As a business owner, you have a lot on your plate daily.

No matter how large or small your business may be, there are everyday duties that all business owners must attend to. These can include strategic planning, finance management, operations management, compliance and legal requirements, customer service — the list goes on and on.

An often overlooked aspect of business management — employee profitability — offers real potential for organizations to gain vital business intelligence while creating a work environment that is more inclusive and much more productive.    

By tracking employee profitability, organizations can see how their employees contribute to their bottom line and how their role within the company adds value to the business overall. This includes customer satisfaction, team dynamics, innovation, and more.

It’s important to understand, however, that there are many more benefits to tracking the profitability of your employees than just the revenue they leverage.

Employee profitability tracking transcends mere mathematics — it urges organizations to consider how effectively they leverage human capital, optimize talent, and cultivate an environment where every employee can contribute to their fullest potential.

Why should you track employee profitability?

Businesses are founded on an idea and a dream.

You have an idea to provide a product or a service that people need and, let’s face it, a dream of financial success. No business owner ever opens shop without any concern of financial troubles. 

While profit is the bottom line, employee satisfaction is necessary if you want to see your company succeed. With employee profitability tracking, these two work hand in hand to ensure the success of business ventures.

The primary purpose of tracking employee profitability is to provide a tangible measure that guides strategic hiring, training, promotion, and resource allocation. It spotlights areas where investing in employee development could yield substantial returns or, on the flip side, reveal inefficiencies that, when addressed promptly, can enhance overall performance.

Let’s say a manager notices a significant increase in sales after investing in immersive training courses for their sales team leads. It’s a sign that spending more on employee growth was a good move. 

On the other hand, within the same organization, a department uses up a lot of resources but isn’t contributing much to the company’s earnings. With employee profitability tracking, the manager can spot this early on, saving the company valuable resources and helping everyone do better in their roles in the long term.

This metric also plays a key role in mitigating workplace bias. For example, Joe and his manager, Bob, are great friends and spend a reasonable amount of time socializing outside of work. Joe is also quite popular with his coworkers and regularly receives corporate accolades, pay raises, and extra vacation time because he is so well liked, although his sales record is subpar.

On the other hand, Stephanie is quite shy and often keeps to herself. She is outstanding in her role but isn’t as popular among her peers and rarely socializes with her coworkers outside of the office.

During her yearly evaluation, she may receive the minimum — if any — pay increase because her inability to actively engage socially with her team means she is often overlooked despite being an employee with a solid history of earning revenue for the company. 

Tracking employee profitability grounds evaluations in concrete data, allowing companies to move beyond subjective assessments that may be influenced by conscious or unconscious biases.

This approach promotes fairness and objectivity in performance reviews, compensation, and career advancement opportunities, contributing to a more equitable workplace culture. Knowing how much profit an employee brings to the company can be the deciding factor in whether or not a business succeeds.

Employee profitability delivers invaluable business intelligence that allows leaders to identify high performers who drive the company’s success and understand the unique attributes contributing to their profitability.

This insight can guide recruitment, training, and engagement strategies, ensuring that the company not only attracts but retains and nurtures talents.

Employee profitability as part of a 360-degree employee feedback strategy

A 360-degree evaluation strategy involves feedback from an employee’s peers, subordinates, supervisors, and self-assessments to offer an in-depth view of how the employee performs in their role. Instead of just hearing feedback from the manager, employees get insights from everyone around them.

This holistic approach builds a balanced understanding of an employee’s contributions, strengths, and areas for improvement.

It’s like putting together a puzzle that gives you the complete picture of an employee’s performance. This helps everyone within the organization understand what the employee excels at and where they could use extra help.

Source: AssessTEAM

When you add employee profitability into the mix, you get an evaluation process that offers a comprehensive view of an individual’s impact on the organization.

It identifies how each employee helps contribute to the financial success of your business, shifting the focus from just doing a job to making a real difference in your success story. 

It’s like being a part of a sports team where everyone’s goal is to win the game, not just to play their position well.

This mindset encourages your employees to find new ways to be not only good team players but also valuable ones that help the team win. It pushes everyone towards being a key player in driving the company forward. It’s all about connecting the dots between doing great work and achieving great results.

Source: Gallup

A 360-degree strategy enriched with profitability data can drive more personalized and effective development plans. Companies can tailor training and development initiatives to replicate these success factors across the workforce. 

Doing so not only amps up individual and team performance but also puts your entire team in sync with where the company wants to go. It’s about pinpointing what works, spreading that knowledge across the board, and aligning personal growth with big-picture objectives.

Advantages of tracking employee profitability

Ever find yourself wondering about the real impact your employees have on the financial health of your business? Well, you’re not alone. Tracking employee profitability isn’t just about counting your pennies; it’s about fostering a healthy, bias-free performance culture that truly reflects the value each team member brings to the table. Keeping an eye on those numbers can be a game-changer for your organization. 

Employee profitability metrics ensure that your business isn’t just surviving; it’s thriving, thanks to your workforce’s collective and individual achievements. The numerous benefits of tracking employee profitability include the following.

