Diminishing Returns – Working More Does Not Mean Getting More Done

Throughout his life, Henry Ford ran a lot of productivity experiments to determine how to get the highest dollar value out of his production line and his employees. In an interview in 1926, Henry Ford concluded that forty hours a week is the optimum number of hours for employees. What he found is that when people work more than 40 hours, the output per employee starts to decline. Ford knew of the law of diminishing returns and he used that to his advantage for maximum productivity. I’ll show you how you can use the same concept for your life to boost your productivity.

I first need to explain the law of diminishing returns. I’ll explain it by dispelling two popular myths:

1. Working more hours means you get more work done.
2. Everything you do needs to be perfect.

I’ll start with the first myth. When the topic of time management and productivity is brought up a lot of people think of ways to utilize your time more effectively and for ways to save on time. The often overlooked aspect of time management and productivity is the law of diminishing returns. This concept stems from economics so let’s grab the definition here:

The tendency for a continuing application of effort or skill toward a particular project or goal to decline in effectiveness after a certain level of result has been achieved.

This is what Henry Ford discovered in his employees. Past 40 hours of work, employee productivity goes down. To apply this in the realm of time management in today’s world, let’s use a simple example everyone can relate to.

A lot of people think that by working more hours you will get more work done. If you work 40 hours, you obviously get more work done than someone who works only 10 hours. Anyone with a brain can tell you that. If you would graph it, this is how it would look like.

Now here comes the caveat. This has the presupposition that for each hour of work you put in, you get a consistent unit of output. For example, let’s say you can produce 3 reports an hour. Someone who works 10 hours would technically be able to produce 30 reports. Someone who works 40 hours would produce 120 hours.

In reality, the person who works 40 hours will most likely not produce 120 reports. No matter how perfect the equation is, reality will say otherwise. Why is this?

This goes back to the law of diminishing returns but you also have to understand the way our body works. In our post on playing at hero mode we’ve talked about how you want to align your body rhythms with your highest value activities in order to be the most productive you can be. As humans we pulse – during the daytime we’re up and engaged but at night we sleep and rest. We go through times where we engage at work but we also need time to renew.

Henry Ford recognized this fact. He knew that the machines were fairly consistent in producing a certain unit of output. That’s partly why he was so successful in rolling out a lot of cars back in the day. But he knew that wasn’t the case for humans. Unlike machines and machinery, we cannot work more and get the same quality of work done. The graph of above is a straight line and it applies to machines on the units of output they can produce. For humans, especially when it comes to knowledge work, we adhere to the graph of below.

This is partly due to that willpower and focus aren’t finite resources, but we’ll save that discussion for another time. What the graph shows you is that working more hours does not mean more work gets done and the quality of work is intact. Once you reach the point of diminishing returns, e.g. you’re physically tired after an six-hour day (if that is the case with you, you need to exercise more to expand the number of hours you’re fit), your quality of work goes down and so does your output.

Is the juice worth the (extra) squeeze?

Up to now I’ve discussed how working more hours is not necessarily better for productivity. Now it’s time to show you how the second myth is dispelled.

The mantra of “everything needs to be perfect” is a really dangerous one when you don’t take into account the law of diminishing returns and its associated opportunity costs. Aaron has written an extensive post on applied opportunity costs which I highly recommend you read in case you’re not familiar with this concept.

Assuming you know what the concept of opportunity cost is, let’s flesh this out. Some people have the urge to make the project they are working on as perfect as possible. They will log extra hours just to get it absolutely perfect. “This pixel needs to be moved one more position to the right. No, move it two pixels up more.” Everyone has been a perfectionist before, including yours truly.

Here is the shocking truth: being a perfectionist can kill your productivity because the opportunity cost might be too high. Does spending those extra hours really give you that extra payoff? In reality, anything 95% done is often good enough. Spending that time for the extra 5% is often not worth it. This is especially the case for the type of work knowledge workers do (there are always exceptions of course especially when you’re dealing with products).

When you want to make something perfect, you really have to ask yourself: is this extra work worth the opportunity cost? When the opportunity cost is bigger than the potential value you might get, you should consider halting the current activity and move on. In other words, you should stop doing something when the additional value you get from that activity is less than the opportunity cost.

Remember, time is arguably the most valuable resource you have at your disposal. It’s finite and once it is gone, it’s gone. Therefore, you should be really careful how you use your time. Invest as much as possible.

Next Actions

• Find your points of diminishing returns in everything you do.
• Be consciously aware of opportunity costs and diminishing returns in everything you do.

Photo by DVIDSHUB.