Time Is Money - But How Much?
Everyone has heard the proverbial truth that "Time is Money" but not many have actually stopped to quantify the dollar value of time. Because of the importance of this concept, in this article we have provided a chart (see Table 1 below) that you can copy and post on your bulletin board or carry in your wallet or purse for quick reference when an appropriate occasion arises.
This table assumes a 40-hour workweek. Along the left column is listed the number of hours per week saved by you or an employee as a result of some new method of operation. The top row of numbers can be interpreted as the value of your time or the loaded salary (salary + cost of benefits + cost of equipment provided + office space provided + etc.) of the employee. The number in the intersection of the appropriate row and column is the annual value of that time. For example, if you can save an employee two hours per week, and the employee's annual loaded salary is $20,000, then the value of that time saved is $1,000 per year. Note that it is unusual today for a loaded salary to be under $20,000, although this may be useful for part-time employees.
While this may be interesting information, what does this have to do with technology? The answer is that technology may be the way to save that time. And this table may be useful in evaluating the cost/benefit of an investment in computer technology. Consider an example:
Suppose you have been considering a computer which you believe will save your employee two hours a week. Assuming a $20,000 loaded salary, this is worth $1,000 per year. If the computer has a useful life of five years, this is $5,000. If the computer system can be purchased for less than $5,000, it might be a good business investment.
However, unless you can actually get two hours of benefit from the time saved, there is no advantage. Since it is usually not practical to reduce your employee's hours, how do you reap the benefit? Often the answer is to put the time toward other activities that benefit the business, such as marketing activities that bring in new customers. Ideally the business can expand further without requiring more help.
The same methodology can be applied to training. If a two-hour training session can save an employee even 10 minutes per day, that training time will pay for itself fairly quickly. With timesaving features like macros and templates in today's software, training becomes even more useful.
Table 1 - Value of Savings Per Year
|
Annual Loaded Salary |
|||||
|
Hours Saved per Week |
$10,000 | $20,000 | $40,000 | $80,000 | $160,000 |
| 1 | $250 | $500 | $1,000 | $2,000 | $4,000 |
| 2 | $500 | $1,000 | $2,000 | $4,000 | $8,000 |
| 4 | $1,000 | $2,000 | $4,000 | $8,000 | $16,000 |
| 8 | $2,000 | $4,000 | $8,000 | $16,000 | $32,000 |
| 16 | $4,000 | $8,000 | $16,000 | $32,000 | $64,000 |
December 1998
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