Pwc

Interpretation:

• Profit per FTE is industry sensitive and therefore benchmark comparisons should be primarily within your industry group.

• Profit is also highly sensitive to relative rates of change in revenues and costs over time. Trends in Profit per FTE are typically more variable in percentage terms than those in either revenue or costs.

• Changes to the number of FTEs employed will have a greater marginal effect on Profit per FTE than on equivalent revenue and cost metrics.

• Organisations that have experienced a sustained period of success, often with competitively high Profit per FTE, can lose their ‘compelling cause’ and even become complacent. Therefore, low profit growth or a plateauing trend in Profit per FTE may indicate that the organisation is vulnerable to external market factors such as increased commercial competition, inflationary rises in the cost base (e.g. raw materials, utility costs etc.) and inflation in wage cost arenas. Under these circumstances it is critical to monitor productivity trends (see Remuneration/Revenue and Remuneration/Costs).

• Key questions to consider:

  1. What human capital initiatives will help to improve your organisation’s profitability?
  2. What single change in human capital policy or employee behaviour would significantly improve customer relationships?
  3. If financial metric performance is good, what are employees and HR doing that is contributing to this?

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