This is true of every BigCorp I've been at. An IT department will be carefully evaluating some extremely expensive class of enterprise software. A business department will randomly purchase one of those options at random, without consulting IT, just because a software vendor mentioned it in a passing.
Be on a project where you billed over a 100 hours for some aspect of it that they decide to cancel. It is amazing how group decisions can blow so much.
Now, I do not mean experiments and throwing the artifacts of that experimenting. That makes perfect sense. Its when they have a need for something that is part of their current business and they just don't execute properly to the point of cancellation.
I work for a Fortune 100 company. I've seen $5+ million spent on some software that was abandoned a year later, and nobody loses their job! It happens frequently enough that everyone is basically blase about it.
Ive heard $300 million was spent on a system at a comoany I worked at which didnt work at all. They bought it because a competitor did. The lower-level managers had to tell the higher-level ones that it was OK "despite some problems." They kept tying more things into it and recommending it to others. Media reports same thing.
Funny that the supplier's entire business model seems to be to charge so much for a BS solution that each company is forced to recommend it to others to avoid reporting the loss.
I work at a decent sized Engineering Firm, I billed 4 Months of time to a project they then outsourced. Then again I'm salaried, but that's still 4 months of wasted effort.
It sounds believable to me. I've had some interactions with big companies and you have to readjust what you think is a reasonable price for something.
I work with hardware and you'd be amazed how much people will spend without batting an eyelid (eg tens of thousands on a single instrument). In some cases they'll even remark at how inexpensive what you've offered is.
For example, the thermal cameras I work with are now consumer available for $5k. A decade ago you'd easily spend an order of magnitude more for the same sort of performance. And companies would happily fork out for it.
Bear in mind this company just lost a developer. The overheads for that member of staff alone, for two months, probably exceed $20k in the US.
During the early days of "intranets", I worked at a very large company akin to a government organization. I thought we could save paper by putting our reports on the intranet instead of printing it out. There was one particularly important report that had needed to be printed every week, and it seemed like a good candidate.
I called the person who needed the report, but they said they didn't need it, and passed me to the person who requested it from them. I called the next person, and they passed me onto another person. I followed this about 5 people deep until I found one person who told me that they didn't need that report at all.
$18000 is the kind of petty cash that a lot of departments have lying around in their budgets at the end of a quarter. Especially if the budgeting process is of the use-it-or-lose-it variety, there can be a push to buy things that are unnecessary at the end of quarters or fiscal years.
I've been involved in more than one project where a company bought a largish subscription license for a product, and never got anybody lined up to actually deploy it before the licensing ran out - I assume whoever was in charge of that initiative got laid off or took a new job and it fell through the cracks.
I don't know how it is in big corporations in America. But working as a consultant in Western Europe, I have been more than once in a situation where I'm starting on a project and I have to wait more than 3-4 months for things like accounts, access/permissions, laptop. Its pretty pathetic at the dailies, to report every day that I'm still waiting for these things.
my friends in Poland (but working for international corps) have similar stories. Starting work and not doing anything for few months before they get everything they need
Entertaining story - although as advice to anyone reading it, running up the clock without proactively notifying people that you're going way beyond your original estimate is a very good way to make getting paid incredibly difficult.
It was my impression that that's what he did. Of course the whole situation still could've made it difficult to get paid, but I don't think there's anything else he could've done.
Specifically telling them that they had kept him over his initial estimate (and so his estimate was increasing) when he neared or passed that point. He didn't sound terribly proactive about bringing this up while talking to people, either. Lunches with the manager where they didn't talk any business, etc.
Yeah. Maybe it's just an omission in the story, but once the original scope was exceeded, an "I wanted to let you know that we've reached the number of hours I estimated for the task; let me know if I should continue on this project on an hourly/daily basis of $x" email was probably warranted.
What if you don't get any answer ? Shall you go on ? Leave unexpectedly? Apparently his staying on the job for his hourly rate wasn't an issue and was even expected.
It won't always work out like it did for OP, so it really depends on how much risk you're willing to take. $18k probably isn't enough to be worth a lengthy lawsuit over, so a more aggressive client might've cost OP significant unpaid time. For some, that's an acceptable risk. For others, not.
It sounds like he gave them an hourly rate, not a project rate, and emailed every day to let them know how many hours he'd worked and what he still needed, both before and after the estimated time frame was blown. It doesn't sound like he did anything irresponsible.
I thought no that's the reason why right answer. He could be as much in the right as possible, and but he still took significant risk that they might argue, delay and force him to go to court or negotiate to get them to pay.
Sometimes it might be worth it - maybe the plug would have been pulled sooner if he had invoiced regularly. But it's still a risk.
Precisely the oposite. People are usually willing to pay far more, if they are to blame for you beeing slow. If they only get the slightest hint of a feeling that you might be kicking the can down the road, they will blame it on you entirely.
Just to clarify, he got paid $21k for 7 weeks of time. He just so happened to only deliver a static HTML page, but was on prem as requested during the engagement.
Still, it's a quick way to get a reputation for running up the clock.
Large companies operate on a completely different scale of money. If this was a page for a product that's going to make a million dollars, this expense was still a rounding error.
Salaries usually come out of a different budget, one that has visibility all the way up to the C-suites. The web page mentioned was probably paid for out of a marketing budget, which often doesn't get as much scrutiny because (1) it's handed out in a big chunk and it's up to the business unit to decide how to divvy that chunk up and (2) marketing spend is much easier to turn down in the event of a slowdown than salaries.
These are largely fixed costs that can be cut anytime. Salaries come with benefits and healthcare and potential lawsuits. Also, as said in other threads, this gives them someone to fire when things go bad without losing their good people.
It's the largest line item for most companies, so apply pressure there and get the most dramatic result in the shortest time. Do that to every project and it takes too much mental overhead.
That's also why when companies start talking about "cost cutting" on the order of $millions, it almost always means layoffs. That's a big lever to push on earnings, for example.
I learnt a while ago that salaries come from a different budget then the project budget. Salaries are an ongoing cost. But a contractor comes out of the project budget.
So since the salary is ongoing and a higher risk (for them), it's priced lower. A contractor the risk is less for them since the project has a fixed budget.
Last year, Walmart gave US associates a bonus that were based on a sliding scale of tenure and capped out at $1,000[1]. While not a particularly large amount of money for a bonus, it is in proportion to their associate salaries. And in proportion to the amount of associates they have: it equated to a $400mm one off cost. If they had adjusted wages by the same amount (i.e. less than $1,000 per employee), that'd be an additional half a billion dollars in net new recurring salary costs that would be hard to ever walk back for what is a fairly marginal increase in compensation. And you've just made your annual increases that much more expensive by raising the baseline. Even for Walmart that'd be a big chunk of change to absorb[2].
</anecdote>
Adjustments to employee compensation can have a lot of second order effects. If you bring in a new employee above what you were bringing employees in at, that doesn't happen in a vacuum. If the employee was brought in at a lower level, you've potentially set a new baseline for where you need to bring talent in at. And also need to make adjustments to your other salary bands to compensate in order to ensure you don't have a flight of more senior or tenured talent when they catch wind of what the new people are being brought in at. It's also hard to "reset" pay tiers over time unless you have an incredible amount of turnover, since your tenured talent isn't exactly going to be happy with a pay decrease over time.
Consultants/Contractors are different. What you pay one consultant has little to no bearing on what you pay any other consultant, nor what you pay employees. The impact of that is insulated to that specific relationship, and ends when that relationship ends.
<another anecdote>
I currently work at an agency, and the client billing rates for my time varies wildly from levels I'm able to get for myself when I do moonlighting projects (and I'm terrible at sales/rate negotiations) to anxiety-inducing "how could someone ever fathom spending this much money on an hour of my time?!" that are only possible because of the particular pre-existing relationships we have with the client that anchor our value/cost at that point. We even have a few clients with multiple SOWs from different departments, where my rates for each department are on completely opposite sides of the spectrum. If you transfer an employee from one department to another for substantially the same work, you'll need to pay them substantially the same regardless of changes to their incremental value from one department to the other.
