A company’s most important resource is its staff. They play a key role in the success of every company. Personnel expenses represents one of the largest cost items at many SMEs. That’s why it’s so important to regularly assess how efficiently and effectively human resources are being deployed at the company. Gather some key workforce metrics data and compare it at certain intervals (for example, once a year).

These figures will provide you as the owner of a small company with a better understanding of the correlations between personnel (expenses) and company performance. You can take advantage of these insights to manage your company. If you realize, for example, that profit per employee is constantly declining, you can take remedial action, either by cutting costs, increasing margins or focusing on performance improvements. Using the following five workforce metrics, you can lay a solid foundation for identifying optimization potential at your SME:

Workforce metric 1: profit per employee

Comparing profit in relation to headcount (total number of FTEs) will give you the profit per employee. Use FTEs in your calculations. If you have two employees, for example, one of whom works 70% and the other 30%, their work output is equivalent to one FTE. The FTE indicates how many full-time positions there are mathematically in a mixed workforce with part-time employees. 

Useful to know

If you establish that profit per employee is continually decreasing, you need to take measures to reduce costs (e.g. cutting production or workforce costs) or to increase profit (e.g. through higher margins or by boosting performance).   

Workforce metric 2: average personnel expenses

Average personnel expenses compares total personnel costs with the headcount. Use FTEs in your calculation (see the profit per employee workforce metric). In addition to salary, personnel expenses contain other costs, such as bonuses, incidental wage costs and employer social security contributions. 

Useful to know

• This key figure is particularly useful for comparisons with the sector. The average personnel expenses metric allows you to assess how your employees are paid in comparison with the competition and can be used as a basis for HR policy decisions.
• Rising personnel expenses with stagnating profit is a warning sign. If average salary costs rise by CHF 30,000  per year with annual profit coming in at CHF 100,000 , the profit will be eaten up within three years.  
  

Workforce metric 3: revenue per employee

Dividing the revenue by the number of employees provides information on efficiency and costs from the revenue per employee metric. Use FTEs in your calculation (see the profit per employee workforce metric). 

Useful to know

• The revenue per employee figure provides an insight into the company’s productivity – particularly by using the sector average as a benchmark. 
  
• Increasing revenue per employee indicates rising profit.
  
• When analyzing this metric, also take account of the possible reasons for changes over the course of time. Revenue per employee may also be on the up, for example, because the company is reducing costs. 

Workforce metric 4: fluctuation rate

The fluctuation rate indicates the number of voluntary and involuntary departures in relation to headcount. Use FTEs in your calculation (see the profit per employee workforce metric). 

Useful to know

High staff turnover generally means high additional expenditure and extra costs for the company. Bear in mind that this metric always also depends on the economic climate. 

Workforce metric 5: age structure

The age structure measures the make-up of the workforce in terms of age as a percentage. Use FTEs in your calculation (see the profit per employee workforce metric). 

Useful to know

There is no right or wrong answer as far as this indicator is concerned. However, the age structure can also provide information on future recruitment requirements, such as in the case of a rapidly ageing workforce. The results obviously also indicate whether certain age groups are under-represented.

In addition to recording and analyzing these five key workforce metrics, it is also worth carrying out regular surveys in face-to-face meetings on soft factors, such as the commitment of employees to the company, job satisfaction, staff well-being at the company and attractiveness as an employer. Don’t forget that you will only obtain honest feedback from employees if a basis of trust exists and they are not frightened to express criticism. Use these results to derive improvements from them. Just like in sport, the soft factors have to be right if the team is to perform at the top level.