Measuring labour productivity - Google revenue per employee

Although it doesn’t appear too often in the textbooks, a common approach to measuring efficiency and labour productivity in real-life business is to track revenue (or sales) per employee…

This excellent chart on Google’s revenue per employee from BusinessInsider is a good example of how the measure can be interpreted. The trick is to:

- Focus on the trends (rather than one period’s data)
- Benchmark the data against direct or relevant competitors

A good follow-up question for a written homework or discussion would be: “why is revenue per employee such a useful efficiency ratio for a labour-intensive rather than a capital intensive business”?