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Memo: The Potential UPS Strike
The fallout would be widely damaging, but the conflict is a long time coming. The United Parcel Service changed commerce by enabling the online retail revolution that defined the last decade. Now, UPS workers are threatening to strike – something that’s been reported on as a potential inconvenience for Amazon, countless retailers, and millions of customers. The current workers’ contract, which the threat of a strike is centered on, was approved by a leadership group that included Jimmy Hoffa Jr, the president of the Teamsters union, whose largest employer is UPS. Hoffa is also the son of Jimmy Hoffa, the labor movement icon and former Teamsters president who disappeared in 1975.
The current contract between Teamsters and UPS is due to expire on July 31. Sean O’Brien, the Teamsters General-President, suggests that UPS workers will strike on August 1 if a deal isn’t reached by the close of business on July 31. Vinnie Perone, a 30 year employee of UPS and Local 804 Teamsters President:
UPS’s opening position is crystal clear: all the company wants after a year with $101 billion in revenue is more money off your backs.
Of the 534,000 members of the Teamsters union employed internationally, 350,000 are employed by UPS. The market leader in courier services has hired just over 72,000 Teamsters since mid-2018 with an average compensation of $95,000 (not including pension benefits). The contract between UPS and its union-backed workers was negotiated by Jimmy Hoffa Jr. and will be renegotiated by O’Brien to include better pay, better overtime protection, and an improved way for workers to stand up against the heat.
An estimated 6 percent of the American GDP moves through UPS, according to Jacobin Magazine’s February report; it’s one that’s worth reading if you want a deep dive into the dynamics of the potential strike.
In recent years, the working conditions of UPS employees have been a subject of controversy, with workers voicing concerns about long hours, inadequate pay, and job insecurity amidst a period of boom for online retail. A strike would impact Amazon. In 2022, UPS shipped 1.3 billion parcels that accounted for 11.3% of the company’s revenue.
These concerns have escalated over the years, but it is not the first sign of conflict. In 1997, 185,000 UPS workers didn’t work for 15 days. The Teamsters wanted to maintain control over the UPS pension fund and they wanted their employer to create 10,000 full-time positions over a five-year period (from the company’s pool of part-time contractors). Technically, the union won the negotiations, though there were lasting ramifications for both sides.
August 4, 1997, probably doesn’t stand out as a significant day in world history. But some would disagree.That’s was the first time United Parcel Service (UPS) workers organized a nationwide strike in the U.S., which ended up with the company losing almost $780 million. In the 15 days that the strike lasted, 80% of UPS shipments went undelivered.
UPS is known for its demanding and physically taxing work. According to a report by the Teamsters union, many employees suffer from work-related injuries due to the demanding nature of their jobs. Drivers often have to work 10-12 hour days, with minimal breaks, leading to fatigue and an increased risk of accidents. Moreover, package handlers often have to lift packages that weigh over 50 pounds, leading to potential injuries.
In addition to poor working conditions, many UPS workers cite low wages relative to the increasing workload. Moreover, UPS has been criticized for its practice of hiring part-time workers who earn lower wages than full-time employees and have fewer benefits.
UPS has been criticized for its use of subcontractors and temporary workers, which can lead to job instability for its employees. Many workers fear that their jobs could be outsourced or automated in the future, leaving them without employment. UPS has also been accused of engaging in union-busting tactics, such as threatening to close facilities if workers unionize or firing workers who support unionization efforts.
The COVID-19 pandemic has highlighted the importance of essential workers like those at UPS, who continued to work despite the increasing volume as the economy shifted with the online retail revolution. By most accounts, UPS (along with FedEx and USPS) rose to the occasion. However, many workers felt that their welfare had not been adequately prioritized by the company. According to a report by the New York Times, UPS workers reported a lack of adequate safety measures to address the physical stresses of heat waves.
Since 2015, at least 270 UPS and United States Postal Service drivers have been sickened and in many cases hospitalized from heat exposure. Dozens of workers for other delivery companies, including FedEx, have also suffered from heat exhaustion, according to the records, and a handful of drivers have also died in the past few years. According to the Teamsters, heat-related injuries, illnesses and deaths among drivers are severely underreported.
The larger issue of income inequality may also motivate a UPS strike. In a report noting the perceived job satisfaction maintained by UPS workers over FedEx drivers, I noted that “UPS [should consider] stock awards for its drivers so that they can begin to benefit from the profits that their work is contributing to at the local levels.”
