Ravi Mohan's Blog
Friday, January 06, 2006
What is your company's M/E ratio?
In simpler words, how many managers do you have per engineer? Look around you . Count the number of managers in your floor/division/office. Count the number of people who actually write or test code. Divide the former by the latter. That is your M/E ratio. Now reflect on this snippet from this very interesting essay "...For instance, you can do what Google does, and give each manager 200 direct reports, rather than the classic 7 or 8, so your management overhead grows with the log base-200 of the number of engineers, rather than the log base-8. That's the kind of clever thinking that comes from hiring math-y Ph.D.s, you know..." As a thought experiment, imagine that your organization hired brilliant engineers and every manager had 200 of them reporting to him and that your CEO, CTO , and the seniormost people in the organization were all PhDs or well known hackers. What do you think might happen? I believe most "don't rock the boat and get my huge salary for pushing paper" type managers would flee in horror. With 200 reports, they won't have the time to harass people and act like the Dilbertian PHB. They might , you know, really add some value! I think you will end up getting really good managers (no, "good manager" is NOT an oxymoron. They are rare but they do exist). And more importantly with log-base-200 growth rate, the empire building politics playing manger will be relentlessly squeezed out. In the last company I worked at, this ratio was about 1/8. Would have been much better, in retrospect, to have had an M/E ratio of about 1/20 (at least). Something to keep in mind if I ever get to create a multi billion dollar company. I think the biggest favor Google has done the world is to prove that an engineer centric, low manager count, ignore-wall-street-and-please-the-customers company can make a lot of money. So no matter what their eventual fate, you can be sure a new generation of entrepreneurs will be paying attention. And learning.