KPI of the Day – Sales: $ Sales per labor hour
Definition
Measures the average amount of sales per labor hours worked. This KPI is mostly used in the retail and restaurant industries.
Purpose
To assess the earnings generated by a business, per each working hour.
Recommendations
$ Sales per labor hour is calculated by dividing revenue earned with labor hours recorded in the reporting period. This data can be collected from the sales report, employee records and time sheet. $ Sales per labor hour also known as $ Sales per employee hour or $ Revenue per employee hour.
Productivity is defined as output per unit of input. Thus, the indicator $ Sales per labor hour is commonly used to assess labor productivity.
$ Sales per labor hour weighs in heavily on sales efficiency. A highly efficient sales level is achieved when the amount of resources available (measured in # Labor hours or their monetary value) generate the most profitable result (measured in # Units sold or in their monetary equivalent).
Based on this formula, this indicator is influenced by two factors: labor hours and sales revenue. Labor hours, in general, can’t be changed significantly because they are related to store opening hours or operational business hours.
However, high levels of sales can be achieved by mapping customer arrival patterns, which can predict peak hours, thus increasing the number of employees working during that time. This data is a good basis for determining work shifts, the number of workers balanced against demand, and finally workers’ wages. In this regard, some best practices for increasing sales efficiency include:
- Identify the most productive sales activity and use it to design consistent, cyclic sales processes;
- Design incentive programs and reward systems for employees, in order to boost their engagement and achieve proportional costs to the sales revenue;
- Save a lot of operational time through check out process automation and order automation;
- Invest in continuous training programs for sales representatives and new employees as well.
If you are interested in more details about relevant KPIs for the sales industry, the smartKPIs.com subscription provides access to +500 KPI examples. Our dedicated Library contains relevant resources to improve your KPI practices. For further related information, feel free to explore our latest Top 25 Sales KPIs – 2016 Extended Edition report.
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