Strategic Human Resource Management

Section Six

denominator (downsizing or outsourcing) are often
dysfunctional because of the long-term loss in organizational
capabilities.^20 The following provides more specific advice on
the use of measures of revenue per employee:

One way to avoid the incentive to outsource to

achieve a higher revenue-per-employee statistic

is to measure value-added per employee,

subtracting externally purchased materials,

supplies, and services from revenues in the

numerator of this ratio. Another modification, to

control for the substitution of more productive

but higher paid employees, is to measure the

denominator by employee compensation rather

than number of employees... If a revenue-per-

employee measure is used to motivate higher

productivity of individual employees, it must be

balanced with other measures of economic

success so that the targets for the measure are

not achieved in dysfunctional ways.^21