A thread on 'cost centers' and how terrible the term is as it relates to tech.

Also, please do read this thread to understand what is happening with the USPS.

https://twitter.com/absurdistwords/status/1291003618318057479?s=20 https://twitter.com/TheEconomist/status/1291958339212107777

First, related to USPS. As many noted, it's a service. To think it should generate a profit is, to put it simply, dumb.

Other things like it: libraries (which are generally community funded), roads, courts, emergency services, police, fire, military etc.

None of those are intended to generate a profit. In fact, it's counter to their mandate as 'public services' or 'public goods'.

The moment public goods are supposed to generate profits is the moment they stop serving the public. History is littered with examples here.

Second, this idea relates to tech in the following way: cost centers.

For purposes here, 'cost centers' means less the practice of budgeting headcount to dept, and more the in business practice of thinking of some dept as 'cost' and some as 'value'.

Many yrs ago when I was starting out I worked for IBM, first as a high-school co-op and then full-time post college. My first real project was working on the system for the 2000 Sydney Olympics called FanMail

Fun project for sure. Lots of perl

I didn't know much about business then so I was literally just learning. One thing I learned about was cost centers and how IBM coded engineers.

I asked around. Turned out IBM at the time listed non-quota carrying, revenue generating sales people as 'cost', meaning, burden.

Let me be clear. What I mean by that is it was commonly understood that engineering was essentially a 'necessary evil to run the business'.

There was also no distinction between engineering, IT, facilities and hardware.

I don't know if this was a universal practice at IBM etc etc though everyone at our site was coded in such a way that IBM thought of us as not value accretive to the business, but rather overhead and cost.

Simply: IBM thought engineers were overhead, sales people were valuable.

Now, that is am amazingly broad simplification of lots of financial complexity that lots of CFOs are going to take exception to and I'm not going to argue with them taking exception to it.

And yet it still stands as a general statement. In fact, the entire 2000s were this way.

How do I know? So many companies in the early '00s literally outsourced their R&D to other companies and thought that engineering was not a core competency of their business. IBM is prime example

If you want to understand why some companies lost their way, deeply understand this

Side note, as country, we also did this. We tried to outsource manufacturing to other countries in very very similar line of thinking.

When a company does it, the company pays the price. IBM has gone nearly 2 decades in irrelevance

When a country does this, people pay the price

So, back to 'cost centers'.

I take a very strong view on these things these days. In fact, I *still* think we are getting this wrong.

Thankfully we have gone away from thinking of engineers as a drag on the value of a company.

I'm much more of a fan of realizing that every role has a purpose and a strategic value to the company, and it's more a function of strategy, timing, lifecycle, and company arc to understand how and where to invest.

Let's talk about it a bit with some specifics.

5 person startup. How many tech, sales folks, marketers etc are there in the company?

Very likely most everyone is hands on code and covers the rest of those functions as side jobs. At the minimum, 4 ppl are engineering and one non-technical co-founder who does all the rest.

(Side note: when I say 'tech' I generally mean everything R&D including design, product, engineering, security, infra, data, etc)

50 person B series company. Same question.

Very likely heavy weighted to tech, specifically engineering and design, though probably have dedicated ppl to most other functions, though perhaps not more than 1-2.

Lots to consider (SaaS, enterprise, bottoms up etc etc)

What do those two have in common? Timing of hires. It's not the right time to do certain things. You can't have a 50 person marketing organization in a 75 person tech company, but you could have a 50 person tech org.

It's literally all about timing, sequencing and lifecycle.

Jump to 150,000 person mega-corp. Same question.

Much harder to answer though for sure much more of a balance.

The point though is that when you get to this level, everything is *supposed* to be in harmony and balanced appropriate to the lifecycle of the company.

BUT! The point is that every function is bringing *value* to the company assuming they are sequenced correctly to the growth and strategy of the company

I think many comps have moved this way, though not all. You can tell which are which by who talks about outsourcing eng still

So, back to USPS.

In the tech world, the above would be akin to saying to engineering dept 'you need to generate a profit' when in fact, it is *part* of a system that is intended to generate a profit.

We wouldn't give a quota to an engineer. It's an inappropriate mechanism

The USPS was not intended to generate a profit. Neither was the military. Nor should they to have a healthy country, just like we shouldn't give engineers a quota to have a healthy company.

Everyone and everything has a role to play in the grand scheme of things.

Final thought: Please call your gov't reps TODAY, tomorrow, and every day until the USPS is 'safe'

Find them at https://5calls.org/ 

Call them every day, multiple times a day if you can. Call them all. Be kind, but persistent. Annoyingly persistent is good.