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For comparison, reddit has four people (I think).
And about 10% of the traffic. This isn't exactly an apples to apples comparison: http://siteanalytics.compete.com/reddit.com+digg.com/
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Well you could be pushing people to only be about themselves and their team and not the company as a whole. Why would I want to work with and help another team if it means I may move them above the 10% line and me below? So while you're right that it would push people to do their job well it could also push them to submarine others.
The point is that companies shouldn't waste a lot of time trying to salvage or put up with people who aren't helping them succeed. If a person is hovering around the bottom 10% and they think the solution is to screw someone else over, they probably should go. I know I wouldn't want to work with them.
It's been my experience that, if a company has not had recent layoffs, there is almost always a bottom 10% that is bad enough to be worth cutting. This has been most noticeable to me at companies of 100+. I've always wondered if smaller periodic layoffs would work better than waiting for a downturn to make hard decisions, which seems like the norm.
They have 72 staff? Doing what??
It really boggles my mind till today what the hell do they do with so many employees? Is it a standard practice for startups for keep many employees to justify raising more funds? They have no significant changes in how the site works, at-least in the last 2 years or so. The site speed, though better, still sucks. No new features. Site gaming is rampant (just look at the comments). What are they doing?
Ad sales. It isn't a very headcount-efficient endeavor once you get past self-served options. A lot of the big corporate branding accounts who have huge amounts of money to burn and don't track conversions (I believe in poker these are referred to as "fish") require someone to chat up the media buyer for a while.
Branding campaigns are only a backup strategy, mind you, in case that Digg doesn't sell out their inventory of inflated page views by rabidly anti-commercial poor adolescents. For some unfathomable reason.
They have 72 staff? Doing what??