The typical company based out of Pakistan bills their development staff between $20 and $30/hr. $30/hr translates to about Rs 4 lac/month (at the time of writing this article). But if you look at market averages, the average developer makes less than 12% (Rs. 50,000/month) of the money they can earn in a month.
Where does all that money go?
Typical companies spend their money in the ratios described below (usually in this order):
- Sales and Marketing: Typically between 10% and 20% (~ Rs 40,000 – 80,000 a month) of the revenue is spent on generating more revenue. For companies delivering good quality work, a large part of their work is recurring revenue from the same customer, which has a near 0 sales and marketing cost.
- Between 5 and 10% of the revenue is spent on overheads like administrative, building and utility costs.
- Between 10 and 20% are company profits distributed amongst the shareholders of the company.
Inefficiencies and idle times: 40% of revenue, roughly 160,000Rs/month from our example above, is lost here. Inefficiencies are caused by lack of skill, bad planning, attrition costs or people just plain slacking off. Your team members can be performing less than optimally which reflects in the entire team/company’s net compensation. This opens up a vicious cycle where employees don’t work hard because they feel they aren’t paid well which in turn constraints average compensations.
- What is left behind then determines what the average salary of a developer is. Some people make higher than the average and hence others have to make less than the average to offset things.
Our aim is to take the top 4 points mentioned above and redirect as much of that as possible towards employees. We hope that this will result in a higher average salary for capable and qualified people. We hope that this would eventually lead to highly empowered, smart individuals who are making enough for their short and long term needs. This will help raise the level the average skill set available in the local industry, help develop a clear focus and most importantly and help deliver maximum value to the customer. The company structure thus sustains itself through happy teams and the resulting happy customers.
How are we achieving this and others aren’t?
- We aren’t a profit making organization. We believe that at the end of the day, companies are known by the people that they comprise of. We thus give away the typical company profits back into employee compensation. This adds about 10% to the net employee rewards.
- We believe that a large amount of inefficiencies go away if people see a connection between their actions and their reward. In a typical company, “the manager” abstracts the developers from project costs, and shields them from timeline impact. Delays in the project usually come at a cost of the net average salary of the company but because the relationship is indirect, people don’t realize it. Nearly all the profit an individual or team generates is distributed back to the team as soon as the revenue is recognized. That means you get a bonus as soon as the project ends. This means that employees soon realize that it’s in their own best interest to plan well, execute on time, and learn skills that are required to eliminate the need for a non billable manager. This would result in the highest possible alignment with the customer delivering the maximum possible value to the customer. This adds between 5 and 15% to the net employee rewards.
- Typical companies create only a few new accounts every year. Once they enter, good quality work means that the accounts continue to generate new projects and expand. Unlike the initial entry, the expansion of the accounts relies heavily on the quality of work that its employees deliver. Through 1 and 2, we thus help reduce the expenditure on sales. A possible saving of 5 to 10%.
- We also understand that most of the people we get don’t have all the skills required to achieve this level of optimality. We thus run a parallel training wing. It also operates as a non-profit P&L within the company. We believe in open access to information so our portals are open for the public and anyone can learn from these to improve themselves.
What does “the company” make?
- We make happy customers
- We make happy employees
- We grow because of both of the above
Unlike a typical company we aim to make no profits at the end of the year.
What does the company provide then?
We provide our customers and our employees the company of great people. Most companies say that their people are their biggest asset. We feel we have taken that a step further.