“God, this is one big proposal that we’re about to send out to Big Potential Client. I’m tired of looking at it. I’m sure that the dollars, scope, terms, and conditions that our sales team put in here are reasonable. I’ll sign it. Or wait, should I spend another hour looking at it?”
Resource allocation is one of a manager’s key responsibilities. Deciding how to allocate their own time is one of most important places this responsibility comes into play.
Most of us allocate our time via a blend of two algorithms: (1) instinct borne out of experience or (2) path of least resistance which includes habit. Is there a better way?
Here’s an Econ 101 formula that can help:
“maximum profit occurs when marginal revenue = marginal cost.”
If our fictional manager with a proposal on her desk earns $125,000 a year, the marginal cost of her time is ~$100/hr.* With all else being equal, she might ask, “is another hour of time going to help this sales proposal yield $100 or more in additional revenue?” If the answer is “yes”, and if there’s nothing else she can do with her time that will make an even bigger difference for the business’s net revenue, then she’s got a good reason to keep working.
*Assumes that the company invests ~$200,000 a year in this manager for salary, benefits, support staff, office space, etc.