Employee Analysis: How Growth in Employee Strength Relates to Profits

In this article, we will perform some analysis on the employee related metrics from the top tech companies. All of the top tech companies are selected based on their current market capitalization with the exception of Yahoo. The year 2014 is not included as part of this analysis. Data: The source of this data is from the public financial records from SEC.gov All the sales figures are normalized and reported in USD billions unless noted otherwise. To begin with let us see the current total employee count at each of the top tech companies [click on the image to see enlarged] As evident, IBM and HP dominate the treemap area In short, the employee strength equation as of 2013 IBM + HP + Oracle > Microsoft + Cisco + SAP + EMC + Apple + Amazon + Google + Yahoo Putting this in perspective [click on the image to see enlarged] Let us see how the employee growth has been across the tech companies [click on the image to see enlarged]   Some key observations

  • Apple had no layoffs since 2000
  • Google had no layoffs until 2013 (effect of Motorolla acquisition)
  • Oracle had no layoffs since 2004 (since it started acquisition spree with Peoplesoft)
  • EMC and Amazon had no layoffs since 2002

What is interesting to observe is the big spikes in Amazon’s employee strength growth! Now let us see the performance metrics related to employees The sales-per-employee ratio provides a broad indication of how expensive a company is to run. [click on the image to see enlarged] Companies with higher sales-per-employee ratio are usually considered more efficient than those with lower figures. A higher sales-per-employee ratio indicates that the company can operate on low overhead costs, and therefore do more with less employees, which often translates into healthy profits. Looks like the big spikes in Amazon’s employee strength is not justified by the down trend of sales-per-employee ratio. Does it mean that it has become more expensive for Amazon to keep hiring at this pace? Finally, let us see the last performance metric related to employees Income Per Employee: Operating Income / Number of Employees Income per employee measures company’s ability to use their employee resources effectively to create profits for the company. [click on the image to see enlarged] Here is the compiled metrics for all the top Tech companies