Full-Time Equivalent (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. The rest of this blog is split into the following sections:
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 high-level metric allows you to quickly measure the overall productivity of your employees to those in comparable companies. It is a great way to start benchmarking your workforce.
To calculate it you only need two figures, which are annual revenue and the total number of employees for your organization and those that you want to benchmark against. Both figures are usually available online, such as from those statutory reports, company websites and news articles. Then the actual calculation is to divide the total revenue by the total number of employees and compare this metric to similar companies.
Revenue per employee is a fundamental metric that gauges the overall efficiency of your workforce in contributing to the organization's top line. A higher revenue per employee indicates better productivity and resource utilization. Compare your revenue per employee with industry averages to assess how efficiently your workforce is generating revenue in comparison to peers.
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This metric provides the next level of detail on the Revenue per Employee metric outlined above. How? It can help to identify specific functions in your organization where there may be opportunities to improve workforce efficiency. Furthermore, this metric is most relevant for commercial functions, such as Sales, Marketing, and Customer Support where revenue is the key activity driver.
To calculate this metric, you will need annual revenue and the number of employees in each function that you want to benchmark. This functional employee data is harder to source, which is where a specialist benchmarking dataset, such as CompanySights can save you a lot of time. Then when you have sourced the data the actual calculation is annual revenue divided by the number of employees in the function or department that you are benchmarking.
This metric provides insights into the efficiency of individual functions or departments. It helps identify areas where revenue generation is particularly strong or weak, allowing for targeted improvements. For example, a higher revenue per functional employee compared to benchmarks suggest that the function is either efficient or understaffed. The exact answer is in the specific context of the organization that is being benchmarked, which typically requires internal conversations to be had with these benchmarks on hand.
This metric is relevant for assessing the efficiency of all non-commercial functions (e.g., operations, finance, HR, IT, legal) where revenue isn’t the main activity driver for the number of employees required.
Like the data sourcing challenges outlined above, finding trusted employee function data for the benchmark companies can be challenging (tip: use CompanySights). But when you do have the data, the calculation is simply the percentage of employees within a specific function relative to the total workforce.
This metric assesses the distribution of employees across different functions. An imbalance may indicate overstaffing or understaffing in specific areas, influencing overall organizational efficiency. By comparing your functional employee distribution with industry benchmarks, you can identify areas where adjustments to the workforce may be necessary.
This metric is all about assessing the potential for offshoring (or increasing the number of employees that your company has in low-cost countries). The benefit of doing this is to take advantage of the labor cost arbitrage that exists between comparably skilled workforces in different countries.
The metric is just the percentage of employees located in high-cost countries relative to the total workforce. A high percentage of employees in high-cost countries may signal the potential for cost savings by moving some roles offshore.
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The main cost of having employees in a company is captured in the base salary. Therefore, it is always sensible to benchmark the compensation being paid to your employees on a role-by-role basis, especially for more senior staff where the cost can make a difference to the bottom line.
Benchmarking the base salaries can be performed by manually reviewing sites such as Glassdoor, but there are also specialist compensation data providers like Salary.com that you can use to save a lot of time. The key reason to benchmark base salaries (plus bonuses and employee benefits) is to help ensure your compensation packages are competitive in the market.
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.
Benchmarking is a key tool that companies use to assess their workforce. The challenge for many teams is sourcing benchmarking data that all stakeholders can trust, which is where a specialist workforce data provider like CompanySights helps.
The five key FTE benchmarking 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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