Promote a bias-free performance culture

Gone are the days when the office extrovert gets all the glory. By tracking employee profitability, you move past subjective measures like popularity or gut feeling and instead focus on concrete data that shows who’s moving the needle for your business. 

It’s like having an x-ray vision that sees through contributions, big and small, providing a panoramic view of your company’s performance. This way, everyone gets recognized for their true worth through a holistic view of your company’s performance instead of a bell curve that classifies employees based on popularity.

Keeps employees happy, especially those contributing to your bottom line

We all know that a happy employee is a productive one, but how do you ensure your top players know they’re valued? Simple: show them the money! When you understand who’s truly contributing to your bottom line, you can reward them accordingly. 

This isn’t just about fairness; it’s about keeping your MVPs motivated and ensuring they stick around to keep driving your success.

Compare team and project profitability

Ever wonder if Team A is outperforming Team B in terms of profitability? Or is Project X more of a cash cow than Project Y? Tracking profitability at these levels can provide eye-opening insights, helping you make informed decisions about where to allocate resources next. 

Plus, it’s a great way to spot underutilized talent. Maybe Sarah from accounting has a knack for projects that outshine the rest, but you’d never know without the data to back it up.

Avoid remote worker bias

Remote and hybrid work environments are very common these days, and it’s easy for employees who aren’t in the office daily to feel out of sight and out of mind. By focusing on profitability, you ensure everyone is evaluated on their contributions, not their location. 

This levels the playing field and ensures no one’s left behind just because they’re not physically present in the building.

Detect underperforming projects and take remedial action

Imagine being able to spot a sinking ship before it’s fully submerged. Tracking project and employee profitability lets managers detect early signs of trouble, allowing for swift, corrective action. It’s like having a profitability radar that signals when it’s time to pivot strategies or shuffle resources.

Discover how profitable your employees and teams are

Ever faced the awkward “Why does X earn more than me” question? Understanding the profitability contributions of each employee provides a clear, logical explanation for pay discrepancies. It’s about rewarding impact, not just effort, and being transparent about the reason behind those paychecks.

Diving into the profitability data can be like embarking on a treasure hunt.

You might discover that certain employees or teams are gold mines of productivity and profitability previously hidden beneath the surface. With this knowledge, you can better leverage their skills, celebrate their contributions, and plan for future successes.

Tracking employee profitability isn’t just good practice — it’s essential for building a fair, motivated, high-performing culture. It offers clarity, drives better business decisions, and, most importantly, ensures that hard work and true impact don’t go unnoticed.

Start digging into those numbers and uncover the untapped potential within your ranks. The results might just surprise you.

Tips for using employee profitability tracking to improve your bottom line

Have you ever found yourself in a late-night spreadsheet spiral, trying to understand exactly how each team member contributes to the big, juicy pie that is your company’s profitability? Thankfully, there’s help! 

The concept of employee profitability tracking might sound a bit impersonal at first — kind of like reducing your team to simple numbers on a page. When done right, it’s a supercharged engine for driving your business forward and boosting that all-important bottom line. 

Here are some handy tips and guidelines to make employee profitability tracking work for your organization without losing the essential human touch.

Start with the why

Before getting into the how, let’s talk about the why. Understanding the direct and indirect ways that employees contribute to your profitability is crucial. It’s not just about who brings in the most sales or billable hours; it’s also about recognizing the value of the support staff who keep the ship sailing smoothly. 

By tracking this, you’re setting the stage for more informed decisions, from promotions and pay raises to training needs and hiring.

Set clear metrics, but keep them human

The first step is to set clear, measurable metrics tailored to different roles within your organization. For your sales team, it might be revenue generated or new clients signed. For your support staff, consider efficiency improvements or customer satisfaction scores. 

The key? Keeping these metrics transparent and ensuring they’re communicated in a way that feels motivating, not overbearing or invasive. Remember, the goal is to empower your employees, not put them under a microscope.

Invest in the right tools

The days of manually tracking performance on cluttered spreadsheets are gone. Today, a variety of software options can automate much of this process, integrating seamlessly with your existing systems. 

Look for tools that offer real-time insights and customizable reports. This will save you time and provide a more accurate picture of your team’s profitability.

Encourage self-assessment and growth

Now, this is where things get really interesting. Integrating self-assessment into your profitability tracking can be a game-changer. Encourage your team to set personal goals that align with your company’s objectives and to regularly reflect on their performance. 

This doesn’t just boost employee engagement — it fosters a culture of continuous improvement and personal accountability.

Use data to drive development, not just decisions

Sure, the insights you gather can help shape strategic decisions, but they’re also a gold mine for driving employee development. This data can be used to identify skills gaps and tailor training programs accordingly. 

Maybe you notice that a team member with slightly lower sales numbers excels in customer retention. Why not offer them training in advanced sales techniques? By aligning development opportunities with profitability insights, you’re investing in your team’s growth and your company’s future.

