Which Metrics can be considered the most essential in the workplace?
It is workplace productivity!
When your business has a high productivity rate, it reflects the ability to thrive in your work processes. Workplace and employee productivity can affect employee performance, health, as well as company reputation. Employees who are engaged in their work environment find their work environment suitable and drive company profits and revenues.
In a time when the modern workplace has changed and global shifts to remote and hybrid work have evolved, productivity growth rates have fallen sharply around the globe.
As per the report from G2, “A 7.3% decrease in productivity occurred in Q1 of 2022, while unit labor costs increased by 12.6%.”
The amount of useful work an employee performs for an organization over time assesses employee productivity. If the company wants to succeed, they need highly productive employees.
The company should know about their revenue per employee (RPE) data to get accurate productivity measures.
How to Measure Productivity?
The RPE data is considered a proxy for productivity and performance. Calculating productivity using RPE is easy since comparing RPE with Cost Per Employee (CPE) allows the organization to identify its return on talent.
More importantly when an organization compares their RPE with their competitors' RPE they can benchmark their employee performance and productivity which results in high efficiency throughout the organization.
However, even if the organization is unable to match the competitors' RPE, the management team could review their strategies and tactics to improve productivity.
What exactly is RPE?
RPE is a measure of the amount of revenue each employee generates for an organization. It gives a clue if the organization’s revenue model suffers and also allows you to check the efficiency of human resources.
The larger the RPE ratio, the higher the productivity. Therefore, organizations with higher RPE ratios are likely to have skilled employees who are productive.
How to compute RPE?
When you divide the organization’s total revenue by the total number of employees, you get the value of RPE.
The formula is:
Revenue per employee (RPE) = Total revenue generated for the year / current number of employees for the year
You can adjust the data (e.g., quarterly, bi-annual) if you want to calculate the RPE value for a limited time period by identifying the revenue generated for that time period and the actual number of active employees during the same time period.
Other formulas to calculate RPE are as follows -
Total December revenue x 12 / total employees as at December 31
Total December quarter revenue x 4 / total average employees December quarter
Among all the ways, the last formula is considered the most indicative way to identify future growth.
What is the good revenue per employee ratio and benchmark?
The RPE of the company depends on the size, nature and sector the company is dealing with. The company's revenue per employee is also considered to grow with its size, so if it is not increasing, you need to reconsider your new hires.
In the tech industry, profit margin is crucial. Revenue per employee is a quick way to calculate a company's profitability, but for labor-intensive businesses, profit per employee is more relevant. Annual reports offer valuable insights into these metrics and can inform investment decisions.
It is said that a good revenue per employee benchmark ranges between $43,000 and $230,000 per employee.
But it is also imperative to consider external benchmarks by conducting market research, like how your competitors' RPE value is growing relative to yours.
Revenue per employee formula is a metric used to assess a company's financial health
In addition, the best practice is to compare your own numbers with the previous years. You can create value for your business by analyzing their ratios for the past few years and identifying if they are declining or improving.
Regarding benchmarks, they can vary by industry, so you can't compare the RPE of an auto parts company with that of Google.
Which companies make the most revenue per employee?
As per the statista research, In 2021, the average annual revenue per employee of professional services within software as a service was just over 160,000 U.S. dollars.
The average annual revenue per employee of professional services within software as a service (SaaS) companies worldwide fluctuated considerably between 2015 and 2020.
Annual reports can provide valuable insights into a company's financial performance and can inform investment decisions.
In 2021, employees generated almost 10,000 U.S. dollars less than in 2015.
In 2021, the average revenue per employee of professional services within software companies was approximately 150,000 U.S. dollars per year. The average annual revenue per employee of professional services within software companies worldwide decreased considerably between 2015 and 2021. Within this period, 2015 was the year where employees made the most revenue.
In 2021, the average revenue per employee of management consultancies worldwide was over 170,000 U.S. dollars per year. The average annual revenue per employee of management consultancies worldwide decreased overall between 2015 and 2021.
The average annual revenue per employee of architecture and engineering services organizations worldwide increased considerably between 2015 and 2021. During the 2021 survey, respondents reported an average annual revenue per employee of 165,000 U.S. dollars.
What if you have low revenue per employee?
As a result of your market research, if you find that you have low revenue per employee, you should ask yourself a few questions. This will help you resolve the issue.
Answer these questions:
- Where do you fall in your industry?
- Are you hiring enough to improve your bandwidth?
- What are your margins of profit and profit per employee?
- Is your business old enough to compete with others?
After getting the answers to these questions, you will automatically know if your RPE is too low and if you really need a higher RPE. For that, we have a tool that can help you improve your RPE ratio.
How to enhance your revenue per employee ratio?
You can drive your business to the next level by increasing your revenue per employee with SaaS solutions.
The most effective way to set performance benchmarks, drive productivity growth, and improve employee efficiency is employee productivity monitoring software.
One such leading software is We360.ai which can cater to your revenue needs by managing your workflow wisely while improving your employee performance, enhancing productivity and boosting revenue.
Here is how We360.ai features can help you boost your revenue per employee ratio by:
- Identifying Work Habits - You can understand your employees’ work patterns with the help of activity tracking. This lets you discover which employees utilize their time more efficiently and which employees are not performing as expected. This feature also helps you track work time by spotting employees’ idle time, offline time, active time, working time and online time.
- Viewing Productivity Trends - The productivity monitoring feature gives you a glimpse into how your employees are spending their time and whether they are aligned with their business goals. It also allows you to keep track of the time and work by showing details regarding productive, unproductive and neutral work at your workplace.
- Getting Real-Time Insights - You can get real-time insights with our screenshot and application tracking features. Using the screenshots feature, you can capture live screens of your employees no matter their work locations. Using application tracking, you can determine if an employee is engaged in non-work-related activities by knowing about the list of top applications and URLs viewed with their usage details.
- Managing Projects & Tasks - Managing tasks and their deadlines get simpler with monitoring software as it keeps complete track of assignment work status. Using work status and completion records, you can see when the work was assigned, completed and ongoing.
- Understanding Employee Wellness - Your employee needs to be engaged enough to be productive. Our Wellness360 feature lets you understand if your employee is healthy, overworked or underutilized. Using this feature, you can reallocate tasks within teams to maintain work-life balance and keep your employees engaged and motivated.
- Downloading Dynamic Reports - Our solution gets you 100+ meaningful reports to enable team leads and HRs to manage and evaluate work effectively. We have a feature to compile several reports together to get major data in a single report.
There are many other features that drive workplace productivity. By implementing an employee productivity monitoring solution, you will not just boost your revenue per employee but also streamline all your work processes.