Virtually all investors will tell you they prefer companies that are “well managed”. But dig a little deeper into the topic and things quickly get murky, complicated, and subject to opinion.
Let’s contrast two companies with a similar number of employees: Google (listed on the NASDAQ stock exchange as Alphabet) and Woolworths. The former made $US162 billion ($233 billion) of revenue in 2019 and delivered a net profit margin of 21.2%. The latter recorded $60 billion of revenue in 2019 at a net profit margin of 2.6%. Both are widely considered to be well-managed companies.
I’ve had the good fortune to visit the offices of Google in both London and Sydney. The food (I dined on roast quail for lunch in the London office) and amenities (napping pods, anyone?) are famously impressive.
Yet can you imagine if the management team at Woolworths tried to offer its employees similar perks? It would be irresponsible. Alphabet generates roughly three times the revenue per employee and almost 20 times the profit per employee that Woolworths does. And that’s after paying for all of the staff perks. At Woolworths, there simply isn’t enough fat on the bone to offer Google-style benefits.
Clearly “well managed” means different things in different industries and companies. In one situation it might be all about efficiency and keeping costs as low as possible; in another, it may be about pampering staff and providing a seemingly lavish environment to get the best out of them.
LOOKING FOR CLUES
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
An outrageous, beautiful monopoly
Telstra's mobile business is a cash machine with few competitors, giving it the highest returns in the world.
Drop the anchor to judge value
Buying and selling decisions should be based on where a stock price is going, not where it has been.
Powering the AI boom
Beyond the software and chipmakers, where will the energy come from?
Get into life
Tucked inside super are products that can protect you from life's inevitable uncertainties.
Paths to home ownership
Taking the road less travelled can sometimes deliver unexpected benefits.
Sold! Quick ways to add value
Small, strategic changes can have a big impact on the look and feel of your home. And get you a better price on auction day.
Money lessons the kids need to know
Your children can learn a lot from your past money mishaps. Here are eight financial conversations I have had with mine.
Property-investing rules: are they likely to change?
The pressure for the government to curb the tax benefits of tax concessions, such as negative gearing and the capital gains tax discount, is unrelenting. Most recently, independent senators David Pocock and Jacqui Lambie proposed five options for paring back investment property tax concessions, with savings to the Federal budget of up to $60 billion over the next decade.
What's love got to do with it?
A rollercoaster of emotions could be driving poor crypto behaviour.
Are we ready to be cash-free?
Saying goodbye to our piggy banks too soon could leave small businesses in the dark when problems arise.
