Leveraging Talent, Maximizing Results
Cable sector keeps an eye on revenue per full-time employee
by K.C. Neel -- Multichannel News, 10/12/2008 6:00:00 PM MT
As the cable industry matures and profit growth slows, operators and programmers are closely monitoring and trimming the cost of doing business, according to the latest study by Pricewaterhouse Coopers' Saratoga division and the Cable Television Human Resources Association.
By evaluating revenue per full-time employee (FTE), operating costs per FTE and profit per FTE, PWC Saratoga found that productivity — or revenue per FTE — fell 2.8% over the previous year. At the same time, operating costs per FTE fell 13%. That compares to a 24% increase in operating costs in Saratoga's general industry index. That suggest that generally compared to other industries, CTHRA participants achieved a stronger control over operating costs, said Shebani Patel, a PWC Saratoga manager who evaluated the data for CHTRA.
“It is interesting to note that despite the decrease in revenue per FTE, CTHRA organizations' greater emphasis on cost controls helped the organizations maximize profit despite flat and declining revenues,” Patel said.
The CTHRA participants experienced a dip in revenue per FTE (to $486,329), but the profit per FTE rose $7.5% (to $159,434).
At the same time, the PWC Saratoga General Industry median comparisons of $355,358 in revenue per FTE and $49,026 in profit per FTE suggests that CTHRA participating companies continue to leverage their talent pools in a way that better maximizes their financial results amid a weakened economy, Patel said.
This is the third year the Saratoga office has put together a human metrics study for CTHRA. It has become easier to collect the data and some trends have become apparent, said The Weather Channel Cos. senior vice president of human resources Lisa Chang, chairman of CTHRA's human metrics survey committee. The survey gives companies a quantitative perspective on qualitative issues, she said.
“It's a great mechanism to compare among peers as well as see their own internal progression,” Patel said.
When CTHRA launched this survey three years ago, most companies didn't automatically compile the kind of data necessary to make the survey meaningful. Today, more firms have joined the survey and are tracking its data points, Chang said.
It's not as if companies didn't want to participate, Chang said. Rather, many didn't have the resources to put the information together. Most companies have the data, she said, but it is not always easy to cull or collect.
Last year, CTHRA created programs to help companies find and extract the needed data. It also held seminars to help companies figure out what to do with the information once it's in their hands. It seemed to help. The number of participating companies has grown every year to 17 in total.
CTHRA provided participants with Microsoft Excel spreadsheets of their specific data as well as the overall results, for year-over-year comparison with their past performance, the cable industry and general business tracked by PWC Saratoga.
“The information becomes more meaningful for each company,” Chang said, “and participating companies can customize their analysis.”
PWC Saratoga also analyzed labor-cost revenue percent, or the relationship between labor dollars (cash compensation plus benefits) invested and revenue generated. This statistic provides a better understanding of the top-line return that is achieved based on how much a company spends on its employees.
Industry leaders in this category are able to maintain a lower labor-cost revenue percentage than their peers, Patel explained. This statistic shows a company's ability to attract and retain some of the most productive employees and compensate them according to financial outcomes, she said.
Participating CTHRA companies' median result was 17.5%, up from 17.2%, Patel said. That means it took about $175 of labor costs to generate $1,000 in revenue. The PWC Saratoga General Industry median was 28%, meaning that it took $280 in labor costs to generate $1,000.
To be sure, this number fluctuates from industry to industry, Patel said. However, the data suggests participating cable companies are managing their labor investments in a way that requires fewer labor dollars to generate the same top-line return, compared to other industries. This is an important measurement for companies today, Patel said, because of the soft economy.
“It is important to ensure that reward and work-force planning practices are in line with projected revenue growth, and that labor costs are controlled relative to the amount of revenue generated,” Patel said. “You don't want that number too low, but you also don't want it to be too [high]. And the cable industry appears to be doing a pretty good job of keeping that number in line.”
The PWC Saratoga survey also looked at median average tenure. The average median tenure for CTHRA companies increased by 16.7% from a year ago, rising to 5.81 years from 4.98 years — as compared to the PWC Saratoga General Industry median of 8.36 years.
To get a better handle on why employees leave the industry or specific companies, the CTHRA set up a think tank last year to study employee turnover. Regardless, the median tenure suggests CTHRA employees have fewer years of service than employees in other industries within Saratoga's database.
It is important to note that tenure does not necessarily speak to the age or experience level of the employee. Moreover, the median tenure of cable company employees appears on the rise compared to PWC Saratoga's General Industry Index, which showed a 12.4% decrease this year, possibly driven by the layoffs of longer-tenured workers.
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