Return On Time

Capital allocation is a key focus for investors—More important is employee time allocation—Maximizing return on time can create a competitive advantage.

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RETURN ON TIME

Management teams are sophisticated when calculating return on investment, looking for positive NPV projects, but these calculations are capital focused. Management is also responsible for allocating employee resources, ultimately generating a return on time and compensation dollars for the business.

We tend to view SG&A spend as an unavoidable cost and fail to ask what value is being returned. Employee time allocation is arguably the most important resource a business allocates.

Business is competitive, now globally. Opportunity exists for sustainable competitive advantages by getting the most out of employees and aligning the work of the group towards the highest goals. Conversely, underperformance quickly follows a low return on time.

The Top Dollar Strategy

Many of the world's most successful businesses focus on attracting and retaining top talent. Investment banks, management consultancies, and fast growing startups scour school campuses for their best college and MBA recruits.

While we may question the value of an MBA, there is no denying the value of an employee willing to work 60-80 hours per week. For the cost of hiring and training a single individual, 60-80 hour workers deliver the productivity of 1.5-2 employees.

Although absolute compensation for these employees is high, it rarely exceeds the cost of multiple people performing a similar task, resulting in a superb return for these firms.

Add in the wonderful opportunity this provides the employee—the ability to accelerate a career trajectory by getting two years of experience in one—and this scenario is a win-win for all interested parties.

Time Allocation

Few businesses are willing to pay top dollar for these highly motivated employees though. Instead businesses employ twice as many, more traditional, 40-hour per week employees. As the number of employees grows, so must the managerial class, to direct the efforts of the team.

The oft maligned managerial class, a class that hardly existed before the industrial revolution, has a difficult job. How is time allocated by employees to maximize the return?

Ineffective corporate bureaucracy can result in groups of people within the same company working towards conflicting goals. Conversely, micromanaging, an attempt to over-optimize employee time, can result in a constrained environment and stifle innovation.

Return on Employees

We find that the return on time varies widely across industries, businesses, and the employees themselves. Harnessing this power is a path to business outperformance.

Elon Musk’s purchase of Twitter, subsequent firing of 80% of the workforce, and improved performance of the platform is an extreme example of this power. This anecdote proves what many of us know to be true—many employees, particularly white collar, do not deliver 40 productive hours of work per week. In fact, teams overburdened by mediocre employees ultimately become less productive.

Whether this is due to poor management or lack of employee effort is irrelevant. The opportunity to improve our return on time is clear.

The Problem & The Fix

Most businesses live in mediocrity. The ideal, maximization of return on time, for the mutual benefit of all stakeholders, is rarely considered. Day by day, the business plods forward, burdened by bureaucracy, blinded by a lack of vision, exhausted by lack of purpose.

The fix is purpose. Harnessing the intrinsic motivation of employees. Creating a situation where the employee desires to excel.

The fix is a win-win mentality. The creation of a dynamic where the corporation will sacrifice for a employee in a time of need, in reciprocation for the employee sacrificing for the business.

The fix is true leadership, which is caring for the success of individual people. The building of a team where employees want to work for each other to reach their worthy destination.

We need more outstanding businesses, with motivated employees, accomplishing audacious goals. We need to maximize our return on time.