14 March 2012

Benchmarking: what you need to know, and why

At the RCSA International Conference last year, the theme was Targeting Innovation for Productivity and as I wrote about in InSight 197 it was an excellent conference. 

One of the aspects that was mentioned by more than one speaker was the importance of benchmarking. The point being that there is little benefit in going down the path of innovation if you do not know what success looks like, specifically. There are two different levels of success, firstly improving against your internal benchmarks and then measuring yourself against industry best practice benchmarks. 

Keynote speaker, Tom McKaskill said ‘metrics and benchmarking are essential (in effective innovation).'

Each agency can measure themselves against their own benchmarks but more relevant are industry benchmarks. 

Here are some industry-wide benchmarks for the 2010/2011 financial year.  
  • The average total remuneration paid per income producer was $98,638 (an 11% improvement on 2009/10).
  • The average percentage of gross profit spent on total staffing and management costs was 55%. Best practice benchmark is 42% (top 10% of agencies).
  • The average gross profit returned for each $1 spent on Income Producing staff was $2.64 (5% lower than last year). Best practice benchmark is $3.60.
  • The number of perm placements per person for 2010/2011 was 11. Best practice benchmark is 22.
  • Average perm placement fee was $7,042 (down 2% on last year)
  • The annual average temp/contract hours processed per person (FTE) was 15,200. Best practice benchmark is 29,000.
  • Average temp/contractor hourly charge rate $48.20 (up 5% on previous year). Average pay rate was $36.20
  • Average temp/contractor gross profit per hour was $6.80 (1% down on the previous year)
  • Average temp/contractor gross profit as a % of sales was 14.4% (down from 17% the previous year). Best practice benchmark is 24%.
  • Marketing expenditure as a % of gross profit was 5.3% (down from 5.9% the previous year).
  • Total expenditure as % of gross profit was an average of 78%. Best practice benchmark is 56%.
  • Average total expenditure per income producer was $201,855 (up from $196,352 in the previous year).
  • Average total expenditure per person was $144,050 (up from $139,694 in the previous year).
This data is from the Recruitment Industry Benchmarking survey of 107 Member participants. The profile of these participants is as follows: 

Member participation by State:
Vic 39% - NSW 34% - QLD 7% - WA 6% - SA 2% - NZ 11% - TAS 1%  

Member participation by location:
44% in the CBD, 37% in the Suburbs & 19% Regional  

Member participation by GROSS PROFIT volume: (Gross profit is the sum of perm fee's + temp/contract gross profit + other gross profit)
  • 13% of members achieved Gross Profit of $5m or more
  • 68% of members achieved Gross Profit of $1.5m to $5m
  • 19% of members achieved Gross Profit less than $1.5m 
Perm sales by sector:
  • Executive is 10% of placements & 12% of the RIB perm sales volume
  • White collar & Professional is 52% of placements & 54% of the RIB perm sales volume
  • Blue collar is 38% of placements & 34% of the RIB perm sales volume 
Temp & contract sales by sector:
  • Executive is 6% of the RIB sales volume
  • White collar & Professional is 52% of the RIB sales volume
  • Blue collar is 42% of the RIB sales volume  
All Annual RIB Averages are based on a team of 15.4 (11 income producers and 4.4 support staff - FTE's) 


It's critical to know whether your efforts at improving specific areas of your company's financial performance are paying off. 

If you don't know, I suggest you find out. Now.

Note: this is not a paid endorsement for the RIB Report. There is no commercial arrangement, financial or in-kind, between myself and the owners of the RIB Report.

3 comments:

  1. Hi Ross

    Can you recall what the average Net Profit % was, and the "Best Practice"?

    Many thanks!

    Megan

    ReplyDelete
  2. Hi Megan

    The RIB Report (for 2010/11 FY) reported as follows

    RIB Average Profit before tax as a % of Gross Profit
    TOP performing members Profit before Tax as a % of Gross Profit > 44%
    GOOD performing members Profit before Tax as a % of Gross Profit 36% to 43%
    RIB AVERAGE Profit before Tax as a % of Gross Profit ranged from 9% to 35%
    RIB overall Average PROFIT before Tax as a % of Gross Profit was 22%

    Hope that helps

    ReplyDelete
  3. Ross, that's fantastic. Thank you so much.

    ReplyDelete