FTE benchmarking is a highly effective way for businesses to measure the efficiency of their workforce. In this blog, we will delve into five key benchmarking metrics that you can use to assess your workforce, providing you with valuable insights for organizational strategic decision-making.
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Benchmarking metrics are quantitative measures that help organizations evaluate their performance against industry standards or competitors. In the context of workforce management, FTE benchmarks provide a quantitative basis for assessing the efficiency and productivity of your workforce.
By comparing your internal workforce metrics to industry benchmarks, you can identify areas of strength and weakness, allowing for targeted improvements. Now with this understanding, let's explore five key FTE benchmarking metrics to gain a holistic understanding of your workforce.
This metric gauges the overall productivity of your workforce by comparing total revenue to the number of employees.
Revenue per Employee = Total Annual Revenue / Total Number of Employees
If your company generates $50,000,000 in revenue and has 200 employees, revenue per employee is $50,000,000 ÷ 200 = $250,000 per employee.
A higher revenue per employee suggests your workforce is productive and resources are being utilized efficiently. However, you should always compare this number to industry standards, because the benchmark can vary significantly. Lower values may highlight opportunities for efficiency improvements, training, or process optimization.
Compare your revenue per employee against benchmarks
This metric examines productivity within specific departments, such as Sales, Marketing, or Customer Support.
Revenue per Functional Employee = Total Annual Revenue / Number of Employees in the Function
If your Sales team has 50 employees generating $50M in revenue, the revenue per Sales employee is $50,000,000 / 50 = $1M per employee.
Use this metric to understand whether staffing levels are optimal in functions where revenue is a key headcount driver. High values indicate efficient teams, while low values may signal overstaffing or the need for improved performance. Always assess within the context of the industry and the company’s growth stage.
This measures what portion of your workforce is dedicated to a particular function.
Functional Employee % = (Number of Employees in Function / Total Number of Employees) × 100
If Sales has 50 employees out of 200 total employees, the functional employee percentage is (50 / 200) × 100 = 25%.
This shows whether workforce allocation across functions is balanced. A disproportionately high percentage in one area may suggest inefficiency, while too few employees may indicate underinvestment. Benchmark against similar companies to identify ideal staffing proportions.
This metric evaluates the share of employees located in high cost countries, which can identify opportunities for labor cost arbitrage.
Employees in High Cost Countries = (Number of Employees in High Cost Countries / Total Number of Employees) × 100
If 100 out of 500 employees are in high cost countries, the percentage is (100 / 500) × 100 = 20%.
A higher percentage can indicate increased labor costs and potential savings opportunities through offshoring or outsourcing. Conversely, a low percentage may suggest underinvestment in strategic locations or challenges in attracting local talent. Use this metric in conjunction with cost and quality data to make informed staffing decisions.
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This metric measures the proportion of a company’s revenue spent on employee salaries, providing insight into workforce cost efficiency relative to business performance.
Salary Cost as % of Revenue = Total Employee Base Salaries / Total Revenue × 100
If your company pays $20M in total base salaries and generates $50M in revenue, the calculation is $20,000,000 / $50,000,000 × 100 = 40%
Efficient workforce management is a dynamic process that requires continuous assessment. Here are three compelling reasons to regularly benchmark and assess your workforce:
As your business evolves, so should your workforce strategy. Assessing your workforce against benchmarks allows you to align your human resources with shifting business priorities, ensuring optimal performance and adaptability.
During a merger or acquisition, understanding how your workforce measures up against industry benchmarks is critical, especially when it comes to the “to be” organization following the transaction. They can help to facilitate a smooth integration process by identifying redundancies, optimizing resource allocation, and ensuring the combined entity operates efficiently.
In times of restructuring or cost reduction, performing a workforce assessment becomes a strategic tool. A key part of this assessment are benchmarking metrics, which can help to identify areas for optimization, enabling organizations to make informed decisions about resizing, reallocation, or process improvements while minimizing operational impact.
While FTE benchmarks are a powerful tool for assessing workforce efficiency, they can be misleading if applied incorrectly. One common pitfall is comparing benchmarks across industries without context. For example, a finance team in a tech startup will naturally differ from one in a manufacturing firm, so using generic ratios can lead to unrealistic expectations. Find benchmarks tailored to your industry, geography, and company size at a minimum.
Another frequent misuse is over-reliance on averages, which can obscure important nuances such as team skill levels, employee experience, or operational complexity. Two companies with the same revenue per employee may achieve vastly different outcomes depending on how their teams are structured and the technologies they use.
Finally, some organizations treat benchmarks as targets rather than guides. Pressuring teams to meet an arbitrary ratio can lead to understaffing, burnout, or compromised quality. Benchmarks should always be used alongside qualitative insights and business-specific context to make informed decisions about workforce sizing and optimization.
Explore trusted FTE benchmarks to assess your company
Benchmarking is a key tool that companies use to assess their workforce. The five key FTE metrics outlined in this blog offer a comprehensive framework for evaluating your workforce's efficiency and productivity. By leveraging these benchmarks, your organization can not only stay competitive but also drive sustained success in the ever-evolving world of business.
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