According to a report by Oxfam, the wealth gap in the United States is at its highest level in over 50 years, with the richest 1% of Americans owning more wealth than the bottom 90%. Many UPS workers feel that they are being left behind in this economy, with their wages and benefits not keeping up with the rising costs of living or the potential upside of stock compensation earned by front office executives.
Although a strike would undoubtedly be disruptive to the company and its customers, it may be necessary for workers to achieve the changes they are seeking. In the age of eCommerce and digitalization, the demand for efficient and timely package delivery has surged. As a result, UPS has experienced tremendous growth. While this expansion should have translated into better working conditions and improved pay for its employees, the reality has been quite different. Instead, UPS workers have found themselves grappling with increased workloads, extended working hours, and a lack of job security. All of this led to widespread dissatisfaction and calls for action.
The UPS deal between management and the Teamsters is the largest (private) union contract in the United States. According to reports, CEO Carol Tomé downplays the threat:
The Teamsters have been part of the UPS family for more than 100 years. So over 10 decades, we’ve negotiated many, many contracts. This is not our first rodeo,” she said. She insisted the company will be be to find a common ground in negotiations that will be a win for the company, its employees and its customers.
The Teamsters union members aren’t so sure. They are preparing for a strike. “Do our members wake up every day wanting a strike? I’d say no. But are they fed up? Yes, they’re fed up,” President Sean O’Brien said in response.
Автор Веб Смит | Под редакцией Хилари Милнс с иллюстрациями Алекса Реми и Кристины Уильямс
Member Brief: The Case For Revenue Per Employee
Meta, Google, Amazon, Salesforce, Twitter, Microsoft – but not Apple. What gives? Each of these companies are vital to the retail ecosystem but one measures key results in a way that is most commonly seen in an altogether different industry.
“You’ll hear revenue per employee again, in tech, no one was looking at these metrics at least in the private world, the VC world for at least five years,” Keith Rabois recently said to Elon Musk’s Twitter management.
Whereas growth and market share were once key performance indicators, profitability and efficiency will be the measures of this next five to 10 years. An OKR (objectives and key results) is a strategic framework and a KPI is a measurement within said framework. Brand and SaaS marketing discusses KPIs with endless zeal, but OKRs are rarely communicated with the same energy. I believe that this will change.
Objectives and Key Results (OKRs) are closely tied to human resources but by connecting business development with HR OKRs, organizations can create a stronger, more consistent brand image while also fostering a positive and engaging work environment for employees. Of all of the HR metrics, one seems to be emerging as key to American economic recovery. There’s headcount, time to hire, acceptance rate, employee satisfaction, turnover rate, retention rate, training expenses, and revenue per employee (RPE). The latter is the measure of the hour.
RPE is the metric that has come to define big tech’s layoff narrative. RPE, often ignored during bull market growth periods has become the talking point used to justify right-sizing organizations. Fortune Magazine explained:
In addition to curtailing talent acquisition efforts and building up its people practice, Apple is reducing business travel and delaying employee bonuses. CEO Tim Cook will also take a pay cut of about 40% this year, which he reportedly requested. Altogether, the moves make for a true “doing more with less” strategy.
Apple is efficient in a key sense that many others in big tech will adopt. Here’s an example that reads like a big law firm’s measure of success. Founded in 2006 and headquartered in Amsterdam with around 2,000 employees, Adyen is the best direct ‘comp’ to Stripe. The Information recently explained why Stripe’s private valuation to Adyen’s public valuation:
Stripe spent so heavily on staff and new business initiatives in recent years that its 2022 expenses per employee were twice those of Adyen, even though Adyen’s revenue per employee was higher, according to an analysis by The Information. The expense gap is expected to stay the same this year, although Stripe is expected to do better on revenue per employee.
Even Google Trends reflect the growing reference to the phrase “revenue per employee.” Long a practice in other industries: they say that if you are a law firm partner, you need to consider yourself a business and not an employee. According to The Four Week MBA, Amazon’s primary OKR – RPE – grew by $40,000 between 2021 and 2022. But clearly the objectives were not met; Amazon recently laid off another 9,000. Though, I suspect RPE grew again in 2023 as layoffs continued. Meta’s RPE is set to rise to $1.85 million based on the Wall Street Journal’s revenue and headcount projections.
And this is how companies will be judged. A firm well-known to many in big tech, Wilson Sonsini measures success by RPE. According to data by The American Lawyer, the firm’s RPE and headcount have grown precipitously since 2019. Law.com began its March 2023 analysis with:
Wilson Sonsini’s profits per equity partner fell 9.5% as the firm bulked up its lawyer head count to 1,045 lawyers including 266 partners.
