How to Improve Revenue per Employee Using Kickidler?

In this article, you’ll learn about revenue per employee, an important financial metric that can be used as a measure of company’s efficiency, and find out how it can be improved using our employee monitoring software.

It’s a well-known fact that employees are the greatest asset of any business, but what if they are simultaneously the biggest expense? For example, labor costs in software engineering or investment banking can easily reach $100 billion per year. Still, companies in these fields tend to report profit margins that are among the highest. What’s their secret you may ask.

It's all about how to maximize revenue per employee (RPE) rate. This important metric tracks how much profit each employee generates for the business and determines the effectiveness of the revenue generation relative to the workforce size, which is one of the keys for long-term, sustainable growth.

In today’s article, we’ll look more into the topic of employee profitability. You’ll learn how to calculate your RPE using a simple formula and find out quite a few useful data collection and analytics techniques how using employee monitoring software can help you find new paths to profitability.

What is revenue per employee (RPE)?

RPE is a business metric that’s typically used as an indicator of the company’s efficiency. A low average revenue per employee indicates issues with resource allocation, cost management, or pricing model. A healthier RPE number means everything is well with your business operating model.

RPE metric helps companies spot productivity gaps, process inefficiencies, resource allocation issues, and other bottlenecks that could be the reason for slow revenue growth.

How to calculate revenue per employee?

Revenue per Employee = Total company revenue over 12 months / Current number of employees

Let’s say your B2B digital startup made $7 million in 12 months with 15 full-time employees. Using our formula, it’s easy to calculate that your average revenue per employee is $5.6 million.

Sure, this formula isn’t perfect – it doesn’t take into consideration other business costs like marketing, IT infrastructure, or equipment costs. The results can also be wobbly if you have high employee turnover or rely heavily on freelancers.

Nonetheless, it’s a good proxy that helps you measure employee productivity and overall operating efficiency.

By tracking your RPE, you can promptly identify efficiency issues and misaligned resources that might be dragging down your profitability (like misbalanced workload distribution or redundant business processes) and use that data to optimize your profit margins.

Think of RPE as your early warning sign of inefficiencies. Not knowing your RPE could result in:

• Resource waste. Companies can unintentionally overhire for low-revenue roles and understaff profitable projects.
• Misaligned priorities. Employees can unknowingly focus on tasks that actually drain profitability and slow down revenue growth.
• Hidden underperformance. Low productivity can be hidden behind the façade of busy work. It’s hard to determine the reason when there’s no factual data to back up process inefficiencies, lack of skills, or low employee motivation.

What factors influence employee revenue generation?

Several factors can influence the rate at which employees generate revenue, from external market conditions to internal company processes. Some factors are beyond your control, such as industry trends or economic conditions, However, your internal processes can be optimized, with improved work environment and employee performance significantly impacting RPE growth.  

Company industry

NYU Stern School of Business runs a US Employee Metrics Dataset, which includes a revenue per employee benchmark.

As is noticeable from the extract from the dataset, the numbers vary greatly due to the differences in business models and workforce capabilities.

Financial services and software companies tend to have higher RPE because they can generate more revenue with fewer employees, thanks to an asset-light business model, flexible product distribution, and greater automation.

In contrast, manufacturing companies often have modest performance indicators, since they usually depend on a physical footprint, including warehouses, transportation, retail locations, production facilities, each of which requires a high staff headcount to keep it functioning.

Other linked factors that can influence the RPE metric include competitive pressure, market dynamics, or a skills shortage.

Operating efficiency

It’s quite a paradox, yet small businesses that work smarter instead of harder can actually outperform those with a bigger but less efficient workforce.

A great option to help you reveal inefficiencies that could be chipping away at your revenue is implementing digital monitoring tools. The software will help you identify time-consuming processes, remove redundant tasks, eliminate unproductive routines, and direct your team’s focus toward revenue-contributing objectives.

Employee engagement

Disengaged employees are less productive. They tend to show signs of absenteeism or quiet vacationing, often completing the bare minimum expected of them. And it comes as no surprise that employees who lack motivation to achieve great results produce lower revenue. But on the flip side, engaged teams outperform on several financial metrics.

To increase employee productivity (and with it, your revenue per employee ratio), try focusing your efforts on enhancing employee recognition, placing greater focus on work-life balance, and adopting smarter workforce management techniques.

How to Track and Improve RPE Using Kickidler?

Revenue per employee is a proxy number for employee efficiency, which is a combination of high personal effectiveness, good project management, and optimized workflows.

