The Pros and Cons of the Sales Per Employee Ratio
One metric used to benchmark performance is known as the sales per employee ratio. It is associated with staff productivity and is often linked to profitability, but it’s important to understand its limitations. Anyone who has studied these ratios knows that it’s impacted by many things.
For example, it’s typically lower for smaller commercial printing companies and inplant printers and higher for companies that offer higher volume types of work such as offset printing and mailing services. Therefore, certain kinds of work can inflate the ratio. And while typically predictive of productivity or profitability there’s not a 100% direct correlation between sales per employee and productivity or profitability of the company.
There are many different organizations that calculate this ratio. For example, NAPL, NAQP, and the IMPA calculate the sales per employee ratio for slightly different markets and can get slightly different numbers. The NAPL data is for medium to larger companies, the NAQP data is for small commercial printers and the IPMA data is for the inplant printers. But, if you look over the course of years, we see across the board that the ratio is declining. Today, the typical range is between $75,000 and $150,000.
After all those caveats, however, there is still a consensus of opinion that increasing the ratio is a sign of increased productivity and higher profitability. Therefore, one of the conversations we often have discussed are strategies to increase this ratio.
One of the strategies that caught our eye recently is a reduction in the number of full-time staff and the use of more on-call staff. The advantage of using more on-call staff is that it minimizes the impact of staffing during slow periods.
Have you incorporated an on-call sale strategy? Did it succeed or fail for you? Has it helped increase your sales per employee ratio? In the next blog we will talk about the keys to a successful on-call staffing strategy.
If you enjoyed this post, you may also be interested in:
- Performance Based Metrics
- The Wrong Metric – When The Best Looks Like the Worst
- What’s the most important aspect of your shop’s productivity? Staff? Training? Equipment? Procedures?
- Overall Equipment Efficiency (OEE)
Howard Fenton is a Consultant and Business Advisor at NAPL. Howie advises commercial printers and in-plants on benchmarking performance against industry leaders, increasing productivity through workflow management, adding and integrating new digital services, and adding value through customer research. He is a paid contributor to this blog.