Time is Money

Editor's Note:  Today's post comes to us courtesy of guest contributor Chris Dobyns.

Everyone is familiar with the axiom that time is money. In its most common usage, the phrase conveys that, like everything else, time is a resource and it is generally better to act as quicky and efficiently as possible.

 

Moving At The Speed of Business

 

For business, time not used to its maximum benefit represents either additional direct costs incurred by the business or lost opportunity costs that might otherwise have been leveraged to some better advantage.

 

Rewards + Time Sensitivity = Goodness

 

As a total rewards professional, you probably don’t need to have studied at the feet of B.F. Skinner or any of the past Pavlovian behaviorists to recall that satisfaction and the positive influence of delivering rewards is notionally reinforced the closer the reinforcement delivery is to the actual behavior or accomplishment being recognized. Consequently, most organizations try to provide recognition in as close proximity to the output or event as possible, and presumably strengthen the reinforcement linkage in the belief the positive behavior will be repeated.
 
Separating Kids from the Adults

 

Okay, so we’ll acknowledge that while all organizations are filled with good intent to deliver rewards to employees as quickly as possible, we all know what the road paved with good intentions . . . leads to. But in the delivery of monetary rewards, a little delay doesn’t really matter that much to employees, right?

 

More recently, I’ve been reading Marc Wittmann’s book, Felt Time: The Psychology of How We Perceive Time, which focuses on neuroscientific research and the psychology of people and their perception and sense of the passage of time. 

 

It’s acknowledged that children have difficulty with impulse control and issues of gratification in instances where a greater reward is possible, but only after a longer delay period. This often leads to short-sighted decision-making – and a phenomenon known as temporal myopia. The reality is that adults sometimes have difficulty making rational, time-related decisions also. But what does tolerance to delayed gratification have to do with recognition and rewards and positive reinforcement?

 

Everybody Likes a Discount Or, Maybe Not

 

Turns out that our perception of the value of monetary payments decreases the longer the receipt of the actual payment is delayed.  A number of research studies have confirmed this relationship between waiting time and the perceived value of the payment.  The research findings are depicted in the graph, where the time delay is reflected on the x-axis and the perceived value is shown on the y-axis.  Consistently, the relationship between delay and perceived value is not linear, but a hyperbolic function. This phenomenon is known as temporal discounting. 

 

Waiting Too Long Will Cost You

 

So, when you combine people’s antipathy for delayed gratification and layer on the effects of temporal discounting resulting from delayed payments, you get something of a total rewards “perfect storm”.

 

Okay, so what if the interval between an accomplishment and the delivery of recognition takes a little too long?  The money still spends the same.  And so what if the perceived value of $50 is reduced to a perceived value of $10 because of a short delay?  The answer is that if you’re seeking to maximize the full spectrum of value from monetary recognition, the length of any payment delay matters a great deal. 

 

But it’s only $50.

 

Sure, but what if it were $5,000 per employee?  And what if it were delayed payments intended for 10,000 employees?  Even assuming a lesser level of “discounting” for a much higher payment (Larger Later Reward), temporal discounting at 40 percent would suggest you might as well take $20 million out behind your building – and set it on fire, for the perceived value you actually obtain from this amount of recognition (by the way . . . don’t actually do this). 

 

What Else Don’t We Know?

 

I’ll admit that I’ve always been aware of this psychological principle that the closer the timing of the reinforcement delivery to the desired behavior, the greater the likelihood the behavior will be repeated.  However, I willingly acknowledge that I was clueless that this phenomenon of temporal discounting was quite so well-quantified.  Probably just another indicator that greater use of applied neuroscientific research in the area of total rewards is long overdue. 

 

In more ways than one, apparently time is money.  

 

Everyone probably has a different perspective.  What’s yours?

 

Chris Dobyns, CCP, CBP is currently employed as the Chief of Staff for the Office of Human Resource Strategy and Program Design for one of the largest U.S. intelligence agencies. The Office of Human Resource Strategy and Program Design is responsible for organizational effectiveness, personnel assessment, compensation and incentives, occupational structure, recognition and rewards, HR policy, human capital program design, implementation, evaluation and assessment and internal consulting. Chris has worked in the area of compensation for more than 30 years, and has been employed in various compensation-related positions by a number of large, private sector companies including, Sears, Roebuck, Arizona Public Service and Westinghouse Savannah River Company.

 

“Time Is Money” image, courtesy of Yury Zap and  fotolia images.

Comments

[Ian Ziegler]

Thank you for sharing Chris!

Any chance the book provides an x-axis title for that chart? It would be very helpful to know the units of time passing as the perceived value decreases.

If those units are months or years to would be much less dramatic than minutes or days.

[Chris Dobyns]

I was hoping someone would ask that question. While it's not definitive, my best interpretation, based on what I read - is that this "decay" time is represented in days. I secretly wished that it were months, since then I probably wouldn't feel quite so much shame regarding the approximately five (5) months that separate the end of our performance management cycle - and when we finally get around to delivering the resulting outcomes (payments) to our employees - which you can assume was at least partly the source of my inspiration for the segment hinting at just setting $20 million on fire.

[E. James (Jim) Brennan]

That fits with my experience that $100 delivered immediately earns as much appreciation as $500 delivered three weeks later.

[Halle]

Ah, sometimes this isn't discussed. However, customers feel it every day.

[Joe Thompson]

Chris,

I had the same question as Ian, and I too hoped that the axis was not in days! I suspect that there is a correlation between the magnitude of reward on the y-axis and the decay on the x-axis.

To that point, I noticed that the Wiki page you linked talked about the value of the Smaller, Sooner Reward (SSR). This is an interesting corollary to your metaphor of burning money. It suggests that we can save money if we act faster. Instead of $5,000 per employee, I could spend $1,000 - if I can shorten the time delay.

So, for a fixed budget, I can have more options. (I am not advocating giving awards to 50,000 employees in your example, rather that you could have much more differentiation among the 10,000.)

So, all-in-all, another great post.

Out of curiosity, do you think that the same phenomenon is present with respect to time-off awards?

[Chris Dobyns]

Yes, so that time-delay phenomenon cuts both ways, as you correctly pointed out. Recognition (sorry, EFFECTIVE recognition . . ) delivered more expeditiously, may in fact represent a "discount" for the employer, if it gets to the employee promptly. Who knew?

On the question of a more non-monetary award (time-off award, baseball tickets, dinner coupon, etc.), I think there's a different psychology and perception to all of that - and I think that's attributable almost exclusively to the fact that non-monetary recognition is not "convertible" in the same manner as cash - and consequently can't be exchanged as readily for a loaf of bread, or jar of peanut butter, up the street at the local Safeway.

[Chris Dobyns]

And to pull the thread on this topic a little further, in an area I had not originally contemplated, there's apparently a relevant tangent to the issue of the effectiveness of executive compensation. I can thank another reader who was nice enough to forward me a link to an upcoming article in the Harvard Business Review (https://hbr.org/2016/10/the-case-against-long-term-incentive-plans).

This article makes perfect sense, given the central topic of both our articles (although I wrote mine first . . . I swear).

[E. James (Jim) Brennan]

Extra time off ... hmmmm. Wonder what the message is to the employee rewarded for doing good work by being released from work?