As with any ‘ratio’, personnel productivity is best measured by linking an ‘input’ to an ‘output’. The key ‘input’ we’re looking at here is labour: the number of people; the cost of those people and so on.
We’re linking it to the output of their activity. Often this is ‘sales’ or ‘gross profit’. These are the types of indicators we use in Benchmarks – however individual business might have their own indicators that address the same issues – units of physical output, for example (eg policies sold per seller, in insurance brokers; or scripts dispensed per pharmacist, and so on).
The way to ‘improve’ a ratio is to lift the ‘good part’ of the equation while holding or reducing the ‘constraint’ factor. So an indicator like ‘gross profit per person’ is improved by lifting gross profit while holding or reducing the number of people or the amount of labour.
The ‘improving gross profit’ metric can be dealt with by looking at the article Manage Your Client’s Margin – Spend Better Before Spending More – the aim of this article is for a company to deliver either more gross profit in total, or to raise their gross profit margin. So fixing those matters will put a company well on the way to lifting personnel productivity.
The labour side can be dealt with in many ways – cutting staff is the obvious tactic, but again this should be considered as one of the last resorts.
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