Assess your firm's efficiency by calculating Human Capital Return on Investment (HCROI)—the profit generated for every dollar invested in your workforce.
Earnings Before Interest & Taxes (EBIT) = Total Revenue - Total Operating Expenses - Total Labor Costs
EBIT Per FTE = EBIT / Number of Full-Time Equivalents
Human Capital ROI (HCROI) = EBIT / Total Labor Costs
Note: This model uses EBIT to provide a clear view of core operational profitability generated by the workforce, before the influence of debt and taxes.
A firm has $5M in revenue, $1.5M in operating expenses, $2M in labor costs, and 20 FTEs:
In the financial services industry, human capital is the most critical asset. The knowledge, skills, and efficiency of your workforce directly drive profitability and growth. However, simply measuring revenue per employee can be misleading, as it fails to account for the substantial investments in both labor and operational infrastructure. The Financial Services Productivity Calculator provides a far more insightful analysis by focusing on two key metrics: Human Capital Return on Investment (HCROI) and Earnings Before Interest and Taxes (EBIT) per Full-Time Equivalent (FTE). This powerful tool is designed for managers, executives, and analysts in sectors like wealth management, banking, and insurance to gauge the true productivity and financial return of their workforce.
Our Financial Services Productivity Calculator centers on the HCROI ratio, a precise measure of the operating profit generated for every dollar spent on total labor costs. An HCROI greater than 1.0 indicates that your workforce is generating more operating profit than its total cost, a clear sign of an efficient and productive team. By using EBIT as the profit metric, the calculation provides a clear view of core operational performance before it's affected by financing decisions (interest) and tax strategies. This approach, as detailed in financial management resources like Investopedia, offers a standardized way to compare productivity across different business units or against industry benchmarks.
In addition to HCROI, the calculator computes EBIT per FTE. This metric reveals the average operating profit contribution of each standardized employee, factoring in all necessary business expenses. It's a more robust indicator than simple revenue per employee because it acknowledges that supporting a productive employee requires significant investment in technology, compliance, and other operating costs. As organizations continue to invest heavily in FinTech and other tools, understanding this net contribution is vital. The strategic insights from the Financial Services Productivity Calculator help organizations make data-driven decisions about staffing levels, compensation strategies, and technology investments. By tracking these metrics over time, as explained in general productivity concepts on Wikipedia, firms can identify trends and proactively manage their most valuable asset. Use the Financial Services Productivity Calculator to move beyond surface-level metrics and unlock a deeper understanding of your firm's operational engine.
Explore all remaining calculators in this Finance & Banking category.
Explore specialized calculators for your industry and use case.
HCROI is a financial metric that measures the return a company gets from its investment in its workforce. It is calculated by dividing the company's operating profit (EBIT) by its total labor costs. It shows how many dollars of profit are generated for every dollar spent on employees.
Revenue only shows the gross income generated. EBIT (Earnings Before Interest and Taxes) is a more accurate measure of operational productivity because it subtracts the operating and labor costs required to generate that revenue. It reflects the core profitability and efficiency of the business operations.
A good HCROI ratio is anything greater than 1.0. An HCROI of 1.5, for example, means that for every $1 spent on total labor costs, the company generates $1.50 in operating profit. A ratio below 1.0 indicates that the cost of labor is higher than the operating profit it helps to generate, suggesting an efficiency problem.
EBIT per FTE shows the average amount of operating profit each full-time equivalent employee generates. It is a powerful metric for measuring the net contribution of the average employee and helps in assessing the overall efficiency and scalability of your business model.