What is The Value of Time? Well, It depends.
“You don’t get paid by the hour but by the value you bring to the hour.”
How many people truly understand the value of their time? As a business owner or manager, how many of your employees truly understand what their time is worth to you?
Is their time worth what it costs you? As management consultants, we thought it was a good idea to have this conversation. We were 110% right.
Get the conversation started
If you want to discuss the value of time with your team start by having each person write down an answer to these questions. Discuss answers and the reasons for the them as a group.
- Why does a McDonald’s cook get paid so much less than a neurosurgeon does for working the same hours?
- If I asked you to sit in a room for one hour and do absolutely nothing, how much would you charge me for that hour?
- What are the differences between hourly rate, burdened rate, and billable rate?
- Think about what your day costs a business and costs customers then think about the value of what you produced. Was it worth it?
The answers to these questions will vary and will surely get the “gears turning” about time and its monetary value.
The wage differential
For question one, we derive that the main reasons for differences in how much people are paid include factors such as training required, value of the output (hamburgers vs. lives saved), supply (how many people can do that same job), responsibility level, stress level, etc. Most of us fall somewhere on the spectrum between these two points base on those same factors.
What to charge someone to do NOTHING?
The second question will make some people uncomfortable. They feel like it’s a trick question but the answers and reasons why are kind of fun. The BCS team was willing to sit in a room and do nothing for anywhere from $8.00 – $100.00, no one was willing to sit in a room and do nothing for free (unless they could have their cell phone with them).
One reason for charging for doing nothing was based an individual’s preference for doing something fun or relaxing, indicating that personal time has an intrinsic value. Another, our MBA student, of course, did simple math on the opportunity cost of doing nothing versus doing something that pays money. It’s likely that you will not get anyone on your team willing to do this for free either; we want to know if you do.
In this discussion, it’s important to ask why an employer would be willing to pay someone to do nothing – think the cost of mistakes of low performers vs. the cost of paying him or her to do nothing.
Hourly rates and the real cost
Learning about the value of time should definitely include a discussion about real numbers. For those who own a business or work in proposal development, or accounting, we have a pretty good grasp on the real numbers associated with staff and the hours that they work. But do the staff? They should.
Most people really have no idea what their time costs a company or customers and believe it or not, most of them care. If they don’t care, you have another problem. Explain overhead, benefits and time off and costs that are rolled into a full cost rate for an employee. Explain profit margins, revenue and cost concepts. Never assume everyone knows how these elements of business stack up, even the most educated employees. It’s worth the discussion.
Now that you have people thinking more about the value of their time, you have created an opportunity to make expectations clear about time reporting, time management, and planning your day ahead of time. This effort to become more efficient should coincide with existing policies for reporting work, project management methodology, and inter-company communications.
Building an efficient and valuable workforce, at its foundation, begins with a real understanding of the value of time. Is time your most valuable resource? It’s certainly ours!