One of the most important numbers a leadership team must understand is the productivity of people within the business. When considering all the KPI’s a business should measure, Labor Efficiency Ratio or LER is one that best measures the productivity of people within a company.
The LER as detailed in Scaling Up by Verne Harnish and the book Simple Numbers, Straight Talk, Big Profits by Greg Crabtree is beneficial because labour is the largest fixed expense in a business, it is the largest cost variable and it has the ability to change the most (i.e. some people are more productive than others) as I previously explained in this blog post the power of LER.
In this video by Rob Simons a Gazelles certified coach from Tennessee, he explains the Labor Efficiency Ratio and breaks down Management LER (mLER), and Direct LER (dLER) as well as explaining how LER can be used to measure LER by staff member and LER by client.