The Most Productive Employees

Most of us know many of the usual metrics to check out when we're looking for candidates for our portfolios. We might look for low debt, for growing profit margins, for growing sales and earnings, and so on. Here's a metric you might not have thought much about: income generated per employee.

It has to be important, though. After all, if you're paying your employees an average of $100,000 each (including the cost of benefits, which can take up 25% to 35% or more), and they're generating an average of $80,000 each in income, then you're in trouble. Employees are a cost to a company, and the more value that can be generated from the cost, the more profitable the company can be.

I recently ran a screen to see which companies in the S&P 500 sport the highest net income per worker. Here are some interesting findings:

Data: MSNMoney.com.

From the table, we can see that in the software industry, Microsoft is getting a lot more dollars per employee than is Oracle or Intuit. We learn that the oil business is far more lucrative than software, when it comes to this metric. We see that the banking industry is not quite as lucrative as you might think. It's not the toughest industry to be in, though. Here's a tougher one: discount retailing.

Data: MSNMoney.com.

You can see what an advantage Costco has, with well more than twice the income per worker as its competitors. Strong income per employee is an indicator of effective management. This is a good exercise to run through when you're examining companies in an industry, to see which firms are best at generating profits with the workforce they have.

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