One of the things I look forward to every year is the Honomichl Top 50 and top 25 Global Research Organizations. The two reports are published during the summer, year after year in AMA Marketing News. We are probably a few weeks away from all receiving the top 25 Global Research Organization list.
One of the things that is always amazing to me is revenue by employee. For years companies have used this as a metric and if you had revenue of over $200,000 per employee you were doing well. Less than that you may have had some issues. I will admit that this isn’t a 100% scientific absolute, but more times than not it does hold true. In 2008 the numbers are higher than that and I have heard at conferences that executives are using a number of $250,000 as a benchmark.
When you look at revenue by employee, you will see a few companies that exceed the rest. In 2005 the companies with the highest revenue per employee were:
2005
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First of all, congratulations for all achieving this revenue per employee. Amazing. Do you see a trend? Ok. Read on and I will ask that question again.
In 2006 the companies with the highest revenue per employee were:
| Dentsu Research | $518,000 |
| Video Research | $436,000 |
| Arbitron | $315,000 |
| Nikkei Research | $298,000 |
It is interesting that the same four companies occupied the top four spots. When you look at the companies comparing the years, Dentsu was flat. Video Research and Nikkei slipped while Arbitron went up.
The real interesting thing to me is where these companies are located:
| Dentsu Research | Japan |
| Video Research | Japan |
| Nikkei Research | Japan |
| Arbitron | New York |
To me that is amazing. In the past few years (I am sure if I went back further the same thing is true) the companies with the highest revenue per employee last year are all located in the same country, all located in the same city and yes, all located outside of the United States. They are all based in Tokyo!
Ok I will be the first one to admit that our revenue at M/A/R/C Research isn’t $500,000 per person or even $400,000 per person but obviously I would like it to be.
Let’s all pause for a moment…
- What are they doing right?
- What are they doing that we aren’t doing?
- Are they better researchers?
- Are their services that much better than ours?
I look forward to hearing and learning from your thoughts and comments.
Merrill Dubrow says:
A quick update on 2007 revenue numbers per employee:
Dentsu Research $467,000
Video Research $431,800
Nikkei Research Not listed on the top 25 global list
Arbitron $311,500
Merrill
Simon Chadwick says:
Merrill,
The answer is very simple:
1) Mainly syndicated (as is Arbitron)
2) Mainly panel based
3) Japanese research market prices – about double those of the rest of the world.
To get a like for like, you need to halve their revenue per employee figures to take account of pricing and then compare to Nielsen Media, Arbitron, MRI and TNS Media.
They are also, amazingly, not very profitable!
Hope this helps,
Simon.
Simon Chadwick
Partner
Cambiar LLC
Sherri Neuwirth says:
My first comment is not company specific, but cultural. The Japanese are known for their industriousness (in other words, they work their butts off).
Now for the specifics.
Dentsu Research is a subsidiary of Dentsu (one of the largest ad agencies in the world). Dentsu Research was created as the research arm of Dentsu and therefore does all of their MR (no sales expense). Also, while they are full service they also have full implementation capabilities — in-house panels, a hall testing facility, telephone int’g facilities, FG facilities, online int’g, etc. It sounds like they may sell many of these services (as profit centers) in addition to using them for their own internal purposes. My guess is that the revenue per employee statistic includes many more lower level (and lower paid) employees (responsible for their operations) than higher level (full service). All of their work is in Japan although I don’t know that this has anything to do with their high revenue per employee. Note that their revenue was down 10% in 2007. FYI — Dentsu Research used to be my client at E&L. I was their go-to person for any research they wanted to do in the U.S. Any interest in approaching them in this regard? My contact there retired years ago and that’s when my work with them ended.
Video Research and Arbitron are completely syndicated. Nothing more needs to be said.
Nikkei Research is a bit more like Dentsu without the parent company. While they are full service, they have heavy internal operations — panels and interviewers (telephone and in-person) which are likely separate profit centers. Again, lower paid (interviewer) employees in the headcount. They also do a lot of library research (which they refer to as desk research). Maybe they’ve created syndicated reports from some of this.
Your thoughts?
Sherri
Michael Mitrano says:
I agree with Simon that the high cost and resulting high pricing of Japan is a factor in moving their ratio up. Combining this with Sherri’s thought: if you have staff who work 60 hrs/week instead of 40 and make 50% more than a comparison company, your revenue/employee looks 50% better even though your labor cost as a percentage of revenue is identical. You probably would see related savings in supervision, rent, etc.
Revenue per employee can be an indicator of productivity, but it can also be an indicator of outsourcing. I don’t know if this is the case, but of the Japanese firms subbed work to suppliers — perhaps affiliated — more than the comparison firms did, that would raise their ration. I have seen large US companies keep their field force “off payroll” by using rented employees, even when it is more costly than hiring them directly.
Merrill Dubrow says:
Sherri & Michael,
Appreciate your comments – do you think Japanese companies are more profitable than US compared around the same revenue? Any insight you have would be appreciated.
Thanks.
Merrill