Productivity in the Work Place – Everybody talks about it, but how do you measure it? One of the key measures for employee productivity is sales per employee. This key performance indicator is used to measure the efficient use of resources, your employees. The higher your sales per employee number the more efficient your work force. To calculate sales per employee you first need to calculate the number of full time equivalents employees (FTE). For example, if you have 30 full time employees and 4 part time employees that work 20 hours each you would have 32 FTE employees:
30 full time employees + (4 part time employees x 20 hours / 40 hours = 2.0 employees) = 32 FTE
To calculate sales per employee the formula is:
Annual sales divided by the # of FTE
Best Practices – When you compare yourself to your industry your sales per employee can tell you about your company differences. If your sales per employee is higher than the industry that means you are more efficient at utilizing your employees time than your competitors. If your number is significantly higher, it could indicate a potential problem. Ask yourself these questions to assess that you are on track with your company vision and culture:
- Is the quality of work produced by employees what I expect?
- How long do employees stay at my company?
- Would my employees recommend my company as a good place to work?
If the answers to these questions are no, you may be spending more money and resources on the back end of your business. You may be using your resources for production rework, new employee training, and hiring costs. All of these factors can increase your work costs overall and decrease your bottom line.
Now let’s say that your sales per employee number is lower than your competitors. What does that mean? This could mean that your competitor has highly automated processes requiring less employees to manage the organizations infrastructure. It could indicate that your employees are not producing that same quality of work as other companies. It may also indicate that you are scaling up and your revenue is lagging behind the employee additions made for the predicted workload. Improve your numbers by asking yourself these questions:
- Do I have repeatable processes for my business?
- Are my processes automated for better productivity?
- Does my employee count make sense for the amount of revenue the company is producing?
- How does my quality of work compare to the industry?
I challenge you to take a look at your sales per employee number and ask yourself these questions. You will gain some valuable insights about your business and your competitors. Interested in learning more about how your business compares to your industry? Contact me for a free Discovery AnalysisTM today.