[2] They did in fact absorb such an increase though - at the same time as the one-off bonus occurred, they increased their minimum wage for US associates to $11/hour, which resulted in an immediate incremental increase of $300mm in annual employee compensation.
Yeah, wouldn't surprise me if at the other side, some exec who budgeted $50k @ $1200/day for a new lead generating page is amazed it only took $21k and the contractor who did it was apparently diligent about coordinating with the design people himself and not wasting nearly as much management time as the agency that did the last one...
Aren't these just terrible business-people then? If I'm in charge of something I should know the field/cost. Most people have that expectation in their job and if everyone chalked up overpaying to rounding errors a lot of money would be wasted.
I work for a Fortune 100 company, and I've been asking myself this exact question nearly every day for the past 18+ years. The amount of money that is wasted is astonishing. $18,000 for a static html page is so little that it's almost laughable. We think it's crazy, because we have a clue what it actually takes to build the web page. But, the people who pay the bills are not technical and have no clue, so they would happily pay $180,000!
This is how corporate works. They have budgets for things. The money doesn't come out of the pocket of the person who cuts the cheque. You send in an invoice and it gets paid. If it doesn't, the company is insolvent or they are at risk to lawsuits which will cost them more than your paltry $18000. But they don't even think about the lawsuit part. Bill comes in, cheque goes out.
Can you give my boss the 101? He has me methodically checking invoices against tenders. I would actually argue the other way. As our consultants rely on our return business, they would quickly solve any problem with the invoice even if not to the letter correct. We have bargaining power and they don't want to bite the hand that feeds them.
Depends on how burned your boss has been. For a while finance departments just paid invoices without question. It was a lot cheaper than what we have now. Then someone in finance did an audit of a routine invoice (a random thing to show a junior how it could be done if requested) and discovered the "services rendered" on the invoice was just sending an invoice - no other work was being done. Now the company spends a lot of money to carefully verify every invoice is for real work done. It might cost more money in the long run but it doesn't feed fraud.
The above might be an urban legend, but it is still a good story.
I'm sure there was plenty of this sort of fraud occurring in the 1950s and such, but technology has enabled this sort of thing a lot lately. Not quite the same but closely related, the "email from the 'CEO' explaining why you need to wire money to this numeric account" is a huge and very profitable scam right now. That stunt may have been possible 50 years ago, but modern scale, tools like LinkedIn making it easy to target the employees that might have that authority, etc. make it all way easier. Oblivious companies get burned quickly nowadays.
In the late 80s or early 90s I was interviewing for a data entry job at General Motors, and was told that they were getting burned frequently by blindly paying incoming invoices for goods or services that were never provided. I was surprised a scam that simple would be so effective.
When I used to work at body-shopping consulting firm, we had one client (one the largest bank in country) that would argue over 15 minutes over estimates...
At my company, AP matches every invoice against a PO, and project managers/department heads are also responsible for approving invoices to be paid, so there are two chances to catch fake invoices or wrong amounts, etc.
This is actually a really big problem called invoice fraud. Many companies struggle in setting up some workable system to prevent it.
The problem usually is that someone at the accounts payable department (sometimes in a different building or country) must pay all the hundreds or thousands of incoming invoices. Having a robust system in place for them to check if the product/service is actually delivered for the price agreed upon (or even delivered at all) is hard.
Usually they use purchase orders initiated by the buyer/manager to solve this sort of problem.
Hiring a freelancer? Issue a purchase order to the freelancer for the maximum amount you think you'll pay them. They then bill you for how many hours it actually took, after completing the job. Then accounting can process it if it's under the PO value.
This happens more than you would like to know. Especially during summer vacations. You need some sort of tracking system to know what to pay and what not to.
You should try working in an investment bank as a contractor. You need to find the right team, but a lot of them are massive collections of people doing virtually nothing but getting paid great daily rates. The trick is to look busy and wrap your team/yourself in a perceived sense of enigma and complexity. If you play your cards right, you can end up in a situation where no one will ask questions as long as you fire off an email now and again. You can keep getting paid for doing almost nothing for years.
This describes >80% of engineering departments at past large firms where I've worked. Ironically, these people are 'architects' and get paid handsomely.
The IT department in my company is full of “senior architects” and “principal architects” who are very pleasant talkers but don’t do anything from what I can tell. They have a ton of stories how they helped others but whenever I needed something from them nothing ever happened besides a lot of meetings.
This is precisely why corporations have so many meetings. Without them, there's whole divisions of people that would be doing nothing all day, every day. No code reviews, no specs, no code, no operational capacity, just taking the credit for other people's actual output.
That doesn't mean the other 80% are useless. They generally work on less important things that are still bringing in more revenue than they cost in salaries.
The George Costanza way of doing business. The more I grow less young (I’m close to 40 now) the more I realize that the Costanza character is one of the closest approximations of daily life in a society like ours. Dilbert or “The Office” TV series are also very good fits but George Costanza is in a world of his own.
I agree with you, but a lot of people are happy to take the money for doing nothing. Sometimes this is driven by lack of capability - if you're not good at much, not very driven but still want a great income and lifestyle, this sorta hits the sweet spot.
Also a lot of these people lie to themselves about their own importance, in order to have a (false) sense of self worth (but they're okay with it).
Pfft that's nothing. We just had a contractor charge us $50k to setup a simple HTTP proxy. I looked at the code; it's a .NET starter app with our endpoints in it that route to other endpoints. $50k and it probably took them 2 hours, which was probably mostly just packages downloading.
Indeed, $50k for a few hours of work is a lot better (for the contractor) than the $21k for 280 hours chronicled in the original post.
Hell, considering probably he spent most of his time sitting around, bored out of his mind, and had to commute 50 miles each day, I would have passed on the contract.
It’s really gross how big companies operate. Our VP was more than happy to pay it! I would even go so far as to say that our entire solution was structured in favour the contractor. A smarter solution didn’t need their proxy at all, but this was the direction we “had” to go with.
Yeah this happens more than you’d expect! Never had it myself but I’ve worked st places where it’s happened to colleagues (usually assigned unimportant BAU work than actually doing nothing but I do know of people who’ve basically had nothing to do!)
Yeah I would certianly feel like I had to be ready to move on unexpectedly.... but you know if I could work from home and clean the house a bit... worth it.
"Hey I'm already up to speed on this so if you want to pick it up again quickly ...." proposal probabbly would seem like a good idea to the company for a while at least.
No, I learned how to manage my work load (potential and actual) from clients for my physical/mental health.
The motivation is what determines the actions.
I know a guy who founded a software company and started contracting work overseas. He became too confident and over-committed to clients without managing expectations. For a couple of months he looked terrible. Thankfully, he found an escape path and closed the company. He's now employed full time in a dev role.
Big companies (rather, people at big companies) WANT to spend money on this kind of stuff for all sorts of reasons.
-A team might have use-it-or-lose-it budget, so they have to spend it on something, and a contractor might be the lucky recipient!
-Tax purposes!
-Spending a lot on a contractor gives them someone to "fire" when they need to explain why something wasn't getting done or something went poorly!
The list goes on!
All that being said, as a consultant myself, I consider those types of projects windfall, as they tend to be the ones that end abruptly. It's kind of a scary feeling getting paid without actual work to do. I have found I 100% prefer the projects where there are clear tasks, goals, and results to report, if for nothing else than my own sanity.
One would think the use-it-or-lose-it problem would've been solved by now. It's so obviously dysfunctional. Is there really no better way to determine budget?
Some organization have this issue where you get a budget for your group, and if you don't use it then upper management will think you don't need more resources next year and will budget less or even cut from your department. If you don't use it, they reallocate it to a department that needs it and you never get it back.
Another part is where if you get a hiring budget they expect you to use it because if you aren't spending it on personnel then it means you aren't hiring the best available people at that time.
Non-profits usually spend out their budget.
Regulated utilities can charge a % + the cost of hiring you if it is a capitalized cost, i.e. hiring a contractor to implement a project.If a contractor works 100% on a capital project it's profits especially in a low inflation economy or when the profits are not going to be as good due to forecasting issues it can pump the books.
There are probably other reasons I can't think of.
