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Formula
Revenue per Employee = Total Revenue / Average Number of Employees
Know your metric
Importance of
Revenue per Employee
Productivity Measure
Revenue per employee is a key indicator of organizational productivity and efficiency, showing how effectively human resources are utilized.
Comparative Benchmark
This metric can serve as a benchmark for comparing performance across firms in the same industry, indicating which companies are more efficient in utilizing their workforce.
Strategic Insights
It provides strategic insights into whether a company might be overstaffed or understaffed, guiding hiring and workforce optimization decisions.
Drawbacks of
Revenue per Employee
Does Not Reflect Profitability
High revenue per employee does not necessarily mean high profitability, as it does not account for the costs associated with generating that revenue.
Varying by Industry
Different industries have varying norms for revenue per employee, making cross-industry comparisons less meaningful.
Potential for Misinterpretation
Companies might appear to have high revenue per employee due to temporary factors like layoffs, which do not actually indicate long-term efficiency or effectiveness.
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