Revenue per full-time employee – why it’s a waste of your time…

The chances are that the way you measure the productivity of your workforce is to calculate revenue or profit per full-time equivalent, or FTE. The beauty of this ratio is its simplicity. You take the net revenue for a given period and divide it by the number of full-timers on the books at that time to produce an easy-to-understand financial metric.  However, apart from being easy to produce, revenue per FTE has limited usefulness. It has some merits for comparison purposes – tracking your business’s quarterly progress or benchmarking against your peers. Whether revenue per FTE is up or down, the key question is ‘why?’… and the number alone won’t provide any answers.

The fact is that FTE, like many measurements of performance, is geared to the needs of 20^th century manufacturing companies. While it might be good enough for your Finance Director, revenue per FTE won’t cut the mustard when it comes to directing shop-floor productivity improvements. Revenue or profit per FTE won’t tell you anything about production bottlenecks, quality issues or how to get more out of the most expensive element of your manufacturing operations – your workforce.

However, the challenge that Production Managers have is that traditionally, it’s been very hard to accurately measure labour content within the production process. Effective measurement of labour requires you to track multiple variables across product teams, shifts, operators and tasks. To rise to this challenge, you need to set aside FTE metrics and implement three key workforce performance strategies that focus on data: gather; process and share.

Gather

The truth is that there is no excuse for not gathering the data you need to understand exactly where labour hours are spent. Forget paper-based timesheets and manual data collection – it’s a practice that is slow, inaccurate and creates unnecessary data entry work.

Today, tablets, touchscreens and barcode scanners are affordable and readily available. You can install and link them to data capture software quickly and easily for a fully automated shop-floor data capture solution. Your operators just touch a screen or scan a part to start an operation, follow the on-screen assembly instructions and tell the system when a task is complete.

Getting useful information that tells you where your workforce is spending its time relies on gathering detailed data at an individual operator and task level.

Process

Once you’ve got your data, acting on it as soon as possible will yield the best improvements to workforce productivity. Choose analysis software that gives you a dashboard view of the metrics that matter to you most. Typically, this will include key performance indicators, such as overall labour effectiveness (OLE), overall equipment effectiveness (OEE), scrap/yield, right first time and on-time in full. With this information at your fingertips, captured, processed and updated in real-time, you can quickly react to anomalies as well as considering long-term improvement measures.

Share

If all you do is gather, process and store the data, your workforce won’t know how or why they need to improve. A key part of driving an improvement culture is feeding back performance analytics to staff. Many of our customers install screens on the factory floor to communicate performance metrics back to operators. When people know that you are monitoring their productivity and work quality they become accountable for their outputs, and often welcome the opportunity to improve.

Employing labour is becoming increasingly expensive with annual rises in the National Living Wage and recent increases in autoenrollment pension costs, so investing in simple measures that improve output will provide a compelling return on investment.