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Performance Indicator and Productivity

Assume:

  • A company has 100 employees.
  • Productivity is $100,000 per employee per year.
  • Variable non-employee cost of sales* is 50%.

* example: materials or merchandise cost

If yearly productivity is improved by only 2%…

The 2% productivity improvement would result in increasing revenues by $2,000 per employee X 100 employees = $200,000 per year.

With variable non-employee cost of sales at 50%, the pre-tax profit improvement is $100,000 per year.

The cost of using The Performance Indicator for all 100 employees for better management and to cause the productivity improvement is only $4,500.

The Return On Investment (ROI) = $100,000/$4,500 = 2,222%

This is why so many organizations are using The Performance Indicator.

 

 

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