SELF TEST #29: Measure Economies of Scale by Type of Employee
Why does the Company need to evaluate the Economies of Scale of more than one type of FTE?
Each type of FTE has a significantly different cost from that of the other types, and from the average of the Company as a whole. The analyses of Economies of Scale and Productivity by the type of FTE enables the Company to manage more precisely the creation of Economies of Scale in the future.
What are the minimum types of FTE the Company should measure?
At a minimum, the Company should measure three types of FTE: Do, Supervise, and Think employees.
What are “Do” employees?
“Do” employees are the employees of the Company who have no one reporting to them. These employees are the primary executors of the Company's activities. They are usually the most numerous and least costly of the Company's employees.
What are “Supervise” employees?
“Supervise” employees are the employees of the Company who have a few people reporting to them or who are technical specialists. These employees are usually middle-rated, exempt employees.
What are “Think” employees?
The “Think” employees are the more senior employees in the organization. These employees set policies and have middle managers reporting to them.
How variable is each type of FTE with the growth in Output of the Company?
The lower the cost of the employee, the more likely it is that that employee type varies more directly, that is, in greater proportion to the growth of the Output of the Company. “Do” FTEs should vary much more directly with the growth in Output than will “Supervise” employees. In turn, “Supervise” employees should vary more directly than “Think” employees.