I assume those other companies are paying more money in this hypothetical?
If so, that's the problem, not the amount of profit.
Increase pay to match, making the profit 105% of expenses, is there still an issue? If there are other negative consequences I need you to explain them.
(Side note, if you say everyone else is making 135%, but our company could only make 120% if we switched focus, are you sure it's not us that's paying higher salaries?)
you imagined a scenario in which a company was not maximizing profitability of their drug production and development and asked what would be the problem with that, I provided an example problem that might exist if that were the case and your response is ok let's make a different starting assumption?
My assumption though is if we switched focus we could make 135%.
>Increase pay to match, making the profit 105% of expenses,
at some point in this imagined scenario it ends up profit of 99% of expenses, which it seems from your previous example is not ok. The company with higher profit margins has more room to maneuver, can offer better perks to employees, can offer higher salaries, assuming only some of the employee pool is self-interested that still means you have less ability to get them one way or another.
Assuming also at the top level that wages are not a percentage but rather negotiated, oh well rich pig pharmaceuticals said they would pay 195 per year, that's 40 more than you're offering - can you match? At some point not being as rich as the other players starts to affect your game.
> I provided an example problem that might exist if that were the case and your response is ok let's make a different starting assumption?
Oh, I didn't realize your example was supposed to be different from my example. I thought you were adding on to it. If your example is different, then you left out several important numbers.
> at some point in this imagined scenario it ends up profit of 99% of expenses, which it seems from your previous example is not ok. The company with higher profit margins has more room to maneuver, can offer better perks to employees, can offer higher salaries
It can, but will it? How many industries do you see dumping all their revenue into extreme wages?
If that happens, fuck it, that's basically a utopia, maybe I should join those businesses.
But most of the time extra profit goes to the shareholders, not the employees. The money doesn't end up improving the company's hiring game.
what if every other company in your industry is making 135% and hiring all the best people away from you.
Not being in line with the rest of your industry also has negative consequences for the future of a company.