In my experience, it's rarely about flagrantly wasting money for the sake of running up expenses to a budget level. Rather, it's usually more about pulling in expenses, doing something you had wanted to do anyway but didn't think you had enough money for, etc.
Budgets are a pretty powerful and widely used tool for managing organizations. And there are other checks and balances. It's not like a manager can necessarily just decide to have a team off-site in Hawaii because there's room left in the budget.
I think the disconnect is that you are describing it as a system, when in reality it's just a bunch of misaligned incentives and plain old human nature. It's unfixable.
There are systems that encourage the opposite behavior, but they tend to be damaging in other ways. It all comes down to the metrics that you are responsible for as a manager.
I used to manage a grocery department at a well-regarded supermarket chain. In retail, one of the only inputs you can affect at the store level that impacts the bottom line is labor, so metrics are usually organized around labor optimization. Each week, you would be expected to exceed the previous year's Units Per Labor Hour (UPLH). This can only be accomplished two ways: increasing unit movement (which you really have no control over and is largely driven by consumer sentiment and population density) or cutting labor hours. In fact, even if volume is increasing, you can't even add hours even though labor needs scale with volume in a brick-and-mortar retail setting. To exacerbate things, the reductions in labor have already compounded yearly since the policy was put into place. They want you to squeeze water from a stone. "Well, So-and-So (who you've never met) was able to increase UPLH by 10% 5 years ago! Why can't you?"
I guess my point is that systems that discourage waste often lead to insane work environments rather than cleverness or innovation, whereas encouraging waste leads to bloat and inefficiency.
There is, but it’s hard—like, theoretically murky hard.
So the basic inefficiency is that you want to do top-down resource allocation, “I approve of this much budget going to that project.” We could call that bureaucracy, or The State, or whatever. There is a reason that every modern military in the world has this bureaucratic gene: you can track who is responsible for every dollar easily, which limits the scope of corruption. Corruption does not itself kill the other countries: it just places an upper bound on how much money, how many resources that military can effectively put to use. But the militaries who can inefficiently use unbelievable resources clobber the ones who efficiently use fewer, and you get a survival of the fittest thing.
So the basic problem is that bad actors exist within a sufficiently large organization, and the bureaucratic solution incurs the cost of making everybody into bad actors, but with the benefit of limiting the badness of their action by top-down accountability. It is also somewhat bounded in how much it wastes: non-bad-actors who really don’t need their big budgets do have a weak vested interest in allowing it to be cut, as it frees up resources for the organization as a whole and this can improve their job stability, year-end bonus, etc.; also business units that really are not pulling their weight can be reorganized over long time scales. That is bureaucracy in a nutshell, the natural top-down solution.
To solve the corruption problem with a bottom-up approach requires connecting individual interests to organization interests, so that in a game-theoretic sense there are no bad actors (albeit there may be irrational ones who want to hurt themselves in order to hurt society). This is a really hard problem in accounting. The basic thing that you want to do is to make sure that everyone gets paid some baseline amount, plus some proportion of “what they make for the company.” In cases where this is really easy to determine, nobody does it any other way. Salespeople get commissions, and they get them fairly universally. This solves any corruption problem bottom-up. [It is also 100% transparent: “Why did she earn more than you? Because she sold more than you”—top-down budgets are frequently confidential wherever possible due to the risk of one subunit (could be larger than an employee) discovering that another subunit which “does less” in whatever sense gets more of the pie.]
The problem is, we occupy complicated systems and it is not easy to determine how much the organization’s bottom line will be impacted by the loss of a particular individual. What is the “commission” that I should be paying to a janitor? Am I supposed to pay developers money for completing “story points?” And how do I do that without creating a toxic atmosphere where everybody wants to overestimate the number of story points in a task—how do I objectively measure those story points in terms of the hard cashy business value they create? What about managers or recruiters; how do I reward you for the business value of the people you managed/recruited?
Without solving this sort of hard problem, you can’t guarantee that when someone uses nepotism to the organization’s great loss, that they don’t feel the full brunt of that loss and therefore have a selfish incentive to be fair in the first place.
That nerve is a popular example of an optimization process that produced a local maximum which is highly sub-optimal.
For various evolutionary reasons, a nerve routing that was direct and sensible when the aorta passed to, say, the gills of a fish, now makes a silly, circuitous route in modern mammals from the brain, down under the aorta near the heart, and back up into the neck...close to the brain. Natural selection has proven incapable of fixing this tangle.
Similarly, organizational budgets that departments need to spend any way they can or suffer cuts next year seem silly. But they stem from reasonable policies, gradually changing and improving over time.
Just like an organism can't sever its aorta and have a better routing of the nerve, organizations are incapable of getting from the current budget situation to a better one.
Wow, that’s a great explanation, and I hadn’t even thought of it that way, myself.
My take was a much simpler “just because there is a better way that exists doesn’t make it practically relevant, because entrenched tradition is usually more popular/widespread than efficiency”... but your boiling the frog idea shows even better how the mess comes about in the first place.
I think the issue is management unwilling to trust other levels of management to make the call when they need money / a strong desire some folks have to filter / make decisions for others.
I don't know what the fix is for that except to take a chance and trust folks but ... it doesn't seem to be a thing and instead they come up with easy systems to just make arbitrary decisions and there ya go.
It boggles my mind sometimes that "Like if you don't trust that guy to make decisions... why is he a director here?"
Sadly it filters down, I've been places where it was clear the director of my department couldn't do much at all... at that point why should I be there, it doesn't matter if he and I talk, agree, or anything then ....
Steve Jobs said something about it making no sense to hire people in decision making roles and not let them make decisions. Granted, Steve was also able to hire some fine people.
The problem is the further down you go the more narrow the focus. When I worked on MS Office I was always annoyed they were spending all the money on other products with few users and no revenue.
After all we were the ones taking in the dollars. Of course at an organizational level it was understood they need to invest in the next big thing even if it’s not making money right now.
Use it or lose it is a blunt hammer to basically say "You get enough for subsistence but no more". Sure there are smarter ways but intelligence costs time and money too.
In government (usa) it absolutely still exists. As the financial period ends each department spends hugely and really wastefully to ensure their full budget is spent. Its actually quite infuriating.
Unless you are getting taxed >100% I never understood why you'd want to throw away money for "tax reasons". Can someone please help me understand this, it always comes up and I feel dumb for not understanding.
If you can "invest" the 1K into something that you don't get taxed, and, can give you some return then it is a win.
I remember being mentioned that the whole reason General Electrics bought a division of Alstom was to not bring the money back to US and get taxed, let's say it was 1 billion dollars and 50% tax.
Instead of getting net 500 million back to US they can keep that money abroad and invest 1 billion in another company that can net more than 500 million in the long term.
Above is likely the way of thinking for those sort of occasions.
It doesn't make sense in terms of raw profit, I agree. But many expenses are paid pre-tax effectively making them cheaper than if you had paid for them with post-tax dollars.
Think of it this way: the “cost” to realize a net profit of $450 is a tax expense of $450. What if you could reinvest that full $900 so that next year your revenue and income are higher? High-growth businesses will optimize for reinvesting because they expect the Return on investment to be higher than the return on realized profit going forward.
This is what Amazon has done for years - it generates a monstrous amount of cash (free cash flow) from retail and funnels it back into expanding current businesses and creating new ones such as AWS. AWS now generates its own surplus, so the cycle continues.
Edit to clarify: Amazon in the past has shown a relatively small net income vs large top line revenue because most cash is reinvested. It’s been a few years since I paid attention to their financials so things may be different now.
It should be a choice between spending pre tax dollars or spending post tax dollars. I doubt many would argue in favor of “burning” money just for the sake of not paying some fraction tax on it.
Imagine that you must access $100 of labour/whatever somehow.
$20000 - sales
($10000) - cost of sales
——————
$10000 - gross profit
($100) - extra labour paid for with pre tax money
——————
$9900 net
($4950) tax
——————
$4950 ending sum (pay dividends or do whatever you feel like with this)
vs
$20000 - sales
$10000 - cost of sales
—————
$10000 - gross profit
($5000) - tax
—————
$5000 - after tax profit
($100) - extra labour, post tax money
————
$4900 - ending sum
It’s a bit unrealistic because (1) labour should always be pre tax (2) there are rules about what goes where in an income statement and you can’t just decide to put stuff where you want but there is some flexibility.
