When it comes to figuring out if your workforce is running efficiently, FTE benchmarking is one of the best tools out there. In this handbook, we'll cover everything that you need to know, including:
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FTE, or Full-Time Equivalent, measures the workforce size based on actual hours worked, not just headcount. It’s considered one of the most accurate ways to evaluate workforce capacity.
To calculate the FTE of any workforce, simply add up the number of days that all employees work and then divide that figure by the full-time week (usually five days).
For example, 100 employees who work two days per week would be calculated as:
(100 employees x 2 days) / 5 days = 40 FTE
FTE provides a standardized way to assess human resources across organizations. For internal planning, it’s the preferred measure, though for external research, headcount can also be used.
FTE benchmarking is the practice of comparing the workforce from one company to a group of similar companies. This comparison can involve assessing the overall size of the organization or the FTE within specific functions. The objective of FTE benchmarking is to figure out whether a company is over or under indexed compared to its industry peers, and to pinpoint areas where workforce efficiency can be improved.
See how your FTE stack up against industry benchmarks
To achieve meaningful benchmark results, we recommend following these five steps:
Clearly identify the objectives and scope of your FTE benchmarking exercise. If you're unsure, start by asking these three questions:
We typically recommend that you start broad, and then narrow it down after you get started. For example, the objective may be to identify cost out opportunities, so your scope may be to analyze the whole organization. But as time goes on you can then drill down into specific functions.
Determine the metrics that you want to measure based on the part of the workforce that you're benchmarking. Here are some common FTE benchmarking metrics:
Think through the key FTE driver for each part of the workforce that you are benchmarking. For example, Sales FTE are typically driven by revenue, so revenue per Sales FTE is an appropriate metric. In comparison, the key driver of HR FTE is the number of people in an organization, so the HR to Employee Ratio would be the right metric.
Research companies that are similar to yours based on industry, size, business model, and other relevant factors. Consider both direct competitors and companies from related industries that may be viewed as highly comparable.
The key challenge here is finding enough relevant companies with accessible data. At a minimum you should be include 10 comparable companies in your benchmarking exercise. Usually speaking, the more samples the better. But it is an area that requires professional judgement, as too many samples may raise the question of relevance.
Collect FTE data from the identified benchmarking companies. Then validate the data for accuracy, completeness, and consistency. Also account for any differences in data definitions, timeframes, or reporting methods to ensure comparability.
This step is usually the most challenging due to the limited availability of company employee data. To overcome this, you can reach out to industry associations, manually search public data sources, or use a headcount benchmarking data platform like CompanySights.
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The last step is to compare your company's FTE metrics against the benchmarking data to identify gaps, areas of strength, and improvement opportunities. For example, these results could suggest that the marketing function has too many employees, or it could be to recommend more people in the R&D function, as they appear understaffed and risk falling behind competitors.
It's important to consider contextual factors when interpreting benchmark results, such as market conditions, organizational goals, and strategic priorities. Finally, tie these new workforce insights back to your original objectives to complete the benchmarking exercise.
When it comes to FTE benchmarking the most common objection is that “we're different”. Many stakeholders dismiss benchmarks as not being relevant to their organization or function, especially when the benchmarks suggest that improvement opportunities exist.
It's important that benchmark samples are as similar to your company as possible. Factors to focus on include the industry, geography, revenue, employees, and business model. It's also wise to include key stakeholders early in the benchmarking process to avoid pushback later on.
This visibility and inclusion will help gain their trust and support when it really matters. The goal here is to eliminate the “we're different” objection altogether, so it doesn’t come up in the final presentation or even worse, the board room.
Gaining access to relevant FTE data from comparable companies is challenging due to the sensitive nature of employee data. This often means that you can spend days (if not weeks) trying to source just a few data points for your benchmarking exercise.
Consider leveraging industry associations, professional networks, or third-party providers that specialize in employee benchmarking data. This includes our database, which is specifically designed for FTE benchmarking purposes - Learn more about our data.
Accuracy, completeness, and reliability of benchmarking data can be a significant challenge due to the many different sources out there. Furthermore, it's important to be consistent with the type of data that you are using, such as whether it is FTE or headcount. Even if they sound similar, always check that the underlying inputs are the same.
Pro Tip: Validate data by cross-referencing your sources, performing an independent audit, or engaging in a data verification process. By leveraging third-party providers, you can usually gain comfort around data quality, including how they source the data and what checks they perform.
A US professional services firm with 3,200 employees across multiple states was experiencing higher overhead costs in its back-office functions. Leadership suspected inefficiencies in the Finance team, but lacked clarity on how their staffing levels compared to peers.
The company partnered with CompanySights to run a custom FTE benchmarking study.
Overall Finance headcount was 16% higher than the benchmark median, split by:
Equipped with the benchmark insights, the CFO implemented the following initiatives:
"FTE benchmarks gave us the credibility to act decisively, and the results speak for themselves."
FTE benchmarking isn’t just a numbers exercise - it’s a powerful tool to transform how your workforce operates. Armed with these insights, you can drive smarter decisions and become a trusted voice in shaping your organization’s strategy.
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