[lifeisstillgood]

>>> And when someone is good at their job, it can still be hard to quantify exactly how good they are, or how much they actually contribute to the business. It’s easier to say, “Okay, let’s have you manage some people,” and pay them more to do that.

It is incredibly hard. So there are two approaches - the sales quota style targets, and the shared equity.

I think the shared equity works - but that interestingly places a hard limit on the number of employees - shared equity gains need to be a meaningful amount of money. In other words, if you paid out all your profits to your employees equally, how many employees would you actually want to have? Would they want to hire anyone else?

Is this a new Coasian limit?

[tonyedgecombe]

I'm not sure that helps with judging somebody's worth. If you are the programmer that added a new feature to Gmail how can that contribution be measured against revenue? Are you worth more or less than the person that created the new menu on search results?

These systems are too complex and interdependent to measure the value of an individuals contribution. People know this which is why corporations become infested with politics.

I'm not sure equity helps (other than competing with other employers at the start). People burn out without some kind of intrinsic motivation.

[lifeisstillgood]

I was thinking more like partnerships in law firms, but even to the extent that everyone is an equal equity partner.

Each partner would very carefully evaluate if adding a new person is worth it, and contributions would be closely watched. It would not end politics but at least it would be fairer

Coase's original idea was of course that firms had employees because the cost of finding someone to do the flexible changing work out in the market was too complex. But add process automation, industry ledgers and a few other bits and I am pretty sure optimal firm size could shrink.

Add in whatever magic sauce people are talking about here (the ability to measure an IC actual contribution - or avoid it altogether through small enough equity) and form size might have a real downward driver.

I suspect that SaaS will see a shift to open source as well. for example even top tech firms spend a fortune building and maintaining custom code for non-core operations (ie HR and reporting and MIS reporting)

Almost all of this can be done well in oss and well enough that if you change your procedures to meet the code you probably win

So with most companies operating on free codebases, sharing equity to drive out the need for managers, keeping employee numbers low, and being able to program / automate most of their non core work firms sizes might take a dive.

[ilaksh]

Great points up until you said that equity doesn't help. Yes they need the intrinsic motivation, but not getting equity that managers are getting can be demotivating.