Revenue per FTE and Cost per FTE: Metrics of Operational Efficiency and Performance

摘要

Revenue from operations (herein referred to as revenue) and operating cost (herein referred to as cost) are two independent sentinels of a corporation's performance and return on investment (ROI), which is defined as the ratio of revenue to cost (revenue/cost). Although a company can actively manage cost by controlling its number of full-time employees (FTEs) and the number or type of activities, it cannot directly manage revenue. Revenue is entirely driven by market forces. So if a company experiences a decrease in revenue, then cost also must be reduced by the same fraction to maintain ROI. However, none of these three parameters alone (revenue, cost, and ROI) provides information about the operational efficiency of a company. To expand on this point, scenarios for two hypothetical companies (A and B) in the same industry are described below.