Workplace Productivity on the Decline

As the economy struggles to steady itself in the wake of the worst financial crisis since the Great Depression, businesses and employees alike continue to feel the economic strain. Budgets remain tight from boardrooms to family rooms, with recovery a stubbornly elusive goal. The impacts are evident in PwC Saratoga’s US Human Capital Effectiveness Report 2010/2011, which combines objective data and analysis to help organizations evaluate workforce performance and increase return on human capital investment. The executive summary highlights PwC Saratoga benchmark results gathered in a year when businesses around the world sought signs of economic improvement while continuing to seek ways to control costs and manage an ever-evolving workforce. The key themes that emerged this year include:  

• Recession takes a toll on productivity. Workforce productivity (as measured by revenue per FTE) decreased, reversing the significant upward swing indicated by the 2009/2010 survey and representing the first year-over-year decrease since 2005. Additionally, organizations are investing 17 percent more in workforce compensation and benefit costs to generate each dollar. In 2008, organizations invested $221 for every $1,000 in revenue. In 2009, organizations invested $259 for every $1,000 in revenue. When viewed in conjunction with a decline in revenue per FTE, these downward trends suggest productivity and profitability may have reached a peak.
• Voluntary turnover drops sharply. Voluntary separations have decreased 30 percent since 2006 and more than 20 percent in the last year. The percentage of employees resigning or retiring has dropped 21 percent since 2008 to 7.3 percent. For high performers, the rates are also down by more than a third--from 5.7 percent in 2006 to 3.7 percent in 2009.  
• Employee costs increase. Employee health-care costs continue to rise, but at a slower rate than in the past.
• Recession improves quality of hire. First-year turnover has decreased from 31.7 percent in 2007 to 23.6 percent in 2009. As the economy improves, historical trends suggest turnover numbers will increase.
• Baby Boomers bide their time. Baby Boomers continued to leave organizations at the lowest rate among all demographic groups, with a voluntary turnover rate of just 4.9 percent in 2009.
• While overall eligibility for retirement increased for employees, it has declined for management. While more than one in five employees are eligible for retirement within five years, the percentage of managers and executives eligible for retirement has decreased.
• HR costs increase, while HR headcounts decline: The increasingly strategic role of HR as a business partner is requiring a greater investment in HR labor costs and systems.