THE TIMES 100 : THE HUMAN FACTOR : Productivity of State’s Firms Showed Mixed Results : Based on revenue for each employee, health care and real estate performed best. But, as usual, numbers can be deceiving.

The productivity of companies in California--measured as the amount of revenue the firms brought in for each employee they have--showed mixed results in 1992, with some industries, such as health care and real estate, way up and others, such as services, significantly down.

In real estate, for example, J.M. Peters & Co. of Newport Beach led the pack, bringing in $1.4 million for each of its employees. Kaufman and Broad of Los Angeles, a much bigger company, was close behind, earning $1.14 million for each of its 960 employees, according to data compiled by STAR Services, a San Francisco-based business researcher.

But productivity numbers can be deceptive as a yardstick of how well a company is really doing.

Since productivity in service- and sales-oriented businesses is typically measured as a ratio of revenue to employees, companies that lay off large numbers of employees appear to have higher productivity. That’s because revenues usually don’t plunge as fast as the number of employees does after a layoff. So it looks like the company is more productive, because when you divide the number of employees into the amount of revenue, the number comes out high.

“Real estate is a good example,” said David Lewin, director of the Institute for Industrial Relations at UCLA. “We know that the real estate market was depressed in 1991 and 1992. Employment is falling, and on the surface it looks like a productivity increase.”

Similarly, part-time and contract workers don’t show up as employees when a company provides data on its expenses; they’re usually reported as vendor expenses. So, again, revenue per actual employee seems high and doesn’t necessarily reflect the number of people who are actually contributing to a company’s revenue.

At home builder Kaufman & Broad, for example, much of the company’s apparent high productivity can actually be attributed to the company’s use of subcontractors, said spokesman Bernard Sandalow.

“As large-production builders, we subcontract virtually all of our on-site construction work,” Sandalow said. “Those are the folks who actually build our houses, but they’re not really on the payroll.”

At the same time, however, Kaufman & Broad has worked hard to increase efficiency this year, primarily by centralizing its marketing, design and purchasing operations.

All told, according to Sandalow, the company’s cost of construction has been reduced by 10% and company revenue has increased.

J.M. Peters Co., a Newport Beach-based home builder, showed the highest productivity among real estate concerns, with $1.4 million in revenue per employee. But President Dale Dowers said the 1992 figures “are an anomaly” because the company downsized and sold $35 million worth of land it had been holding. That made revenue double, Dowers said, while the company’s employee base remained constant.

Among the most complicated industries to examine is health care.

According to The Times 100 study, Cypress-based PacifiCare generated the most money per employee, with $837,000 for each of its 2,100 full-time workers. TakeCare followed with $587,000 per employee and Foundation Health brought in $338,000.

But it’s hard to tell which is really more efficient, because each firm relies on varying amounts of contract and part-time work. A company that did not even make the industry’s top three, for instance, Fountain Valley-based FHP International Corp., had roughly the same income as PacifiCare last year, about $1.8 billion, but because it hires fewer contractors, it showed a much lower productivity level.

Still, according to Lewin and others, health care is a highly profitable and fast-growing field. And it is in fields where revenues are rising or falling fairly steadily, with employee counts moving with them, that measuring productivity as a ratio of revenue to employees is most meaningful.

Issues of subcontractors aside, for example, sales in health care are rising faster than employment is growing. So overall, the industry is posting huge gains in productivity.

Indeed, the average revenue per employee among health care companies was $318,000, up from $144,490 in the previous year, according to data compiled by STAR Services, a San Francisco-based business researcher.

The company with the highest revenue per employee of all of those surveyed was Bergen Brunswig Corp., an Orange-based wholesaler of pharmaceutical products. The company earned $1.57 million for each of its roughly 3,100 employees.