Explore the transformation of human capital from the industrial era to the knowledge economy, focusing on productivity metrics, workplace diversity, and the importance of measuring employee performance. File photo.
During the industrial revolution, it became imperative to compete with adversaries on a productivity level. Work Measurement Study became the order of the day. The terminology described the systematic application of industrial engineering techniques to establish the work content and time it should take to complete a task or series of tasks.
Work measurement is a productivity improvement tool. Before improvements can be made, the current productivity level of an organisation must be measured. This measurement was then used as a baseline to determine if improvement projects have resulted in genuine improvement. We have now moved on to the knowledge economy and the third industrial revolution. It would seem some old lessons have been forgotten. Today one also needs to study the same concept, only in a different manner.
1. The World Economic Forum report, Measuring Stakeholder Capitalism contains a set of 21 core and 34 expanded metrics and disclosures which was published in September 2020. The report drafted in “ Towards Common Metrics and Consistent Reporting of Sustainable Value Creation” The report focused on four themes, People, Planet, Prosperity, and Principles of Governance, these metrics and disclosures reflect a six-month consultation process with more than 200 companies, investors and other interested parties.
Percentage of employees per employee category, per age group, gender, and other indicators of diversity (e.g. ethnicity). Global Reporting Standards (GRI) 405: Diversity and Equal Opportunity sets out reporting requirements on the topic of diversity and equal opportunity. This standard can be used by an organisation of any size, type, sector, or geographic location that wants to report on its impacts related to this topic.
Of particular interest in the South African context are the statements; “Gender, ethnic and cultural diversity, particularly within executive teams, continues to be correlated to financial performance across multiple countries worldwide. What drives this correlation is that more diverse companies are better able to innovate, attract top talent, improve their customer orientation, enhance employee satisfaction, and secure license to operate.”
Companies that focus on improving the representation of a diverse workforce and effectively utilise inclusion and diversity as an enabler to develop their talent can reap tangible and intangible benefits. Revenue Per Employee is the ratio of revenue generated per employee of a company on an average; this ratio gives an idea about how the company will perform in a specific quarter – especially considering the revenue vs. cost of each company employee.
2. The revenue per employee indicates the average revenue a single employee generates. It helps predict the company's performance in a particular quarter, especially when comparing payment and employee costs. To better understand, comparing it to the company's historic ratios over multiple years is essential. For example, it may show whether the ratios are increasing or decreasing. It helps track changes in employee productivity levels which is essential. Comparing ratios with peers and past performance helps deeper insight. There are a number of reasons why it’s a good idea to calculate this metric on a regular basis.
One can only improve something that one can measure. It may be insightful to compare revenue per employee year-on-year to see if there are any notable changes.
3. Human capital is a broad term that refers to the economic value of a person's education, training, skills, and other experiences. While the theory is criticized for being too simplistic, many businesses are seeking to invest in the human capital of their employees in order to become more profitable.
The possible downside of relying too heavily on human capital is that it is portable. Human capital is always owned by the employee, never the employer. Unlike structural capital equipment, a human employee can leave an organisation. Most organisations take steps to support their most useful employees to prevent them from leaving for other firms.
Revenue per employee can vary significantly by industry. Here are some general estimates for different sectors:
Technology: Often has high revenue per employee, with values typically ranging from $200,000 to over $1 million, depending on the company and sub-sector (e.g., software vs. hardware).
Financial Services: Generally high, with averages between $500,000 and $800,000. Investment banks and asset management firms can have even higher figures.
Healthcare: Revenue per employee can range from $200,000 to $600,000, depending on the specific area (e.g., hospitals, pharmaceuticals).
Retail: Usually lower, with averages around $200,000 to $400,000, influenced by the type of retail (e.g., e-commerce vs. brick-and-mortar).
Manufacturing: Varies widely, but often falls between $100,000 and $300,000.
Construction: Typically lower, with averages around $100,000 to $250,000.
Hospitality: Revenue per employee can be quite low, averaging between $50,000 and $200,000.
Revenue per employee can vary significantly by industry. Here are some general estimates for different sectors in the USA, it may differ in South Africa:
Technology: Often has high revenue per employee, with values typically ranging from $200,000 to over $1 million, depending on the company and sub-sector (e.g., software vs. hardware).
Financial Services: High, with averages between $500,000 and $800,000. Investment banks and asset management firms can have even higher figures.
Healthcare: Revenue per employee can range from $200,000 to $600,000, depending on the specific area (e.g., hospitals, pharmaceuticals).
Retail: Usually lower, with averages around $200,000 to $400,000, influenced by the type of retail (e.g., e-commerce vs. brick-and-mortar).
Manufacturing: Varies widely, but often falls between $100,000 and $300,000.
Construction: Typically lower, with averages around $100,000 to $250,000.
Hospitality: Revenue per employee can be quite low, averaging between $50,000 and $200,000.
4. According to the latest Independent Communications Authority of South Africa (ICASA) Electronic Communications Questionnaire an unexpected picture emerges. The total national mobile traffic decreased by 22.92%, Mobile to other mobile networks decreased by 13.49%, and Outgoing mobile traffic to the same mobile network in minutes also decreased by 26.06%, and Mobile to fixed decreased by 16.05% in 2023. The total number of minutes is still a staggeringly large number over 73 billion minutes.
It is easier to see that one employee takes longer than the benchmark, skilled employee in a manufacturing factory. It may be quite a different thing to measure the productivity of employees who spend a lot of time each day on their phones whether they are making calls or are searching for items on the web, or working on some electronic platform.
* Kruger is an independent analyst.
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