In today’s rapidly evolving business landscape, companies are increasingly seeking new ways to evaluate their performance and long-term prospects. Traditional metrics such as revenue, net income, and market capitalization have been widely used for years, but they may not tell the whole story, especially for big tech companies. The comparison between big tech companies and law firms is based on the premise that both types of businesses will be judged by this OKR in the coming years.
The Case For A New Measurement
RPE is a simple yet powerful metric that divides a company’s total revenue by the number of its employees. This ratio indicates how much revenue each employee contributes to the business, offering valuable insights into the company’s efficiency, productivity, and ability to scale. There are several reasons why RPE is becoming an increasingly important metric for big tech companies:
Focus on Efficiency and Productivity
RPE helps measure how effectively a company is utilizing its people, a critical component of any organization. But also, how those people perceive their role in the growth and health of the company. Senior Research Analyst for Yahoo Tom Forte cited the type of role that saw early attrition at Amazon, i.e. ones that didn’t directly impact revenue growth:
So if you look in particular at the March quarter and the June quarter last year, they had about 100,000 attrition between those two quarters, and it was mostly not rehiring someone to replace someone who left at the fulfillment center level.
A higher RPE ratio implies that the company is generating more income with fewer employees, indicating a more efficient and productive business model. As Amazon begins to show, they’re willing to explore whether or not they can accomplish “more” with fewer cost centers.
Attraction and Retention of Talent
Talent is a critical resource in the tech industry and companies need to ensure they can attract and retain top talent to maintain their competitive edge. A higher RPE ratio suggests that the company is utilizing its workforce effectively, which can lead to increased employee satisfaction and loyalty. This, in turn, can help attract new talent and reduce turnover, contributing to the overall health and growth of the company.
Scaling and Growth
As tech companies grow, they often face challenges in scaling their operations efficiently. RPE can help identify whether a company is maintaining or improving its productivity as it expands. A consistent or increasing RPE ratio during periods of growth suggests that the company is successfully scaling its operations, which is essential for long-term success. Barron’s recently published relevant numbers:
Apple generated around $2.4 million in revenue per employee in its latest fiscal year and has averaged around $2.1 million on the same metric over the past five years, according to FactSet. That far outstrips Facebook-owner Meta (META), which generated $1.35 million in revenue per employee in 2022—below its five-year average of $1.5 million.
This gives us a uniform means of comparing companies regardless of their status as a public or private company.
Use in eCommerce and Retail
RPE can serve as a valuable benchmark for comparing companies across the tech industry. The Information framed this public vs. private tech company conversation as such:
An unfavorable comparison to Adyen is a surprising turn for Stripe, a startup brand that became a near-holy name in Silicon Valley. Its early rapid growth and exposure to the fast-expanding e-commerce market helped the payments firm raise more than $2 billion from some of venture capitalists’ biggest names over a dozen years. After it raised money in early 2021 at a $95 billion valuation, it was one of the most highly valued startups in the world.
In comparison, Adyen raised just $200 million as a private company, although it raised hundreds of millions when it went public in its 2018 initial public offering. Its current market capitalization is about $44 billion.
By evaluating this metric, investors, analysts, and other stakeholders can gain a clearer understanding of how well a company is performing relative to its peers, which can help inform strategic decisions and investment opportunities.
Shopify was ahead of the curve in discussing the potency of this measure in retail. RPE is the key metric for assessing the health and prospects of big tech companies, but can be used to assess brands as well.
If you’re looking for real-life examples of how brands calculate RPE, let’s take data from 2PM to calculate the average revenue per employee popular retailers make. Knix: has 127 employees generating an average revenue of $70.5 million per year. That comes out to $555,118 revenue per employee. Boll and Branch: has 116 employees generating an average revenue of $80.8 million per year. That equates to $696,551 revenue per employee. Everlane: has 309 employees generating an average revenue of $361.2 million per year. That equates to $1.68 million revenue per employee.
By focusing on efficiency, productivity, talent attraction and retention, in addition to scaling, RPE provides valuable insights into a company’s performance that traditional measures may not capture. It also emphasizes the importance of efficient profit-seeking. As the tech industry continues to evolve and face new challenges, RPE will play a crucial role in helping companies navigate the competitive landscape and achieve long-term viability.
Автор Веб Смит | Под редакцией Хилари Милнс с иллюстрациями Алекса Реми и Кристины Уильямс