The True Cost of Time
When people are looking for a solution like HotDocs the aim is usually to reduce the risk of inaccurate documents and to reduce how much time is spent in producing these documents. I would like to focus on the time element.
In an ideal world, HotDocs could turn to a prospective client and say “we will save xamount of human hours, which in turn will save you “xamount of money” but there is an enormous difficulty to overcome. What does that saving of time equate to in terms of money?
This reminded me of what a professor once asked my class at university: “What is the true cost of time?”
The following hour was spent trying to formulate a suitable response and we suddenly realised that this is incredibly difficult, if not impossible, to calculate accurately. Here is why.
The typical approach companies take when trying to calculate the value of time and cost savings is salary divided by working days/hours multiplied by time saved, equalling cost of time:
Nice try – but there is a universe of other considerations that would help businesses to arrive at a more accurate figure. For example, I could take into account the cost of the building employees are based in (rent, heat, electricity), but are these costs fixed or variable depending on how many employees are located on the premises? This question alone could be another head spinning exercise in calculation.
I could also talk about the on-boarding cost of employees. Was there a recruitment company involved? New materials needed such as a laptop and HotDocs licence, for example? There is also a problem with this. You don’t know how long they will work for you, so you can’t divide this figure over a period of time to come up with an accurate cost.
Then we have annual leave, sickness, maternity leave, pension contributions, tax, travel expenses, telecoms, training – this could go on for some time, so I will stop now.
If you want to focus on one area to get a better understanding of the cost of time, ask another question; what output does the employee produce over a specific period of time?
In a factory environment this is relatively easy to work out. Employee xproduces outputxper hour. Every hour of time should produce the same result. However, if you try to apply the same logic to other industries you soon run into problems. Try and work out what your sales, marketing, accounting, administration or recruitment teams produce on an hourly basis and you will see what I mean.
The conclusion our class came to and responded to our tutor with was that the true cost of time is an incredibly difficult calculation to make, but we got the feeling it is actually a much higher cost than most companies think it is, both in terms of cost of employment and output of an employee. Our tutor (who at this point had a rather smug grin) responded: “Trying to work out the true cost of time is as complex as trying to get my 14-year-old son to tidy his room, but I still try”.
So what does this mean for a company looking to implement a solution like HotDocs?
I use HotDocs in-house to produce documents, mostly software licence agreements and partner agreements. For a 20-page agreement it takes me 2-3 minutes and I have zero legal background. A recent HotDocs customer was producing similar sales-based contracts from Word templates, which would take their legal department 40-50 minutes to produce. Now their sales team is empowered to draft these contracts in the field within five minutes. The template content was written, authorised and automated by the legal department and the HotDocs interview is completed by the sales team – freeing up the legal department to focus on other work.
So, a saving of 40 minutes per document. If we were to multiply this figure by the number of documents being produced, we arrive at a rudimentary total time saving figure. For this client, the amount of time saved was almost unbelievable.
How much is that figure truly worth to them?
HotDocs achieves a sizable return on investment (ROI) in a very short time, simply using the standard formula of salaries against time. However, the more analysis carried out on what time actually costs, the higher ROI implementing a solution like HotDocs will deliver.
To find out more about how HotDocs document automation software can improve the cost of time in your business, schedule a 30 minute demo.