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Codermetrics by Jonathan Alexander

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Timeout for an Example: The Seven Percent Rule

In the 1990s, when corporate downsizing was all the rage and watching the NYSE and NASDAQ stock markets became a regular pastime, many business publications mentioned the “seven percent rule.” The gist of the “rule” was that a public corporation that announced large layoffs would see a quick seven percent jump in its stock price.

As James Surowiecki pointed out in a 2007 New Yorker article, the data over the last two decades doesn’t support this rule. Downsizing doesn’t always result in a stock price boost any more than downsizing always results in a better, more profitable business. In the end, as Surowiecki points out, the value that the employees create and the opportunities lost in layoffs sometimes outweigh the cost-cutting benefits of workforce reductions.

Whether you work in a for-profit or a not-for-profit software development organization, and whether your coders are paid or unpaid, it is always desirable to get more “value” from the existing coders. Adding new team members is great if you are able, but changing team members is usually costly. So we all look for ways to do better, both for our own satisfaction and for the success of our team and our organization.

I have a new “seven percent rule” for you to consider related to software development teams. This rule doesn’t have anything to do with downsizing—instead, it has to do with increased productivity and results from existing workers. Like any other organizational “rule,” ...

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