In particular, the one easily controllable lever is how much interest you pay on debt (pre tax spending)
What matters in your example is where that extra money is spent, you might try to invest it in the company by purchasing new machinery rather than just wasting it on a new luxury company car (or an overseas 'business meeting'). That way if you are making a 10% return on your company/investment each year it continues to grow.
My FSA card is pre-tax money to be used for healthcare expenses. Towards the end of the year, I ended up still having a balance that would go away if not used, so I bought things that I would not have otherwise purchased.
That's a bit different. You're effectively getting "taxed" 100% on whatever is left over so you might as well spend the money on anything that has non-zero value to you.
But if you, say, only lost 30% or 50% of the balance, it's not immediately obvious if you should spend the balance or not.
OT but this is such a weird aspect of FSAs. I can carry some amount over with my plan which makes things a lot easier.
They may have a tax rebate which requires them to "invest" $x each year and failure to do so will result in penalties, perhaps nullifying the agreement and requirement to reimburse previous rebates.
So the company hires a few contractors to help get them as close to $x as possible, but they don't really have any work for them to do.
Some companies get tax breaks for hiring X number of workers in certain locations. Which is why sometimes you get companies hiring a bunch of people at a data center who don't do anything related to the data center, but mostly exist as a way to get a tax break and good press.
In limited cicrumstances it can make sense. If you're investing in a multi-year project you may as well maximize your investment in one year and take the loss against other taxable income that year. Then, when the project is finished, you pay taxes on the income that year. Only you can take those funds and invest them into a new multi-year project...
Interestingly enough there is also evidence, that a government structure with much smaller parts (decentralization) is even more inefficent, and especially prone to corruption.
My experience working my way up from small companies didn't really bear this out. Budgets at my bigish company are strict and audited; having a contractor results in regular check-ins from managers to see if it can be cut off. The smallest companies I worked for were family slush funds.
Getting bigger any organization inevitably achieves a level of complexity where it becomes less, and less efficient by spending increasingly more resources on communication, and politics (in wider meaning of the word, not electoral). Do you think governments are small organizations?
UPD: Apperently, I'm not the only one here who came to the same thought :-)
a company is accountable for the dollars you pay to it, and has to provide a commensurate value, or you take your business elsewhere. dollars paid to the government keep coming in no matter how wasteful their practices
That's not how people choose which health insurance policy is offered by their employer, or which private company won the contract to deliver their electricity.
a key difference is that the largest shareholders are proportionally affected by the waste, and have a proportionately large amount of power to do something about it.
I think most VCs would have some thoughts on the idea that a start up they just pumped millions into has lost "the start-ups money" in some stupid experiment and not theirs.
You could say that the owners/shareholders are losing it themselves, because they voluntarily invested in the company, as opposed to the state, which takes your money even if you don't want it to.
Those are some of the most regulated industries in existence. Those companies are "private" in the sense that private individuals reap profits, but their funding is secured by proxy through force (legislation/forceful-taxation).
I think you’ve confused a discussion about how individuals make choices about their purchases for a complaint about the results of my personal choices?
The government isn't supposed to run a profit. Therefore it becomes very difficult to know which part of it is wasteful and which isn't. Companies simply fail if they don't make a profit or have an outside funding source.
That has no relevance to whether google got money under the threat of violence (government taxation) or whether it’s money that was voluntarily given to them for goods/services.
Google wasting money is no different than my neighbor wasting money. The government wasting money is upsetting because it was taken from me supposedly to help the country.
Your perspective might be different if you pay very little in taxes.
Big corporations are inefficient and lack accountability. Governments are like big corporations in that manner, but also can't be held accountable by the market.
Corporate monstrosities can get away with being inefficient insofar as they can stay out of the red overall. Governments can get away with being inefficient insofar as we are forced to continue funding them via taxation. Note: giant, unaccountable, inefficient corporations usually became so large through monopolies created through government force (i.e. regulation).
I remember growing up and going to work with my Dad. There was like a 3 hour period where he had no work for me to do. He told me I'd only get half wages for the day (I was like 12) since the last few hours I did nothing. I felt betrayed. He empathized with me, saying 'It sometimes feels like more work to not have any work to do'. I completely agree.
In my current role, there is no real roadmap or trajectory for what I should be doing or how I should report on it, etc. I have felt at times that I was just collecting a check, and that felt really scary. I expected I would love to have a job where I could kind of just do whatever I wanted on my own time table. But I have learned it's actually very stressful, and at best very boring. Luckily I got a roadmap created and prioritized, so I feel better. But it is an odd experience.
One of my bosses was the recipient of one of these during a corporate merger, and I think it did a lot of damage to him. He has been mostly was coasting off of his reputation from before he slacked off for 3+ years in that role. But it doesn't look like he's able to last for more than a year anywhere. I suspect that he was one of those competent-but-lazy types whose skills rusted out to to just lazy.
I was tempted to ask if you have any tips for finding such jobs ;) but actually the times when I’ve been most unfulfilled in my career have been when I’ve been bored at work. I’d much rather be working like crazy (within certain parameters), keeps things interesting!
That said I do know people who’ve been paid to turn up at an office and just work on their side projects. Could probably handle that!
Happens all the time. We can hire only at certain times when budgets open, so you go ahead and hire but you have no time to deal with the person. It’s better to have the person sit around until you have time because the alternative is losing the contractor and not being able to hire when you really need someone.
Stupid but very real. I always find it funny that wasting 100k this way is perfectly fine but a 5k raise is almost impossible.
When I was out of the vendor side of the business doing consulting for a number of years, I always had to shake my head a bit when clients wouldn't use paid-for time with us or would apparently never make use of some materials like a whitepaper we did at their request.
But it's exactly like you say. People wouldn't get their act together sufficiently to have a team meet with us on some topic for a day or some marketing campaign would be canceled or changed so they no longer specifically needed what we had created for them. Easier to just forget about the whole thing and move on.
> I always find it funny that wasting 100k this way is perfectly fine but a 5k raise is almost impossible.
This is too real.
At my current job they are incapable of even small raises to keep up with inflation or even investing money in making a better product. Although the company has no problem redecorating the office, sending management to a useless international fair where they spend their time in bars getting drunk, or spending exorbitant amounts of money for sending someone to CNN and getting $0 ROI from that.
I've worked at pretty big companies and the only way I've ever gotten away with not producing any code was because I was going through onboarding hell. At the worst 2 weeks to get onboarded.
I was a contractor - as a general rule I find companies expect contractors to be productive really quickly because they are paying more for them then they are for employees.
In 5-ish years of consulting I only had this happen once. BigCo hired LittleCo to produce one piece of a very, very large system with many parts. I was consulting for LittleCo. Our part was on schedule, but no other parts were. They couldn't let us go because they needed support for initial roll out, but they didn't have anything for us to do.
We did some make-work projects, optimizations and stuff. We also picked a random technology stack per week and spent a day building "something" to learn those tools. Also, we played a lot of video games. This period lasted about 3-4 months.
I've lived this. Myself and a very expensive team of EY kids were waiting eagerly every day for anyone in corp management to throw us any kind of tasks.
On the rare occasion that we were given a task, we would all descend upon one computer like vultures, group-solving the problem typically in 60minutes or less. Then it was back to doing nothing.
Diplomacy (the game) became our primary activity. It was fun, but such a terrible waste of time, talent, and money.
I wasn't EY, I was in through a small local firm. And we billed much less :). So the weekends when the EY guys didn't fly home, they had a few hundred $ to burn. We lived well on the weekends!
Yes, billed at $120/hr for a recent college grad programmer, with per-diems and weekend travel allowances to go back home (fly cross-country). I should note that this was pre dot-com bust... late 1990s, so $120/hr was pretty good then.
