Operations is all about quantifying and measuring things to see what’s effective, in order to make your strategies more efficient (and profitable).  There is one exercise I happen to like to get people thinking from an operational standpoint, and that is to have them tally their own personal hourly rate.

Once you have this metric, it is easy to see that it’s worth it to hire a $10/hour personal assistant to make phone calls and copies; or that paying someone double your hourly rate would be a better choice if they can do the work 10x faster than you!

If you have, or recently had a salary, that’s the simplest way.  Hourly rate is –

ANNUAL SALARY  <divided by> 2080  =  YOUR HOURLY RATE

(2080 is 52 weeks/yr (times) 40 hours per week; a standard annual average.)

Now, if you don’t have a salary or are an entrepreneur bootstrapping it, use your goal salary for this year.

Let’s say your # is $75,000; your hourly rate is $75,000/2080 = $36/hour.

Great, now what?  A few ways to work with this number:

1)      Delegating and Hiring: Look at the people you employ or consultants with whom you contract.  How does their rate compare to yours?  Are they worth it? Are you utilizing them fully for the work they perform?  Are there things you’ve got them doing that should be delegated to someone with a lower hourly rate?   Remember, experts who charge $100-$200/hour are bringing their schooling and years of experience with them, don’t waste their time on items that you should be figuring out on your own.

2)      Time Management: Use this number for calculating mundane tasks.   I’ve used this to decide such life-shattering items as dining out versus shopping  & cooking or taking a taxi rather than riding the subway.   If it will take you an hour to shop and cook dinner at the example rate ($36), perhaps your time is better spent to order take out ($18) and work for that hour on a new client proposal instead.

3)      Budgeting projects/Team Building:  Operationally speaking, you need to evaluate how you are going to divvy up your time and the time of your team.  Your ‘hourly rate’ (ie, your overhead expenses) need to be ultimately supported by profitable ventures.   Some percentage of you or your team needs to focus on running the day to day business, another portion on gaining new business.  That mix will depend on the big picture, your store of funding, cash flow, etc.  But, it is useful to have this hourly metric in your head when looking at short and long term scheduling, rather than a large lump-budget number.