Are You Getting Your Money’s Worth From Your Employees?

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In today’s business environment the saying “cash is king” is still very much true.  This is because cash is needed to meet our financial obligations.  As business owners and leaders, one of our major cash obligations is payroll.  Payroll can include salaries, taxes, insurance and various other perks that you company may offer.  With a watchful eye towards your cash flow, the question you are probably asking is, “Am I getting my money’s worth for my employees?”  Below are a few key performance indicators of payroll:

  • Sales – the most common performance indicator for employees is the amount of sales they generate.  This number is easy obtain and compare among various employees; however, it can be very deceiving. For example, Employee A and Employee B may both have the same sales number, but Employee A may be selling items with lower margins. This may cause lower overall earnings even though the revenue is higher. Thus, a sales performance indicator needs to go beyond just revenues.
  • Sales Volume – as with “sales”, the volume of sales is also very easy to track. Please note, you can have the same issues with this number management as you do with sales performance indicators. The number of products of all your employees may not necessarily indicate the current financial worth of each employee.
  • Time – another performance indicator is the amount of time each employee spends on the work he or she performs. This indicator is most useful for service and project based industries. However, the assumption that the more hours spent on work equals more productive employee is not always true. If you pay an employee $25 an hour and they spend 10 hours on a project that you are billing for $100, the employee is actually losing money for your business.
  • Space – another consideration is the amount of space the company needs for its employees. The more employees you have, the more square footage of lease spaces needed to house those employees in your office. With today’s technology, many employees have the capability of working outside of the office location (such as from home). Although not all employees are able to work independently, this is a great cost savings measure that can reduce your monthly fixed rent.

Each of these performance indicators needs to be tailored to your specific company. If not used properly, your company could be losing money on unproductive employees.  If you have any questions concerning the productivity of your employees, please feel free to call us and we can tailor performance indicators specifically to the needs of your company.

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