Celebrate the wins and learn from the losses

Last but not least, remember to celebrate success. Use the insights from your profitability tracking to recognize and reward outstanding contributions, whether it’s through public acknowledgment, bonuses, or professional development opportunities. When the numbers reveal areas for improvement, approach them as learning opportunities rather than setbacks.

Employee profitability tracking isn’t just about boosting your bottom line; it’s about building a stronger, more cohesive team where every member feels valued and understood. By approaching this process with empathy, clarity, and a focus on growth, you can harness the full potential of your team while steering your business toward greater success. Your bottom line (and your team) will thank you.

Challenges of using employee profitability tracking

Below are some of the challenges of tracking employee profitability.

• Time investment must be logged in timesheets. First off, there’s the task of logging every minute worked into timesheets. Imagine needing to document each detail of your day, from project work to a quick brainstorming session by the coffee machine. 
  While it’s essential to track where time is spent, filling in timesheets can quickly become the chore you love to hate. It’s a delicate balance between ensuring accurate tracking and not turning your team into clock-watchers.
• Accurate project budgeting with fixed expenses. Then, there’s the hurdle of accurate project budgeting against fixed expenses. It’s like trying to predict the weather — requiring a mix of skill, experience, and a bit of luck. 
  Accurate budgeting forms the backbone of profitability tracking; slip up here, and the repercussions can ripple through your calculations, undermining their reliability.
• All projects have to be well-documented in the system. Ensuring thorough documentation for every project is another mammoth task. 
  Every piece of work needs to be cataloged with the precision of an archivist, capturing every twist and turn along the project’s journey. It’s vital for maintaining accuracy in tracking, but let’s be honest — it’s not fun.
• Employee hourly rates must be kept up to date. Updating employee hourly rates regularly is crucial, too. 
  This means staying in step with changes in market rates, promotions, and inflation — ensuring your profitability assessments are based on current figures. It’s a continuous process that requires keen attention to detail and an unwavering commitment to accuracy.
• Ethical considerations. The collection and use of employee data must be handled with the utmost care. Transparency and responsible data management are paramount. 
  Employees should be fully aware of what data is being tracked and for what purpose, reinforcing a culture of trust and respect. How you handle this data impacts employee trust and defines the ethical backbone of your tracking efforts.

How to overcome the challenges of using employee profitability tracking

Below are some ways you can overcome the challenges of tracking employee profitability.

Simplify timesheet collection

Bring up the subject of timesheet collection, and you’re bound to get an eye roll or two. It’s an easier practice — and one that most employees seem to prefer — to use a simpler method for employee time tracking.

Picture this: instead of the annoying task of writing down every single minute worked every single day, why not switch to a more laid-back weekly or even monthly timesheet submission? It’s like choosing to clean your house once a week instead of tackling daily household chores.

This method reduces the hassle for your team and keeps essential time tracking in place without making everyone feel like they’re chained to the clock. This approach is all about finding that sweet spot between necessary oversight and giving your team the breathing room they need.

Sync with bookkeeping for budget harmony

Oh, the symphony of integrating timesheet data with bookkeeping — music to any project manager’s ears. Imagine your project budgeting numbers and timesheet data seamlessly synced, dancing in perfect harmony.

This integration ensures that your budgeting is always on point, reflecting the actual hours worked without manual juggling. With this setup, you’re always in the loop, making informed decisions based on accurate, up-to-date financial data.

Payroll integration for seamless compensation

Last but certainly not least, let’s dovetail timesheet tracking right into payroll.

When hourly pay rates are perfectly in sync with the hours logged, it’s like having your cake and eating it, too — everyone gets paid accurately and on time, without any guesswork.

This integration is a game-changer, ensuring payroll computations are as smooth as a well-aged whiskey, with no harsh aftertaste of discrepancies or errors.

It means you can rest easy, knowing your team is compensated fairly for their hard work, reinforcing trust and satisfaction. Plus, it frees up your time to focus on what really matters—driving your project to success.

Unlock the true value of your workforce

Implementing employee profitability tracking means navigating the complex dynamics of a modern business landscape. It’s a strategic move that goes beyond merely quantifying work contributions; it’s about measuring the real value each team member contributes to the organization. 

It means the popularity of a team member like Joe doesn’t overshadow the quiet brilliance of Stephanie, ensuring rewards are handed out based on the true value an employee brings to the table.

It informs smarter decisions regarding investments in employee development and shows how individuals contribute to the company’s success. Whether it’s through enhancing team dynamics, boosting customer satisfaction, or driving innovation, understanding employee profitability helps identify where and how to steer company resources for maximum impact. 

It emphasizes a culture of fairness and transparency, where promotions and rewards are based on concrete contributions rather than subjective favoritism.

By integrating profitability tracking into performance evaluations, businesses create an environment where employees are motivated to contribute to the company’s financial health, recognizing their direct impact on its success.

Explore how to transform employee performance reviews into opportunities for growth and cultivate a culture of continuous improvement. 

Edited by Jigmee Bhutia