To track RPE, which is a combination of high personal effectiveness, good project management, and optimized workflows, you require detailed data on:

• Employee time
• Workload allocation
• Employee productivity and output toward revenue

Kickidler lets you have visibility into all these metrics and more through its comprehensive analytics functionality. All the collected data can then be used to figure out the best approach to optimize RPE. Here’s what worked for our clients:

1. Accurate time tracking

   While financial reports do provide valuable insights on revenue growth and profit margin, they don’t exactly tell how productive different activities are.

   This is where time tracking data comes in, showcasing where employees’ focus lingers and how much valuable output they produce. For example, if you notice your specialists being stuck in unnecessary meetings or constantly blocked by delays on the side of another department, you should probably focus on improving cross-functional collaboration.

   With Kickidler, you can track billable vs non-billable hours, monitor project progression, and predict delays on actual employee data. All this valuable data will help you identify arising process bottlenecks, optimize resource allocation, and streamline tracking profitability across projects to understand exactly how your employees contribute to different revenue streams.

2. Analyzing profitability

   When you know where your time and money is going, you can better predict your revenue. Even more, future profitability trends can be modeled using budget forecasting and a comprehensive set of reports.

   Kickidler’s advanced analytics help easily calculate project costs and profits based on valuable monitoring data, from logged working hours to detailed employee activity.

3. Identifying and adjusting inefficiencies

   Time tracking data reveals why resource waste at work happens. For example, you could be allocating excessive amount of resources to low-impact assignments and assigning too few specialists to labor-intensive ones.  

   With insights into worktime, you can improve your staffing levels, determine the ROI of new software, and make other improvements to your internal company processes in order to improve business efficiency.

   For example, you could benchmark performance changes after adopting a new business tool or streamlining a process in two separate teams. Or you could try empowering your talented employees by coaching them how to set better goals or apply better time management techniques.

4. Promoting ongoing improvement

   There is quite a number of things you can work on to improve your revenue per employee metric, from adjusting your pricing strategy an finding cheaper suppliers to exploring new revenue streams or diversifying into a new market.

   The success of these efforts will hinge on your employees and their expertise and skills. Your RPE won’t miraculously improve without some restructuring if, let’s say, you notice a bloated organizational structure, redundant employee roles or mismatched employee skills.

   Cooperate with your HR department to ensure they have enough data for informed workforce planning. This can be achieved through monitoring employee performance and other engagement metrics, as well as measuring revenue contribution per client and sales team efficiency.

5. Setting revenue-centric goals

   To ensure you build good revenue, you need to work on continuous improvement of your workforce efficiency.

   While many managers perceive this as making people busy with a swarm of tasks every second of their day, in reality ‘busy’ doesn’t automatically equal extra revenue or productivity.

For example, your employees might be chasing the wrong objectives or feeling exasperated because of underlying process inefficiencies. To ensure optimal resource allocation and overall business efficiency, we recommend that you start tracking metrics like:

• Employee working hours as well as their productivity levels during these hours
• Resource utilization rate that will show the percentage of available time an employee time spent on revenue-generating work to ensure
• Project profitability, where high revenue coupled with high expenses usually mean lower net profit and profit margins
• Task completion rate to understand exactly how effectively employees work on getting through their tasks and address any potential performance issues

Kickidler allows you to monitor all these KPIs over any given time period. The software helps managers direct employees’ efforts to the highest priority tasks, thus ensuring they hit bigger revenue goals. With our monitoring tool, your employees, in turn, get the chance to concentrate on actually delivering results while having enough flexibility to plan their days.

Here at Kickidler, we prioritize and value results over hours. We believe that sufficiently skilled human capital can figure out on their own exactly when, where, and how they perform at their best.

This approach to management, while certainly being a more flexible one, allows managers to build a strong remote culture of high employee accountability, as a result boosting both employee satisfaction and steady revenue growth per employee.

Generate higher returns today with the help of Kickidler

Kickidler reveals exactly how your company generates revenue and where opportunities are lost to operating inefficiencies. Here’s how you can use our platform to up your RPE game:

1. Use a variety of reports to run an in-depth employee analysis for any given period to evaluate the health of your workforce.
2. Track employee profitability at both project and individual levels by analyzing their billable working hours and progress toward project completion.
3. Avoid poor resource allocation using detailed project insights.
4. Identify workflow inefficiencies, non-productive tasks, and bad time management habits, helping your employees reach peak productivity.
5. Benchmark employee performance to evaluate the impact of optimizing business processes and adopting digital management tools.

Don’t leave your profitability up to chance. Start using Kickidler today to unlock your full potential of your employees!