WORKSHEET #29: Measure Economies of Scale by Type of Employee
Determine the salary grade levels and type salary grade mid-point for each FTE type the Company uses.
Count the number of FTEs by type for the Company as a whole and for each functional cost organizational unit.
Use the same level of detail of analysis to count the FTEs for the Company as a whole and for each functional cost organizational unit at an earlier period, at least three years ago.
Count the number of annual units of Output for today and at the earlier period.
Calculate the rate of growth, in percent per annum, for the numbers of Do, Supervise and Think FTEs and for the numbers of final Output for the Company as a whole. Do the same calculation for each functional cost organization unit.
Review the current Productivity (i.e., FTEs/Output) and rates of Economies of Scale creation (% per annum growth vs. growth in Output) for the Do, Supervise and Think employees for the Company and for each functional cost organization. Identify those organizations producing Diseconomies and Super-economies of Scale. Explain the differences in rates of Economies of Scale creation.
Estimate the target the Company must set for Supervise and Think employees in order to close its remaining gap on its financial performance goals:
Determine the amount of profit shortfall the Company faces after it considers improvements made in the section Managing Costs: Quantifying Cost Reduction Objectives.
Determine the limits on the growth of average FTEs across the Company (i.e., the weighted average cost for the FTEs for the Company as a whole) to close the portion of the gap that the Input People must contribute.
Calculate the number of company-wide weighted average FTEs the Company may add in order to support the financial goals it has set.
Estimate the number of FTEs of Supervise and Think employees that the Company may add in order to reach this goal.
Assign these growth of FTE targets to each of the Company’s functional cost organization units.