Orders, revenue & profit per employee – simple indicators of how well an IT services company is doing…

IT services companies quoted on stock exchanges publish their financial results quarterly and at the end of their financial year. Results are normally published with copious supporting notes and narratives, and are complemented by presentations, conference calls, and webcasts for stakeholders, analysts and anyone interested in the company’s performance. There are also normally internal presentations to the company’s staff to cascade the results and key messages across the organisation. There’s nothing unusual or sinister in any of this, but it’s often the case that positives are accentuated, and negatives get less air time.

Every employee is interested in their company’s performance, at least in the Badger’s experience. But employees are often suspicious of the results presented because they seem at odds with what they subjectively ‘feel and sense‘ on a day to day basis. Not every employee is a financial expert or has the time to understand and interpret the jargon, meaning and intricacies of published financial results, so is there a very simple way to get a quick, macro feel for how the company is doing?

Well, yes! Simply divide the reported orders, revenue and profit numbers by the company’s total number of employees. (Some companies publish headcount in their reported results, but for those that don’t it can often be found on their website, company overviews, press releases or marketing material). Simply track how these three ‘per employee’ numbers change quarter by quarter and year by year to get a broad sense of performance devoid of any propaganda. In simple terms, a material upward trend in the numbers suggests a healthy, efficient and growing company that will provide good career opportunities for employees. Flat or declining trends suggest stagnancy, little career development opportunity for employees, and the likelihood of a strategic overhaul at some stage to address these adverse trends. The latter often leads to workforce restructuring and loss of jobs.

Anyone can do the above. It’s simple, and whilst financial purists may assert otherwise, the Badger has found it a reliable way for anyone to keep grounded on how well an IT services company is doing. Why not have a go yourself? Comparing the trend of these three numbers for your company with those of your competitors can be a real eye opener!

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