Sales per employee

Sales per employee, or turnover per employee, is a value showing how large a return the company generates per employee. By dividing total income by the total number of employees in the company, you get a value showing how efficiently the company generates income from its workforce. The key figure gives a general picture of how much return each employee contributes.

How do you calculate sales per employee?

Sales per employee is calculated by dividing total income in a given period by the number of employees the company has had in that period.

Sales per employee = Total income / Number of employees

Total income is the sum of all the income the company has generated from sales in the given period.

What can sales per employee be used for?

Turnover per employee can be used to evaluate efficiency in the running of the company, profitability, the organisational structure and strategy or use of resources, as well as productivity among staff.

A high turnover per employee can indicate that the organisation is run with high efficiency, which may in turn have led to greater profitability. If you assess the result on the basis of how much the company earns, this value can also say something about the organisational chart and the company's organisational strategy working well. If productivity among the employees is high, that can lead to a high turnover per employee.

A low turnover per employee can indicate that the organisation is not run as efficiently, which in turn leads to lower profitability. If you assess the result on the basis of how much the company earns, a low value can also indicate that the company's organisational strategy is not working well enough, or that the organisational chart is set up in a way that hinders optimal operations. If productivity among the employees is low, that too will contribute to a low turnover per employee.

Tips for increasing turnover per employee

If a company has an expansionary organisational strategy in which the focus on increasing the number of employees is greater than the focus on increasing sales, this can lead to a lower turnover per employee. This is often a temporary strategy, and it is generally most favourable to have a high turnover per employee. To increase turnover per employee it is useful to consider the profitability and efficiency of both sales and staff. It can be worth reviewing the marketing strategy, the market, customer relationships and products in order to increase earnings. It can also help to consider how well the allocation, the organisation of and the division of work between employees is working.

Here are some tips for increasing turnover per employee:

1. Best-selling products. Examine which products/services earn the most money.
2. Customer service. Evaluate the company's customer service strategy.
3. Efficiency. Evaluate the efficiency of production/sales compared with earlier periods or with companies in the same industry (with a similar capital structure).
4. Optimal workload. Analyse what the optimal workload is for each employee in order to minimise the use of resources and maximise quality.
5. Organisational chart. Consider whether the organisational chart reflects capacity and strategy.
6. Use of resources. Evaluate whether the company makes full use of each employee's abilities.
7. Number of employees. Analyse how many employees are required per department based on where the company earns the most money.
8. Working environment. Analyse how the working environment affects the quality of the work.
9. Variety in the work. Consider whether each employee gets variety in their work and has tasks they enjoy.
10. External expertise. Consider whether external expertise needs to be brought in to increase sales.

Advantages and disadvantages

The advantage of the sales per employee key figure is that it gives a picture of how efficiently the company uses its employees to generate income. The value can also give an insight into how resources should be allocated between different departments for optimal operations.

Sales per employee also has its limitations. The key figure takes no account of what work each employee does, nor of other factors that affect how, and to what standard, the employees carry out that work. There will therefore be large differences between industries, and it can be useful to work with benchmarks specific to the industry or the company in order to get usable data out of a comparison.

Example

To illustrate the value of sales per employee, imagine a consultancy with 10 consultants employed, each of whom is able to serve 1 customer per month. Each customer pays a fixed price of NOK 10,000. The company has the option of investing in training that will make the work more efficient and enable each consultant to serve 2 customers per month. This investment will also mean that no consultant is able to serve any customers for two months while they undergo the training.

We can divide the question into two situations: situation 1, in which the company invests in training, and situation 2, in which it does not. In situation 2, sales per employee remains stable at NOK 10,000 a month, since each consultant continues to serve 1 customer. In situation 1, by contrast, sales per employee falls to NOK 0 in the two months the training is under way, since no consultants can serve customers in that period. Once the training is complete, capacity doubles, and sales per employee rises to NOK 20,000 a month, that is, twice as high as in situation 2. Over time the temporary decline during the training is therefore recovered, and the company is left with a permanently higher turnover per employee than if it had not invested in the training.

Read more about how the key figures in Capassa keep sales per employee and other productivity measures updated automatically.