The Best Metric for HR Effectiveness: Revenue per Employee

September 18th, 2012 by

I recently did a quick Google search on the number of different HR metrics out there to “help” HR professionals better measure their effectiveness, their return on human capital, etc. I found 441 on one list. Holy cow! No wonder many HR Pros struggle with metrics…

The problem with many HR metrics is they are just that, HR metrics (versus business metrics). We struggle to explain their relevance and bottom line impact to our C-Suite executives. If you could only pick one metric, or perhaps more appropriately only had time to measure one metric, I would submit that Revenue per Employee (RPE) would be it. It’s been around forever and is well understood in B-schools. Just take the revenue produced by your company or business unit and divide it by your total number of Full Time Equivalent (FTE) employees.

Many HR activities impact both sides of the equation and it’s our job as HR Pro’s to show our executive teams how. Employee Performance, Innovation, Sales, Culture, Employee Engagement, headcount, turnover, recruiting effectiveness, supervisory skills, training programs, etc. They all impact RPE.

How to use it… Just compare your number over time – is the number going up or down. Go online and find out what your industry averages look like. How do you stack up? You can also use RPE to help justify your next HR initiative. RPE thinking can help you determine if your department is focused on the right priorities. Try it out!

I’d love to hear from companies using RPE in their HR strategic planning. Please share!!

Photo Source: Victor1558

2 Responses to “The Best Metric for HR Effectiveness: Revenue per Employee”

  1. Excellent points. Unfortunately HR doesn’t have any control over most of the variables that make up the revenue per employee.

  2. CAI says:

    Hi Ryan,

    Thanks for the feedback! I’d like to disagree, however. HR can influence job performance, employee engagement, training, skills acquired, etc. All of these factors contribute to how well employees do their jobs and the results they bring to their company. If you find that your RPE is going up, look at the different HR initiatives you implemented and show your senior team how they directly contributed. It’s up to your HR team to use facts and numbers to show that they are making a difference in the company. Thanks!

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