My brother, an engineer, calculated the value of his leisure time: He figured he worked hard to enjoy himself, so his basic equation was to simply take his daily salary and divide it by his personal time – which after sleeping, commuting, working, eating and chores is about 4hrs (if we’re lucky) per day. The median Australian income is circa $60,000pa or $164pd. So, a typical calculation would yield a net effort return of circa $40 per leisure hour. If we could buy an extra hour for less than $40 we should, and we should be remunerated at more than $40ph to sacrifice this ‘leisure time’ (which incidentally is 33% more than our average work rate per hour). Each of us will place a different value on our personal time, from infinity to very low (if we really have sad existences). But place a value we must, if we are to make very practical decisions like when to work overtime, when to outsource the mowing, how to value the time saving that the ride-on lawnmower will bring!
Our work lives are a blur of activity. Multi-tasking at a million miles an hour as we speed-up everything we do to compete on a global scale. Productivity seems to be about working everywhere, on everything, all the time. Churning through daily tasks like the proverbial hamsters, spinning that wheel faster and faster, until…
Where will it end? Only when we explicitly place a value on that most precious commodity of all. The resource that, for all of us, is guaranteed to run out. Time.
Anyone with a mortgage understands the Time Value of Money, and it is denominated by interest. Einstein proclaimed that “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it”. Certainly the finance industry is based on the time value of money.
Whilst the literature is full of theory and mathematics for calculating the “Time Value of Money”, I am more interested in the “Money Value of Time”. In this frenetic hyper-connected-to-everything world we live in, so abundant in everything (for those lucky to live in wealthy first world countries), what is the one thing we treasure most? For me, it is time.
Similarly, organisations need to evaluate and define the money value of time within their own operations. The value of process cycle time reduction is not simply in the productivity benefits that may accrue from automating or out-sourcing business processes. The greater value is in the actual hours per process saved from initiation to successful completion. How is it that sophisticated enterprises can easily calculate the cost saving of head-count reductions, but place no value on cycle time reductions? If a process change actually increased cost but reduced time, would it be pursued? In project evaluations, we discount the future value of free cash flows generated from the investment, but how do we evaluate the money benefit of time saving through process improvement? My fear is, that too many organisations have not calculated their money value of time, and this may have potentially dire consequences for their fortunes.
For in a global economy, process velocity and agility will segregate the winners from the laggards. When the cumulative opportunity cost of delays is organisational irrelevancy and ultimately collapse, the value of time gains urgent recognition. When the opportunity of speed is out-performance, the appreciated money value of time soars.
Whether it is in glamorous new product research and development or mundane employee on-boarding, those organisations that save time and seize their opportunities sooner will continuously out-perform their competition. And it is not about just executing each transaction faster, that makes the difference – it is the total process duration that needs to be reduced. And that means continuously eliminating the bottlenecks. Bottlenecks arise from poor process definitions and lack of process understanding amongst participants. They result from a lack of structured data collection requiring frequent data acquisition iterations. They result from slow and untraceable information exchanges. They result from poorly substantiated decision requests that cause approval bottlenecks. And they result from complex system user-interfaces that require extensive training and support.
The key step for organisations is to set a value on process time reductions, and to re-evaluate initiatives that remove bottlenecks accordingly. When the benefits of process optimisation start to flow (and they tend to flow quickly to all corners of an organisation) management generally rapidly acknowledges and reassess upward the money value of time saving, releasing further investment for elimination of process bottlenecks. This then tends to set in motion a virtuous circle where process optimisation success feeds into an upward re-evaluation of the money value of time and in turn to further investment in eliminating bottlenecks, until process speed is constrained only by the limits of the innovation cycle and global market demand, and never by the capacity of the organisation to deliver best-in-class process performance.
Our vision at IQX is to help organisations unlock the money value of time by accelerating process outcomes. We do this by focussing on the people executing the processes. We help users save time by providing earlier and more holistic business insights by incorporating supporting documentation, enable quicker and broader collaboration by including external participants, and deliver more streamlined and intuitive user-experiences by spanning multiple back-end applications. We believe the value proposition in reducing cycle times (whilst also reducing risk and direct costs) for processes such as capital expenditure request approvals or new product introductions is compelling, and encourage all organisations to assess their process performance against industry benchmarks to evaluate their longer-term competitiveness. In our experience, dramatic process improvements are readily achievable through a combination of web and native mobile apps, automated workflow and approvals, document management, cross-system integration and effective process monitoring. So, finish your work day sooner, and enjoy some time on the deck watching your son mowing the lawn for a well-deserved $10!
By Richard Frykberg