By Thomas Shambler
What makes employees at Silicon Valley's top companies so productive? It's a mix of organisation, priorities, and good leadership.
According to new research, Apple, Netflix, Google and Dell are 40 percent more productive than the average company. This comes from a new study by leadership consulting firm Bain & Company.
You might think these top technology companies are so successful because they attract top-tier employees; high-performers who are naturally gifted and getting work done quickly. But that's not the case, says Bain & Company partner Michael Mankins.
Speaking about the study – which was put together with help from the Economist's research division, Mankins admits, "Our research found that these companies have 16% star players, while other companies have 15%.
They start with about the same mix of star players, but are able to produce dramatically more output." According to Mankins, what differentiates these high-performing companies from the rest, is how they treat those star players.
Executives from large companies across 12 sectors said that there are three components of human capital that impact productivity the most: time, talent and energy. The top companies in the world organize these components in a way that makes them 40 percent more productive than the rest. Consequently, they also have profit margins that are usually 30-50 percent higher than industry averages.
"To put that in layman's terms, it means that between the hours of 8 o'clock in the morning on Monday and 10 AM on Thursday, the best create as much work—can complete as much work—as the rest do in the remainder of the week. Now, of course, they're still working all day Thursday and all day Friday. And that result is that they can produce much more for the customer and much more for the shareholders.
So not surprisingly, they generate vastly superior performance." They get more done by 10 am on Thursday than others do in a week, but they don't stop working. This difference compounds every year; over a decade, they can produce 30 times more than the rest, and with the same number of employees.
Mankis explores the ways these companies streamline their organizations in his new book, Time, Talent, Energy. He says the quickest way to become more productive is to group your star players together and cut organizational 'drag' time.
Most companies follow a method of egalitarianism for staff – which essentially spreads the talent out across the organization. Companies like Google and Apple, however, don't. They select a handful of roles that are most critical to the business that will most affect the success of a company's strategy and execution. "They fill 95 percent of these roles with A-level quality staff," says Mankins, "the rest of the roles have fewer star players".
An example of this can be seen between Apple and Microsoft in the early 2000s. “It took 600 Apple engineers fewer than two years to develop, debug, and deploy iOS 10,” he says. “Contrast that with 10,000 engineers at Microsoft that took more than five years to develop, debut, and ultimately retract Vista. The difference is in the way these companies chose to construct their teams.”
Of course, another way to boost productivity is to put a stop to all the things that stop your employees from getting their work done, or as Mankins calls it 'organisational drag'. The average company loses more than 25 percent of its productive power to these processes that waste time. While this often happens when companies grow, research published in the Harvard Business Review found that organizational drag costs more than US$3 trillion each year in lost output.
The most common drags have to do with expense management, says Mankins, "at most companies, there are spending limits and audits, and time spent making sure employees are tracked at all times. At Netflix, however, there is no expense policy.
The only policy is, 'Act in the best interest of Netflix'. The company is in effect telling employees, "we assume you are not here to rip off the company, and we're not going to put in place processes that consumer human capital, waste time and zap energy. They tell employees to assume their best judgement, and they can be more productive if they are not held back".