Full Time Equivalent Math

Full time equivalent(s), commonly referred to as FTE(s), represents the number of equivalent employees working full time. One full time equivalent is equivalent to one employee working full time. Typically, FTEs are measured to one or two decimal points. FTEs are NOT people. Rather, FTEs are a ratio of worked time, within a specific scope, like a department, and the number of working hours during a given period of time. As such, an FTE often does not equate to the number of employees actually on staff. FTEs are a mathematical tool used to compare and help understand workloads, and the fragmentation of those workloads, across processes, teams, departments, value streams, and businesses. This is especially relevant in environments where employees work multiple processes, are shared among multiple teams, work odd schedules, and/or work part time. Managers use FTE insight for things like:

  • calculating current and future state staffing requirements,
  • calculating real or potential labor savings from process improvement,
  • understanding resource requirements for projects, and
  • normalizing staff count for the purpose of generating performance metrics such as revenue per person and productivity per person per hour (where the FTE is used as a mathematical proxy for “person”)

Some FTE math follows. FTE1FTE2As with any measure (no pun intended) of Lean Math, there are at least a few things to be mindful of:

  • Just because the math “works” doesn’t mean that FTE-based conclusions are sound. As previously stated, FTEs are NOT people, they are ratios. Real people do the work. As lean practitioners try to understand improvement opportunities, and the chance, for example, to redeploy a worker to a process that needs additional capacity, they must pragmatically and respectfully consider things like how the work is/will be designed, standardized (which means understanding steps, sequence, and cycle time), balanced among team members, “levelized” in the context of volume and mix, apportioned given cross-training gaps and gap closure opportunities and limitations, political dynamics.
  • The math required to determine optimal staffing is specific to balancing line staffing for a given product or service (or family of products or service) and is rarely the same thing as FTEs. This is, among other things, because optimal staffing can be calculated for multiple “playbook” scenarios based upon different demand rates and, simply put, optimal staffing is often different than actual staffing.

Related post: Work Content