But the client company had more cash-flow than they could burn, so they didn't care. Unsurprisingly, they hit serious financial difficulties within a few years.
i worked for lockheed martin 10 years ago (give or take) on a client site. I was W2 (although I wish i was 1099). Anyways, when the government changed from W -> Obama a lot of the DOD contracts were changing because everyone anticipated the Obama was going to cut defense spending (which he did). The project found out that the DOD was not going to be able to re-fund the project, but we had to continue to the end. I ended up forced to "work from home" for about six months until the contract ran out. I legally couldnt get another job, but I went on vacation for a month or two. So I calculate I got paid 1/2 my salary at the time + benefits for doing exactly nothing.
I worked for another large defense contractor auditing government IT systems. To do this, you needed a clearance and auditing certification designed by the gov. Well, they would just go ahead and hire people WHILE the clearance process went through (which can take months) and only schedule certain technology certification classes every few months. There were people sitting at home for 4-6 months getting paid in full while they waited for either a class or their clearance to go through. I sadly already had a clearance and "only" had to wait a month for my class.
You can have unclass internet access in a SCIF - i can't imagine not having that while sitting there all day! Maybe it was a program requirement for your team?
Anywhere where employee hours are getting charged out, a company can increase profits by increasing headcount.
It also seems to happen more indirectly. A contracting company is often motivated to increase red-tape (such as complex and unnecessary health-and-safety, because everyone agrees safety is good). That has a double win: less competition (side effect of complex requirements) and more hours charged (each hour charged increases profits with little risk).
I quit at a company I was contracting at because they kept dangling the whole, "We're going to convert you to an FTE next." in the meantime, I was working less than 20 hours a week. If you didn't have a project to bill hours to, you didn't get paid, period. I was floating between teams, fixing bugs and doing minor stuff, not being able to bill much of anything. Once I quit I was offered another contract role. I basically told the recruiter, "Listen, if I'm in the office, I'm getting paid for my time, period." Recruiter got it cleared with HR and the hiring manager.
My first day went like this:
Manager: "Ummm yeah, the two major projects we had you slated on, ummmm those got put on hold for the time being. Get your desk and PC setup and we'll have something for you soon."
I literally went 4 months and barely billed any real project work. My last two weeks I had 36 hours of non-billable time. I had two weeks where I actually billed a full weeks worth when a dev took off for his honeymoon and did exactly zero work he was assigned. The funny part is when I quit, the hiring manager told me he would hire me in a minute and to keep in contact.
In the meantime, I was able to learn AngularJS and some other stuff while I was sitting at my desk all day. In a sense, I was very productive when I was there.
If that happens then you're definetly charging too little. In a lot of places you can't actually just work for just one client for an extended time as a consultant or freelancer as you then might just as well be an employee.
I've seen the same thing, off and on, for over 20 years.
Employee or contractor gets stuck somewhere with nothing much to do... speaks to manager about it repeatedly... gets the "just find something to do, we'll get to you" speech... fails (often despite good-faith effort) to find anything useful to do... and eventually gives up.
Worst case I personally witnessed was a quite talented dev going six months without any actual project, then another couple before quitting.
Another case was a guy who tried to use his abundant free time to learn other skills but mostly ended up playing Myst, which proves this phenomenon is as old as dirt. :-). (He ultimately gave up the Myst Gig and quit, I'm sure to the consternation of his manager who probably lost a head-count over it.)
I know a couple of friends who worked at the major banks. They all started out as contractors. I remember one guy told me during their first year that all they did was browsing Reddit at work. He was a close friend and didn't want me to join their team because he knew I would display the level of work ethic that would make him look bad.
I had a friend working on contract for the local city government. The contract was I believe for 2 years. A year in the project got cancelled but since his contract has already been signed they just kept paying him with no work for him to do. He just went in (because of course he still had to show up for some reason), and played games all day. Now I partially understand why so many government projects go over budget.
The adventures of enterprise/corporate payments. They can be annoying, slow, bureaucratic but boy when the time comes, invoice gets paid. One of our smaller business customers recently got acquired by a large corporate so the next $5000 "small enhancement" project had to go through their procurement who then apologized when we demanded the payment immediately. Why ? Because they thought they had not paid on time even though we literally had sent them the invoice a week ago (our smaller business clients will pay "due upon receipt"). This corporate client apologized profusely but when we finally realized it was not 30 days (they pay net 30), we backed off :). Still got a couple of apologies.
He didn't charge 18K. He got lucky while he did not keep his promise of his quote.
He kept his mouth shut, even though he knew he needed to have a difficult talk about assets and time reserved etc.
Instead of that, he waited for weeks before he nervousy crafted an invoice full of mistakes because he was probably editting and re-editing because he knew he was doing something wrong, but had a conflicted mind because he felt entitled to get paid a daily rate instead of fixed price like he agreed. He then sent the email safely from home miles away.
I've got similar experiences working for corporate clients, but it was legal work, not tech stuff. It was a bit more complex than the equivalent of a static HTML, but something that anyone with an IQ of > 90 could learn in less than half a year.
There were days when I'd charge clients $15k... for a day's work. This wouldn't have been possible if I worked on-site. But I was essentially completing $15k of contracted work in a single day, which was sold as a fixed-fee in return for a legal report. The type of work that should cost maybe $200 in total.
Corporations get kind of crazy, there's extreme focus on some areas (mainly, those with KPIs and KPI owners attached), and extreme nonchalance on others. They're so big that there's just lots of insane things like this that slip through.
These types of gigs are more about who you know rather than the work that gets done. I'm guessing that you didn't just cold interview for this work, right?
Indeed. My story isn't entirely comparable as I didn't do it as an independent. This was indeed billed as an employee of a fin/legal company with offices in ~100 countries.
For some background info for the person you're replying to... I can easily name a whole range of colleagues with whom I could easily complete $1m per person / annum of work (about $4k a day) in billable time.
The problem is you don't get the work without the company name.
Even having worked in this business, with clients trusting me on a personal level who'd love to grant me the work even if I worked as an independent contractor... my clients are other fortune 500 companies, sales goes through a process, which has all kinds of checks and balances in place. For example, if you have no certification for data security (i.e., audited on e.g. ISO2700-1/2), you don't stand a chance to say receive sensitive due diligence docs in order to perform legal work. Performing such an audit can easily cost hundreds of thousands a year, just to pay the auditor. Building an internal framework to comply with standards, regulations etc, costs way more. This makes it impossible for small firms or contractors to compete as they can't average out a $100k audit over $50m in revenues.
Not all work has these requirements of course. But in some fields, and some clients do. Building an internal software tool for a national seller of paint products, fine as an independent contractor. Trying to win a government tender for a tool that handles personal data, extremely likely you won't be considered without working for an organisation that has 10 certifications in place that cost >$1m a year to renew. In my line of work, it'd be very tricky to sell my work to clients as an independent.
> $15k of contracted work in a single day, which was sold as a fixed-fee in return for a legal report. The type of work that should cost maybe $200 in total.
If you have an extremely high-margin service, e.g. perform bill $10k of work for $100 of salary, there's absolutely no incentive to automate things on the seller's side. It essentially means hiring someone to build out a (software) solution to squeeze the $100 into a dollar of payments on a cloud provider. All you're doing is raising your margin from 99% to 99.99%, it's meaningless, your profits increases by 1%, assuming the Capex for development was zero. And given this is typically a low-volume kind of transaction, with considerable development costs to build a Saas solution, this assumption is way too generous.
It's exactly these kinds of services which are completely fine to have humans perform.
It's the type of legal work where you bill $200 for a simple contract review and have to pay a paralegal say $100 for the work, which would be great to automate to a $1 of AWS payments. Here you're increasing margins from 50% to 99%, doubling profits. Any development costs can be averaged out to approach zero, as document review is a high-volume task in any organisation.
There was a time during the golden dotcom era when my manager scheduled a monthly management meeting across the Atlantic, which required me and 2 colleagues flying all the way over for a meeting that lasted about 4 hours.
Business class plane tickets, 2 nights in a nice hotel, rental car, dinner at very fancy restaurant.
Meanwhile, that same 100k+ employee company wasn't able to set up email fast enough for new employees, so some new hires had to use hotmail(!) for weeks before they were in the system.
