How to compare companies to countries

The Reality-Based Community

A much simpler measure would be employment. Multiply a firm’s headcount by some sort of population-to-employment ratio (about 2 for the U.S.) and you have the size of the population that the firm supports. Wal-Mart has 1.8 million employees; McDonald’s is second with 450,000. (Both of those numbers may be exaggerated by high ratios of part-time to full-time employees.) That makes Wal-Mart about the size of a smallish state or a tiny country: Oklahoma or Connecticut, Namibia or Moldova.

Nah, this doesn’t work either. The number of people companies employ doesn’t correspond very well at all to the amount of economic activity they’re responsible for. And, like profits, it’s wildy variable at the stroke of a pen. If Walmart outsourced 70% of its employees to a bunch of captive local subcontractors (as they already do with their cleaning staff to avoid certain liabilities) that wouldn’t make any difference whatsoever to their economic impact. You could probably do some kind of deep analysis of supplier chains to figure out what proportion of employees there should be credited to the top-level company (just as you can look at ecosystems to see what proportion of prey animals goes to feed a particular top predator), but the number isn’t at all easy to derive.

In addition, even once you’ve done that kind of accounting, it doesn’t account for the differences in revenue generated per person depending on the kind of work a firm does. So a multi-office law firm might generate as much money as a much larger (headcount) retail chain, rather like looking at the difference in GDP per capita between Liechtenstein and Togo…


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: