Overview:
Human Organisation:
SBC:
Overview:
Palantir is Significantly Accelerating Its Pace of Hiring This Year to Help Meet Ambitious Targets.
The latest Tweet by Bloomberg states, ‘Palantir is significantly accelerating its pace of hiring this year to help meet ambitious sales goals, defying convention when many other tech firms are freezing headcount or cutting jobs’.
Whilst, yes, many investors view this news within a very optimistic light, there are some interesting points to take into consideration in which can be negative.
Human Organisation:
Firstly, to understand this point, one must understand the idea of human organisation. Companies at their core consist of a combination of individuals who come together to solve an issue. In order to create the most successful company, fundamentally this relies on the organisation of those individuals to proceed forward within the most productive, and innovative manner.
Often, to ensure that this combination of individuals can succeed, organisational structure and culture are mechanisms used by management to ensure that the company can prevail.
Within Palantir, it seems clear that the organisational structure is very appealing. For example, within recent press releases, and commentary by Palantir employees, Palantir naturally enforces a high level of responsibility upon teams. This sense of responsibility and conspicuous structure of Palantir leaves employees with a high degree of purpose within the organisation.
Actually, a hallmark of a good company is measured by the incentive structures associated with promotions. For example, within a good company, the incentive structures associated with getting a promotion should be focused on increased productivity, working late hours after close, and making good results.
This is in comparison to a bad company in which to gain a promotion, one must participate within company politics and gossip after work. This show that the incentive structures are aligned to discourage hard work, but instead to encourage zero-sum, status games.
Similarly, when it comes to organisational culture, Palantir is well known for having a culture vastly different from conventional Silicon Valley companies. This culture is namely, the ability to use data within an ethical manner, whilst also protecting civil liberties. Furthermore, another example of the organisational culture for Palantir is their emphasis of protection of the West, in comparison to working with adversarial nations, such as China and Russia.
Thus, it is fair to say that the organisational culture at Palantir is centred on the pursuit of a noble goal.
The main concerned many investors have when it comes to Palantir and their increased hiring procedure is the lack of good human organisation, in which eventually will lead to stagnation, and a lack of innovation.
And, to be frank, human organisation is no trivial matter.
Investors must recognise that an increase within hiring does not coincide with an increased output. This is where human organisation must be vital for a large group of individuals to succeed.
SBC:
Palantir has been criticised within recent times for using excessive amounts of SBC to give to employees.
There are major benefits however of using SBC, including the incentive alignment between shareholders and employees. This means that, employees are more incentivised to participate within activities in which will fundamentally improve the longevity associated with Palantir, and their competitive lead. This, ideally will result within a higher stock price, therefore benefitting the employees and the shareholders.
Also, in consideration of Palantir’s small market capitalisation and size, in comparison to other Silicon Valley companies – such as Facebook, and Google – Palantir has a major necessity to retain employees for the long term.
Unfortunately, companies such as Google and Facebook can easily pay employees much higher wages, and can attract the best talent via hard equity methods. Palantir, due to their small size, does not have this level of flexibility when it comes to high employee pay, and hard equity methods.
So yes, there a clear benefits associated with SBC, including:
- Incentive alignment between shareholders and employees
- Ability to retain the best talent
But, importantly to note, Palantir increasing their employee count by 25% may indicate towards the future excessive use of SBC.
Whilst Alex Karp did mention that SBC expenses will taper down within the following 18 months, this new rise in employees has caused concern for many shareholders.
Some argue that the looming fear of more SBC is back.
It must be said that, excessive SBC is very bad for shareholders. This is because, SBC causes dilution for the existing shareholder base. This results within a decrease in existing stockholders’ ownership of that company.
SBC is seemingly beginning to normalize ($149.323M Q122 versus $193.731M in Q421).