Anyone else think $21k for this much time is too low? That's $156k a year assuming full-time hours which a contractor probably isn't going to get. Plus the guy lives in California. Plus health insurance.
What's a typical rate for this length of contracting work in California?
This is an impressive story! It's unbelievable to read about how some big companies function. The funniest part is that he didn't get paid $18,000 like the title says - but $21,000!
I charged $500 for a single static HTML page in the early 2010s. I figured out free hosting using Google App Engine. Also I was on a Skype call the whole time and it had to be done by the end of the day with the client . I don’t think the author did anything wrong .
the money is good, but the working condition seems to be bad :D I'd hate having to work with soemone constantly 'peering over my shoulder' even if just virtually.
Indeed! Consider a simple brochure-style marketing page, which is often a good use case for static HTML. Such a page should be centered around content, and that content (photography, illustration, copy, animation, etc.) may need to be specially built for the page and may be expensive to produce. Everything has to fit together flawlessly, telling a compelling story while staying on-brand. Performance needs to be great. And if the page is generating much revenue, it is easy to justify spending even more money in optimizations if they are likely to improve conversion rates.
I realize this has nothing to do with the ridiculous situation described in the article, but I do think it's worth pointing out that $18k is not at all an inherently ridiculous amount of money to charge for a static HTML page. In some cases, it may not be nearly enough.
Had a similar story was a subcontractor to a huge digital agency on an advertising related project for F50 company. Was a small webapp (40h of pure dev time) we were actually on a fixed price contract 15k. Had a bunch of meetings with up to 20 people on the call (copyrighter from digital agency present in every single meeting for an app that had a single button with a single word submit). Eventually we had a meeting with actual VP of the F50 who said he forgot to email that he no longer needed the project and to pay everyone. We got our 15k and digital agency got prob to the tune of 500K.
I read the title, expecting it to be kind of a 'scam', or at least that they overcharged and got away with it.
Turns out he did spent that time at the company where they hired him and it only seems fair to me. Even though they probably just wasted too much of his time - and their money.
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[ 2.8 ms ] story [ 303 ms ] threadThis should be read by everyone concerned about, how few people in a startup can beat big corporations
One division will be counting paperclips and another dropping $50k on a machine no one needs to do their job.
It entirely comes down to management in each place.
Now, I do not mean experiments and throwing the artifacts of that experimenting. That makes perfect sense. Its when they have a need for something that is part of their current business and they just don't execute properly to the point of cancellation.
Funny that the supplier's entire business model seems to be to charge so much for a BS solution that each company is forced to recommend it to others to avoid reporting the loss.
Why do you think this is limited to big corporations? Plenty of smaller shops are doing the exact same thing
I work with hardware and you'd be amazed how much people will spend without batting an eyelid (eg tens of thousands on a single instrument). In some cases they'll even remark at how inexpensive what you've offered is.
For example, the thermal cameras I work with are now consumer available for $5k. A decade ago you'd easily spend an order of magnitude more for the same sort of performance. And companies would happily fork out for it.
Bear in mind this company just lost a developer. The overheads for that member of staff alone, for two months, probably exceed $20k in the US.
I called the person who needed the report, but they said they didn't need it, and passed me to the person who requested it from them. I called the next person, and they passed me onto another person. I followed this about 5 people deep until I found one person who told me that they didn't need that report at all.
I left that company within 2 months of joining.
I've been involved in more than one project where a company bought a largish subscription license for a product, and never got anybody lined up to actually deploy it before the licensing ran out - I assume whoever was in charge of that initiative got laid off or took a new job and it fell through the cracks.
Sometimes it might be worth it - maybe the plug would have been pulled sooner if he had invoiced regularly. But it's still a risk.
This is, why you leave a paper/email trail.
Still, it's a quick way to get a reputation for running up the clock.
So since the salary is ongoing and a higher risk (for them), it's priced lower. A contractor the risk is less for them since the project has a fixed budget.
</anecdote>
Adjustments to employee compensation can have a lot of second order effects. If you bring in a new employee above what you were bringing employees in at, that doesn't happen in a vacuum. If the employee was brought in at a lower level, you've potentially set a new baseline for where you need to bring talent in at. And also need to make adjustments to your other salary bands to compensate in order to ensure you don't have a flight of more senior or tenured talent when they catch wind of what the new people are being brought in at. It's also hard to "reset" pay tiers over time unless you have an incredible amount of turnover, since your tenured talent isn't exactly going to be happy with a pay decrease over time.
Consultants/Contractors are different. What you pay one consultant has little to no bearing on what you pay any other consultant, nor what you pay employees. The impact of that is insulated to that specific relationship, and ends when that relationship ends.
<another anecdote>
I currently work at an agency, and the client billing rates for my time varies wildly from levels I'm able to get for myself when I do moonlighting projects (and I'm terrible at sales/rate negotiations) to anxiety-inducing "how could someone ever fathom spending this much money on an hour of my time?!" that are only possible because of the particular pre-existing relationships we have with the client that anchor our value/cost at that point. We even have a few clients with multiple SOWs from different departments, where my rates for each department are on completely opposite sides of the spectrum. If you transfer an employee from one department to another for substantially the same work, you'll need to pay them substantially the same regardless of changes to their incremental value from one department to the other.
[1] https://www.thestreet.com/story/14446039/1/walmart-uses-u-s-...
[2] They did in fact absorb such an increase though - at the same time as the one-off bonus occurred, they increased their minimum wage for US associates to $11/hour, which resulted in an immediate incremental increase of $300mm in annual employee compensation.
I've worked my entire career in startups and venture-backed companies. I cannot fathom the level of sloth, but I'm sure when I'm older I'll crave it.
Software particularly has stupidly big margins (and stupidly big overhead) when you’re talking companies the size of oracle and microsoft
The above might be an urban legend, but it is still a good story.
The problem usually is that someone at the accounts payable department (sometimes in a different building or country) must pay all the hundreds or thousands of incoming invoices. Having a robust system in place for them to check if the product/service is actually delivered for the price agreed upon (or even delivered at all) is hard.
Hiring a freelancer? Issue a purchase order to the freelancer for the maximum amount you think you'll pay them. They then bill you for how many hours it actually took, after completing the job. Then accounting can process it if it's under the PO value.
No PO, invoice doesn't get paid.
Also a lot of these people lie to themselves about their own importance, in order to have a (false) sense of self worth (but they're okay with it).
So dangerous that a lot of events take place in Q2 and Q3 to emphasize networking over mindless bored trading.
I was gardening various projects on GitHub and increasing my StackOverflow reputation.
I wasn't enjoying it.
At some level there is a need for accomplishment.
Poor work ethics become a virus, difficult to concentrate at home later.
Hell, considering probably he spent most of his time sitting around, bored out of his mind, and had to commute 50 miles each day, I would have passed on the contract.
1 year contract.
6 months have gone by and they've done ... nothing. Their boss keeps saying "Don't worry we'll get to you, we're just swamped right now, you're good."
They're already talking about extending the contract.
I kinda want to be a contractor now.
"Hey I'm already up to speed on this so if you want to pick it up again quickly ...." proposal probabbly would seem like a good idea to the company for a while at least.
No, I learned how to manage my work load (potential and actual) from clients for my physical/mental health.
The motivation is what determines the actions.
I know a guy who founded a software company and started contracting work overseas. He became too confident and over-committed to clients without managing expectations. For a couple of months he looked terrible. Thankfully, he found an escape path and closed the company. He's now employed full time in a dev role.
This path isn't for everyone.
-A team might have use-it-or-lose-it budget, so they have to spend it on something, and a contractor might be the lucky recipient!
-Tax purposes!
-Spending a lot on a contractor gives them someone to "fire" when they need to explain why something wasn't getting done or something went poorly!
The list goes on!
All that being said, as a consultant myself, I consider those types of projects windfall, as they tend to be the ones that end abruptly. It's kind of a scary feeling getting paid without actual work to do. I have found I 100% prefer the projects where there are clear tasks, goals, and results to report, if for nothing else than my own sanity.
Another part is where if you get a hiring budget they expect you to use it because if you aren't spending it on personnel then it means you aren't hiring the best available people at that time.
Non-profits usually spend out their budget.
Regulated utilities can charge a % + the cost of hiring you if it is a capitalized cost, i.e. hiring a contractor to implement a project.If a contractor works 100% on a capital project it's profits especially in a low inflation economy or when the profits are not going to be as good due to forecasting issues it can pump the books.
There are probably other reasons I can't think of.
What I'm asking is, if the above system encourages managers to waste money, why hasn't anyone come up with a better system?
Budgets are a pretty powerful and widely used tool for managing organizations. And there are other checks and balances. It's not like a manager can necessarily just decide to have a team off-site in Hawaii because there's room left in the budget.
I used to manage a grocery department at a well-regarded supermarket chain. In retail, one of the only inputs you can affect at the store level that impacts the bottom line is labor, so metrics are usually organized around labor optimization. Each week, you would be expected to exceed the previous year's Units Per Labor Hour (UPLH). This can only be accomplished two ways: increasing unit movement (which you really have no control over and is largely driven by consumer sentiment and population density) or cutting labor hours. In fact, even if volume is increasing, you can't even add hours even though labor needs scale with volume in a brick-and-mortar retail setting. To exacerbate things, the reductions in labor have already compounded yearly since the policy was put into place. They want you to squeeze water from a stone. "Well, So-and-So (who you've never met) was able to increase UPLH by 10% 5 years ago! Why can't you?"
I guess my point is that systems that discourage waste often lead to insane work environments rather than cleverness or innovation, whereas encouraging waste leads to bloat and inefficiency.
So the basic inefficiency is that you want to do top-down resource allocation, “I approve of this much budget going to that project.” We could call that bureaucracy, or The State, or whatever. There is a reason that every modern military in the world has this bureaucratic gene: you can track who is responsible for every dollar easily, which limits the scope of corruption. Corruption does not itself kill the other countries: it just places an upper bound on how much money, how many resources that military can effectively put to use. But the militaries who can inefficiently use unbelievable resources clobber the ones who efficiently use fewer, and you get a survival of the fittest thing.
So the basic problem is that bad actors exist within a sufficiently large organization, and the bureaucratic solution incurs the cost of making everybody into bad actors, but with the benefit of limiting the badness of their action by top-down accountability. It is also somewhat bounded in how much it wastes: non-bad-actors who really don’t need their big budgets do have a weak vested interest in allowing it to be cut, as it frees up resources for the organization as a whole and this can improve their job stability, year-end bonus, etc.; also business units that really are not pulling their weight can be reorganized over long time scales. That is bureaucracy in a nutshell, the natural top-down solution.
To solve the corruption problem with a bottom-up approach requires connecting individual interests to organization interests, so that in a game-theoretic sense there are no bad actors (albeit there may be irrational ones who want to hurt themselves in order to hurt society). This is a really hard problem in accounting. The basic thing that you want to do is to make sure that everyone gets paid some baseline amount, plus some proportion of “what they make for the company.” In cases where this is really easy to determine, nobody does it any other way. Salespeople get commissions, and they get them fairly universally. This solves any corruption problem bottom-up. [It is also 100% transparent: “Why did she earn more than you? Because she sold more than you”—top-down budgets are frequently confidential wherever possible due to the risk of one subunit (could be larger than an employee) discovering that another subunit which “does less” in whatever sense gets more of the pie.]
The problem is, we occupy complicated systems and it is not easy to determine how much the organization’s bottom line will be impacted by the loss of a particular individual. What is the “commission” that I should be paying to a janitor? Am I supposed to pay developers money for completing “story points?” And how do I do that without creating a toxic atmosphere where everybody wants to overestimate the number of story points in a task—how do I objectively measure those story points in terms of the hard cashy business value they create? What about managers or recruiters; how do I reward you for the business value of the people you managed/recruited?
Without solving this sort of hard problem, you can’t guarantee that when someone uses nepotism to the organization’s great loss, that they don’t feel the full brunt of that loss and therefore have a selfish incentive to be fair in the first place.
This comes to mind:
https://en.wikipedia.org/wiki/Recurrent_laryngeal_nerve
For various evolutionary reasons, a nerve routing that was direct and sensible when the aorta passed to, say, the gills of a fish, now makes a silly, circuitous route in modern mammals from the brain, down under the aorta near the heart, and back up into the neck...close to the brain. Natural selection has proven incapable of fixing this tangle.
Similarly, organizational budgets that departments need to spend any way they can or suffer cuts next year seem silly. But they stem from reasonable policies, gradually changing and improving over time.
Just like an organism can't sever its aorta and have a better routing of the nerve, organizations are incapable of getting from the current budget situation to a better one.
My take was a much simpler “just because there is a better way that exists doesn’t make it practically relevant, because entrenched tradition is usually more popular/widespread than efficiency”... but your boiling the frog idea shows even better how the mess comes about in the first place.
I don't know what the fix is for that except to take a chance and trust folks but ... it doesn't seem to be a thing and instead they come up with easy systems to just make arbitrary decisions and there ya go.
It boggles my mind sometimes that "Like if you don't trust that guy to make decisions... why is he a director here?"
Sadly it filters down, I've been places where it was clear the director of my department couldn't do much at all... at that point why should I be there, it doesn't matter if he and I talk, agree, or anything then ....
Steve Jobs said something about it making no sense to hire people in decision making roles and not let them make decisions. Granted, Steve was also able to hire some fine people.
Practice may not make perfect, but it sure damn helps. As long as we learn from our mistakes.
After all we were the ones taking in the dollars. Of course at an organizational level it was understood they need to invest in the next big thing even if it’s not making money right now.
There are ways that are arguably better, like bottom-up budgeting, but they take a lot more work, and are arguably more subjective.
Internal information systems can be so poor that the best prediction of next years budget is last years budget.
Let's say the company has earned 1,000$ and the tax rate is 50%. Your expenses X are 100$.
So 1,000$ - 100$ = 900$. Of which 50% (450$) are tax and 50% (450$) are profit.
Now double X to 200$:
Then 1,000$ - 200$ = 800$. Of which 50% (400$) are tax and 50% (400$) are profit.
That means your profit is 50$ lower (400$ instead of 450$) then if you hadn't increased your spending?
Clearly my thinking is wrong somehow, but where?
I remember being mentioned that the whole reason General Electrics bought a division of Alstom was to not bring the money back to US and get taxed, let's say it was 1 billion dollars and 50% tax.
Instead of getting net 500 million back to US they can keep that money abroad and invest 1 billion in another company that can net more than 500 million in the long term.
Above is likely the way of thinking for those sort of occasions.
This is what Amazon has done for years - it generates a monstrous amount of cash (free cash flow) from retail and funnels it back into expanding current businesses and creating new ones such as AWS. AWS now generates its own surplus, so the cycle continues.
Edit to clarify: Amazon in the past has shown a relatively small net income vs large top line revenue because most cash is reinvested. It’s been a few years since I paid attention to their financials so things may be different now.
Imagine that you must access $100 of labour/whatever somehow.
vs It’s a bit unrealistic because (1) labour should always be pre tax (2) there are rules about what goes where in an income statement and you can’t just decide to put stuff where you want but there is some flexibility.In particular, the one easily controllable lever is how much interest you pay on debt (pre tax spending)
My FSA card is pre-tax money to be used for healthcare expenses. Towards the end of the year, I ended up still having a balance that would go away if not used, so I bought things that I would not have otherwise purchased.
But if you, say, only lost 30% or 50% of the balance, it's not immediately obvious if you should spend the balance or not.
OT but this is such a weird aspect of FSAs. I can carry some amount over with my plan which makes things a lot easier.
So the company hires a few contractors to help get them as close to $x as possible, but they don't really have any work for them to do.
I'll correct my original comment then:
At least private companies that compete in a relatively free market are losing their own earned money when they're inefficient, not someone else's.
Private companies are losing money on behalf of their owners or shareholders.
If you don’t like your employer healthcare, quit and find another or buy it on your own. There is choice there and you just don’t like it.
