FTE, or ‘full-time equivalent’, is a way to normalize staffing decisions. In the modern workforce, particularly in administrative environments, employees perform multiple functions, or work unusual schedules.
Using FTE to determine the size of the workforce makes accurate productivity and cost measures possible. A full-time equivalent ‘person’ is simply 40 hours of working time. This could be a single person working in one role, or four people each working 10 hours on a particular job.
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In the example above, assume 4 people all contribute to the same job part time, and get 40 pieces of work done per week. If you simply divided those 40 pieces by the 4 people working on them, productivity would be 10 per person per week. When using the FTE method, it is 40 units per FTE per week.
While this sounds obvious in this example, the math behind the concept is often overlooked, especially when there are many small additional responsibilities that pull people away from a primary job.
It is difficult to accurately estimate FTE when people multi-task profusely or when staffing is static and demand is dynamic. In the first situation, it can be hard to apply hours to a specific job, or the few minutes here and there are not accounted for in productivity calculations.
In the second situation, people adjust their work pace when demand fluctuates, making it hard to determine true FTE requirements. In truth, static staffing is nearly always wrong. It is either too high or too low for the momentary demand. Often this is masked by working from a backlog, but that adds lead time to the process, which hurts customer satisfaction. In practice, the staffing must be flexible to be both efficient and responsive.
In a Lean environment, daily management requires knowing precisely how long tasks take, and how much time is available to complete those tasks. Calculating staffing in terms of FTE allows leaders to be much more flexible in matching their teams to the size of the workload.
So to use the concept of FTE effectively, think of it like a balance sheet. All the jobs and the FTE requirements on one side should match the actual number of people assigned on the other side. Two common problems are not accounting for all the work that is being done, and double counting people.