All employees are potential profit centers that connect to the bottom line of the company either as cost generators or profit generators. Any employee can potentially identify a cost-saving idea for the company, that contributes to overall profitability. Any employee is capable of presenting an innovative idea that could potentially be a revenue generator. What’s important is to monitor and record these employee contributions, reward them well and incentivize to obtain more of them. Understanding the individual productivity of your employees is one of the best ways to analyze your organization’s overall operational efficiency and talent management efficiency. Business owners need to know how to calculate profit per employee.
Evaluating the value added from your Recruitment and Staffing Solution USA involves analysis of staffing decisions, performance metrics, talent metrics and decision models to show their predictive accuracy. Most organizations don’t evaluate the impact of their hiring processes and decisions. Validation of staffing and hiring solutions (i.e. showing predictive accuracy) is important because it is the way staffing processes demonstrate value. This validation involves a systematic investigation of the relationship between pre-hire and post-hire data. This is a criterion related validation that applies business intelligence to the hiring process. The effort made to collect and understand outcome data is directly proportional to the ability to prove the value of a staffing center or system.
Profit per employee tells you how much profit each of your employees brings in over the course of a year. The higher your profit per employee, the more effective your Staffing Center performed. Profit per employee is usually used to compare businesses within the same industry. Employee turnover has a large negative effect on profit per employee. Turnover requires your business to interview, hire, and train new workers which adds to costs, but not to profts.
Profit Per Employee = Business Net Profit / Full-Time Equivalent Employees
Profit Per Employee = $1,400,000 / 25 = $56,000
The profit per employee for this business example is $56,000 on an annual basis. Each employee generates around $56,000 of profit each year. Your Staffing Center either increases this Profit Per Employee or reduces it.
Profit Per Employee is the most critical business outcome that will show the value of your staffing process, based on your Recruitment and Staffing Solution USA. Senior managers can easily see the overall contribution of all the employees who have been hired. Your analytical efforts will gain the recognition of your senior managers by demonstrating that staffing can be a profit center.