Value-Added Productivity Per Employee

What is Value-Added Productivity Per Employee?

Value-Added Productivity Per Employee

Value-Added Productivity Per Employee is a measure that helps us understand the contribution made by employees to the overall revenue generated by a company. It takes into account the total employment in the organization and calculates the value added by each employee.

To calculate the Value-Added Productivity Per Employee, we need to consider two factors: total product revenue and external direct material. Total product revenue refers to the total income generated by the company from its products or services. External direct material represents the cost of materials purchased from external suppliers.

The formula to calculate Value-Added Productivity Per Employee is as follows:

Value-Added Productivity Per Employee = (Total Product Revenue - External Direct Material) / Total Employment

Total employment includes all the employees working in various functions of the organization, such as sales and marketing, distribution, manufacturing, engineering, customer service, finance, general and administrative, and others. It also includes contract and temporary employees on a full-time equivalent (FTE) basis. By considering all these employees, we get a comprehensive view of the organization's productivity.

This measure helps us understand how efficiently employees are contributing to the revenue generation process. A higher Value-Added Productivity Per Employee indicates that employees are adding more value to the company's products or services, resulting in higher revenue. On the other hand, a lower value may indicate inefficiencies or lower contribution by employees.

By tracking this measure over time, companies can identify trends and make informed decisions to improve productivity. They can analyze the factors that contribute to higher or lower value-added productivity and take appropriate actions to optimize their workforce and processes.

For example, if a company notices a decline in Value-Added Productivity Per Employee, they can investigate the reasons behind it. It could be due to factors such as outdated technology, inadequate training, or inefficient processes. By addressing these issues, the company can improve employee productivity and ultimately enhance its overall performance.

In conclusion, Value-Added Productivity Per Employee is a valuable measure that helps companies assess the contribution of employees to revenue generation. By understanding this concept and tracking it over time, organizations can make data-driven decisions to optimize their workforce and improve productivity.