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Yahoo: What Happens When Your Revenue Per Employee Is Upside Down...

Short post today from the road.  A while back I wrote about the virtues of Revenue Per Employee as the only metric that really matters in the end.  I like it because it's a business focused metric, there's lots of ways for skilled HR leaders to impact it (you choose - the possibilities are endless), and, contrary to the naysayers, it has an earnings side tied into it - it's Revenue per Employee people!  The more you reduce your people on the same revenue level, the greater the earnings.

Or, you could keep the same number of people and get more out of them - which equals more revenue and if you do that with the same number of people, you increase earnings almost certainly since people-related costs are the biggest expense for most businesses.

Anyway, here's what happens when your Revenue Per Employee gets upside down:

"Yahoo's turnaround attempt is going to be messy.

CEO Scott Thompson delivered a painful jolt Wednesday with a payroll purge of about 2,000 workers, or about 14 percent of Yahoo's 14,100 employees. The cuts will save about $375 million annually as Yahoo tries to boost its earnings and long-slumping stock price.

As traumatic as the job cuts may be for laid-off workers, Kessler says Yahoo needed to prune its payroll to show Wall Street that the company can be run more efficiently than it has been in recent years.

Last year, Yahoo produced revenue of $353,000 per employee while its two biggest rivals, Internet search leader Google Inc. and social networking leader Facebook Inc., each generated $1.2 million per employee.

Other major technology companies were also far more productive: Microsoft Corp. had about $800,000 in revenue per employee last year, while Intel Corp. posted $540,000 in revenue per employee, according to S&P's data."

Go dig into your revenue per employee.  Do some benchmarking as much as you can with your competitors - it will be educational for sure.

Comments

HRAthletics

Great metric. Revenues are a more accurate reflection of employee contributions. Earnings relect more management decisions. We don't really expect employees, especially hourly, to cut costs and sacrifice revenues at the expense of earnings. What are they going to do (fire themselves, cut their wages and benefits or outsource a function)? Employees just need to just produce. Management should be more concerned with eliminating waste. Earnings can get complicated and can be a higher level concept.

Helen

I hear what you're saying but if you want a metric that's tied to earnings, would Profit per FTE be the better metric? The definition of earnings is profit, not revenue.

KD

Hi Helen -

You could do that, but the revenue per employee already holds you biggest connection to the biggest connection - employing people - follow me? Also, growth companies may not have earnings yet, so revenue allows you to compare across companies in different industries and at different stages in their growth...

Thanks - KD

Evelyn Washington

Hello,
All of this information is very good. If the employers were to have a meeting and show each employee their worth in the agency, do you think this would increase productivity. Instead of always calling the employees in for what they did wrong?

Thanks,
E. Washington

Payroll System

Yahoo is clearly reevaluating its human capital strategy. Marissa Mayer definitely has her work cut out for her.

INSYSPAY

Tracking your revenue per employee (RPE) metric is a solid productivity indicator. Nice Share.

hr and payroll software in qatar

Great metric revenue about employee. Yahoo is fast forwarding fast thinking one.

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