In our last blog, we introduced the concept of “revenue per employee”. This week: how to use the concept in conjunction with identifying “revenue generating” and “non-revenue generating” employees to determine whether you have the right balance of workers.
Back in 2019, we asked the questions:
Turns out it costs you a minimum of 1.5 times that person’s annual salary. Which means a $50,000 employee actually costs you $75,000. Just to have that person there. That figure alone should convince you to look at the value each workers brings to your business. So where can we start?
Identifying the dollar value contribution of a sales team member is fairly simple: you weigh up the value of sales they’ve made against the costs of employing them. But what about the rest of your team who aren’t on the road? They contribute just as much to your bottom line as the sales staff, but in a different manner. Example? Without the production and warehouse team, your sales team has no product to sell.
Big businesses typically classify workers into categories of “revenue generating” and “non-revenue generating”. A revenue-generating employee is anyone who performs work your clients pay you for. Think sales people and business development team members. Non-revenue generating employees are responsible for completing tasks not billable to clients. Think support workers: clerical, finance or IT.
Using these classifications allow you to assess not only how much money each employee generates for your business, but what ratio of workers bring in the dollars. Within such information in hand, you can compare your productivity with competitors and also determine whether you have the right balance of workers who drive revenue compared with those who perform support functions.
You can also communicate the concepts of revenue per employee and revenue generating vs non-revenue generating to your employees. Once they grasp what it costs to have them occupy a seat in your office, they can play an active role in determining what they need to do to cover (and exceed) the costs associated with their employment. This might include:
Evaluating each employee’s contribution to your business is key to carving out your sustainable market advantage. Bare Bones Consulting can help you identify which members of your team are high value (for any number of reasons), who might need some help to move into the “high performer” category and simple, cost effective ways to address both situations. Like to know more? Give us a call or shoot us an email through our “Contact Us” page. It’s your time to succeed!
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