity without large corporations.
People can talk all day about how people shouldn't have bosses, but they don't stop and consider what civilization would actually look like if that were true. It would look radically different from today.
That’s not a firm, it’s just a person participating in the economy. There is a whole field of economics that asks: “having regard to the fact that if production is regulated by price movements, production could be carried on without any organisation at all … why is there any organisation?” https://en.wikipedia.org/wiki/Theory_of_the_firm
True. But services you need all the time are or at least should be much cheaper in house. I mean your inhouse lawyer probably costs 100/h, outsourced 400/h.
Germany? So lets say 25/h is overhead (office space etc), 1680 workhours per year, so about 125k. Taking 80% to calculate the employees gross salary gives 100k annual. As far as I understand this is a very decent salary.
How much do you pay inhouse councils in your country?
