When we compiled this year's Soft-letter 100 rankings, we missed a small company with an eye-opening story about employee productivity. Altura Software, a developer of cross-platform development tools, managed to generate $5.1 million in revenues last year with a staff of just 14 people--equal to a hefty $365,164 in sales per employee.
As a point of comparison, Altura managed to crank out roughly twice as much revenue per employee as most small and mid-sized software companies. And Altura wins the productivity race against most large companies as well: Only six Softletter 100 companies (including Microsoft, at $520,113) had higher sales-per-employee numbers in 1997.
What's Altura's secret? From the beginning, says Altura president Lee Jay Lorenzen, employee productivity has been "a guiding principle" for the company. "When you get the sales-peremployee number right, everything else--profitability, growth, market focus--follows almost automatically." In fact, Lorenzen points out, Altura last year generated $2.5 million in profits and grew by 45%, "so we must be doing something right."
But high productivity doesn't just happen, he notes. Lorenzen recently described five principles that contribute to Altura's stellar sales-per-employee ratio:
* Treat employees like owners: To make sure Altura's employees are constantly aware of productivity and profitability trends, Lorenzen opens the company's books every month and shows everyone the impact of product sales, major contracts, and other financial indicators. "They're as informed as I am," he says. "No one is ever in the dark about how we're doing."
* Give employees a stake in company-wide productivity: Altura has an employee profit-sharing plan that distributes 10% of the company's pre-tax profits to its employees. A quarter of this amount, says Lorenzen, is distributed equally to all employees, "independent of salary level or contribution." This flat-rate percentage--which may represent a "hugely motivational" 30% bonus for some employees--gets employees excited about the company's success. More importantly, Lorenzen says, Altura's employees have a stake in keeping the company's payroll lean--because a larger staff means a smaller share of profits for individual employees.
* Reward big contributors: The other three-quarters of Altura's profit-sharing program goes to product- or project-specific pools that reflect how much each team (and individual team members) contributed to company revenues. "One result is that developers don't want to be assigned to projects that won't bring in substantial sums of money," says Lorenzen. "This kind of push-back keeps us focused on making the right decisions about opportunity costs."
* Structure prices to drive high sales-per-employee: Altura tends to avoid mass-market segments where prices are low, Lorenzen notes. Instead, the company targets customers who will pay premium prices for high-performance tools and intensive support, usually as part of renewable annual licenses. "There are a lot of businesses we could be in, so we try to pick segments that are willing to pay a premium price for extra value."
* Set a ceiling on salaries: "I've learned over time that big salaries aren't really a motivating factor," Lorenzen says. "We're willing to pay big bonuses based on profits, but we have a company-wide salary cap--currently $80,000--that helps keep our payroll costs under control." Lorenzen concedes that new employees are often taken aback by the idea of a salary cap, but so far Altura hasn't had problems recruiting top-quality engineering talent. "When the company does well, our developers have a chance to earn 40% to 50% of their base salary in bonus money--that's the incentive."
Lee Jay Lorenzen, president, Altura Software, 510 Lighthouse Ave., Pacific Grove, Calif. 93950-2756; 408/655-8005. E-mail:
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