It is a myth that corporations like free markets.
There are many reasons that Google and Amazon didn't exist a thousand years ago, and it isn't solely due to the lack of computing technology.
And so it is entirely sensible that everyone should contribute towards keeping the highly developed society functioning as best as it can.
Google wasting money is no different than my neighbor wasting money. The government wasting money is upsetting because it was taken from me supposedly to help the country.
Your perspective might be different if you pay very little in taxes.
Corporate monstrosities can get away with being inefficient insofar as they can stay out of the red overall. Governments can get away with being inefficient insofar as we are forced to continue funding them via taxation. Note: giant, unaccountable, inefficient corporations usually became so large through monopolies created through government force (i.e. regulation).
If Whole Foods wastes their money and goes out of business, I don’t care. I’m not being forced to pay them to make up for it.
In my current role, there is no real roadmap or trajectory for what I should be doing or how I should report on it, etc. I have felt at times that I was just collecting a check, and that felt really scary. I expected I would love to have a job where I could kind of just do whatever I wanted on my own time table. But I have learned it's actually very stressful, and at best very boring. Luckily I got a roadmap created and prioritized, so I feel better. But it is an odd experience.
so hard
That said I do know people who’ve been paid to turn up at an office and just work on their side projects. Could probably handle that!
Stupid but very real. I always find it funny that wasting 100k this way is perfectly fine but a 5k raise is almost impossible.
But it's exactly like you say. People wouldn't get their act together sufficiently to have a team meet with us on some topic for a day or some marketing campaign would be canceled or changed so they no longer specifically needed what we had created for them. Easier to just forget about the whole thing and move on.
This is too real.
At my current job they are incapable of even small raises to keep up with inflation or even investing money in making a better product. Although the company has no problem redecorating the office, sending management to a useless international fair where they spend their time in bars getting drunk, or spending exorbitant amounts of money for sending someone to CNN and getting $0 ROI from that.
We did some make-work projects, optimizations and stuff. We also picked a random technology stack per week and spent a day building "something" to learn those tools. Also, we played a lot of video games. This period lasted about 3-4 months.
On the rare occasion that we were given a task, we would all descend upon one computer like vultures, group-solving the problem typically in 60minutes or less. Then it was back to doing nothing.
Diplomacy (the game) became our primary activity. It was fun, but such a terrible waste of time, talent, and money.
But the client company had more cash-flow than they could burn, so they didn't care. Unsurprisingly, they hit serious financial difficulties within a few years.
Anywhere where employee hours are getting charged out, a company can increase profits by increasing headcount.
It also seems to happen more indirectly. A contracting company is often motivated to increase red-tape (such as complex and unnecessary health-and-safety, because everyone agrees safety is good). That has a double win: less competition (side effect of complex requirements) and more hours charged (each hour charged increases profits with little risk).
I quit at a company I was contracting at because they kept dangling the whole, "We're going to convert you to an FTE next." in the meantime, I was working less than 20 hours a week. If you didn't have a project to bill hours to, you didn't get paid, period. I was floating between teams, fixing bugs and doing minor stuff, not being able to bill much of anything. Once I quit I was offered another contract role. I basically told the recruiter, "Listen, if I'm in the office, I'm getting paid for my time, period." Recruiter got it cleared with HR and the hiring manager.
My first day went like this:
Manager: "Ummm yeah, the two major projects we had you slated on, ummmm those got put on hold for the time being. Get your desk and PC setup and we'll have something for you soon."
I literally went 4 months and barely billed any real project work. My last two weeks I had 36 hours of non-billable time. I had two weeks where I actually billed a full weeks worth when a dev took off for his honeymoon and did exactly zero work he was assigned. The funny part is when I quit, the hiring manager told me he would hire me in a minute and to keep in contact.
In the meantime, I was able to learn AngularJS and some other stuff while I was sitting at my desk all day. In a sense, I was very productive when I was there.
Yeah that's what I would hope to do too. Lots of time, let's dig in to that stuff there's never time to learn!
Employee or contractor gets stuck somewhere with nothing much to do... speaks to manager about it repeatedly... gets the "just find something to do, we'll get to you" speech... fails (often despite good-faith effort) to find anything useful to do... and eventually gives up.
Worst case I personally witnessed was a quite talented dev going six months without any actual project, then another couple before quitting.
Another case was a guy who tried to use his abundant free time to learn other skills but mostly ended up playing Myst, which proves this phenomenon is as old as dirt. :-). (He ultimately gave up the Myst Gig and quit, I'm sure to the consternation of his manager who probably lost a head-count over it.)
Now, how can I find such jobs/companies, minus the commute? :P
https://news.ycombinator.com/newsguidelines.html
He kept his mouth shut, even though he knew he needed to have a difficult talk about assets and time reserved etc. Instead of that, he waited for weeks before he nervousy crafted an invoice full of mistakes because he was probably editting and re-editing because he knew he was doing something wrong, but had a conflicted mind because he felt entitled to get paid a daily rate instead of fixed price like he agreed. He then sent the email safely from home miles away.
There were days when I'd charge clients $15k... for a day's work. This wouldn't have been possible if I worked on-site. But I was essentially completing $15k of contracted work in a single day, which was sold as a fixed-fee in return for a legal report. The type of work that should cost maybe $200 in total.
Corporations get kind of crazy, there's extreme focus on some areas (mainly, those with KPIs and KPI owners attached), and extreme nonchalance on others. They're so big that there's just lots of insane things like this that slip through.
For some background info for the person you're replying to... I can easily name a whole range of colleagues with whom I could easily complete $1m per person / annum of work (about $4k a day) in billable time.
The problem is you don't get the work without the company name.
Even having worked in this business, with clients trusting me on a personal level who'd love to grant me the work even if I worked as an independent contractor... my clients are other fortune 500 companies, sales goes through a process, which has all kinds of checks and balances in place. For example, if you have no certification for data security (i.e., audited on e.g. ISO2700-1/2), you don't stand a chance to say receive sensitive due diligence docs in order to perform legal work. Performing such an audit can easily cost hundreds of thousands a year, just to pay the auditor. Building an internal framework to comply with standards, regulations etc, costs way more. This makes it impossible for small firms or contractors to compete as they can't average out a $100k audit over $50m in revenues.
Not all work has these requirements of course. But in some fields, and some clients do. Building an internal software tool for a national seller of paint products, fine as an independent contractor. Trying to win a government tender for a tool that handles personal data, extremely likely you won't be considered without working for an organisation that has 10 certifications in place that cost >$1m a year to renew. In my line of work, it'd be very tricky to sell my work to clients as an independent.
This sounds like a SaaS waiting to happen.
If you have an extremely high-margin service, e.g. perform bill $10k of work for $100 of salary, there's absolutely no incentive to automate things on the seller's side. It essentially means hiring someone to build out a (software) solution to squeeze the $100 into a dollar of payments on a cloud provider. All you're doing is raising your margin from 99% to 99.99%, it's meaningless, your profits increases by 1%, assuming the Capex for development was zero. And given this is typically a low-volume kind of transaction, with considerable development costs to build a Saas solution, this assumption is way too generous.
It's exactly these kinds of services which are completely fine to have humans perform.
It's the type of legal work where you bill $200 for a simple contract review and have to pay a paralegal say $100 for the work, which would be great to automate to a $1 of AWS payments. Here you're increasing margins from 50% to 99%, doubling profits. Any development costs can be averaged out to approach zero, as document review is a high-volume task in any organisation.
Business class plane tickets, 2 nights in a nice hotel, rental car, dinner at very fancy restaurant.
Meanwhile, that same 100k+ employee company wasn't able to set up email fast enough for new employees, so some new hires had to use hotmail(!) for weeks before they were in the system.
What's a typical rate for this length of contracting work in California?
Of course, he's probably charging too little in general. Everyone is.
You should definitely look for somewhere else that will pay you more money. If you'd like to discuss it offline, I'm happy to.
I realize this has nothing to do with the ridiculous situation described in the article, but I do think it's worth pointing out that $18k is not at all an inherently ridiculous amount of money to charge for a static HTML page. In some cases, it may not be nearly enough.